The small law firm owner's "not enough time" problem really need not be so!

In my “Robservations in Law” newsletter of 26 November 2024, I concluded with this…

“The bottom-line…

Slow down on estimating fees, think it through, and don't be hesitant to experiment...a lot!

As your confidence builds, and you get better at pricing, a small increase in time invested into pricing from your FirmTime? allocation will change the profit profile of your practice massively…guaranteed!

Robservation: Don’t think you have the time? Rearrange your priorities. Just stop doing some of the other FirmTime? things that aren’t likely to be doubling your profit”!

The obvious question follows, “But how do I know what those things are”?

The question is a good one, and it reflects the reality that most owners in small legal firms don’t have a good chance of usefully rearranging how they spend their days because they can’t rearrange what they aren’t even close to fully understanding.

In a profession with profit margins that range from small to non-existent, the all-important owners shouldn’t be spending important parts of every day busily engaging in low-benefit activity…they simply have too many important hats to wear to go there!

Plenty of owners still record carefully the effort they put into client files (whether or not they charge by the hour is a separate discussion), but very few record the effort they put into the multiple firm “files” they engage with.

Of course there can be waste in client files, and plenty of files are known by experts to be loss-making whether the firm knows it or not, but this waste is nothing when compared to the valueless time losses in the FirmTime? sphere when it isn’t wisely planned and carefully analysed, which is mostly the case.

Here’s an actionable approach to the problem…

Every time you start on a task, ask yourself, “Do I really need to be doing this”?

Follow up with, “Does ANYONE in the practice really need to be doing this”?

How about, “Is this task truly a higher priority than everything on my, ‘Must do TODAY for sustainable practice financial health’ ActionList”?

If this next cap fits, wear it!

Common scenario…I have an employed lawyer with an employment contract that in return for all the benefits I provide them requires them to repay me with an average of 8 hours a day invested in what I want them to be doing for my firm.

Q.1…Have I set the goals correctly for the split of that 8 hours between FirmTime? activities and ClientTime? activities? (Tip: Always start with allocation of required FirmTime? so it gets the level of attention it deserves. Don’t over-allocate, because it governs the level of ClientTime? you expect daily on average, and that is a huge factor in your practice revenue generation and profitability).

Q.2…Am I being fair to this team member by keeping them busy to at least the resulting ClientTime? goal? Not subjectively…what do the numbers say?

Q.3…Am I investing effective time from my own FirmTime? allocation in ensuring they are using the FirmTime? they have been allocated for what I need them to be doing?

*????????? Handling relevant new enquiries promptly and effectively so we are converting a satisfactory percentage, and getting good feedback from the prospects even if they do not right now become a client.

*????????? Developing their professional skills we identified together at the planning stage.

*????????? Writing relevant, pragmatic, content in areas of our expertise as directed, and/or carrying out research to assist me or others on the team produce content related to our respective expertise and interests.

N.B. I most certainly do not want them developing skills in recording unexplained, “General Administration”!

I will make the time to keep a close eye on all categories of FirmTime? because I recognise that it can consume more than 40% of the firm’s productive capacity, and with the thin profit margins we have I know I cannot let myself and every other stakeholder down by passively tolerating chronic waste in this area.

Where I observe FirmTime? being wasted in one way or another if I cannot promptly fix the problem I will reduce the allocation accordingly, move it to ClientTime?, and recognise that I will almost certainly need to ramp up marketing accordingly to continue being fair to my employee by providing enough client file work for them to hit our jointly set goals.

Is all this effort really worthwhile?

It most certainly is, and firms that choose this approach have a real chance of being in that top few per cent of small legal firms that are truly financially healthy, have few liquidity problems, are less stressful to manage, and are worth serious money upon succession.

Whether or not a small legal firm uses time spent on a client matter as a factor in pricing the matter, its owners cannot ever escape the reality that its key resource for producing revenue (and hopefully a genuine profit) is what its people can usefully do with their time towards achievement of the business plan.

Knowing where that fundamental resource is or is not being invested usefully allows owners and managers to quickly redirect misused resources.

Robservation: Getting this process right will, in my experience, add revenue of around $100,000 per year per direct fee-earning team member, and almost all of that will drop straight down to where it belongs…your bottom-line!