Law firm billing tips that will double your revenue

Doubling your revenue sounds impossible. 

How can these billing tips double your law firm’s revenue at a time when many firms are experiencing a decline in demand for legal services? According to the 2019 State of the Legal Market, law firm realization rates have dropped significantly and continued to decline since the Great Recession. This has harmed firm revenues. 

Is it possible in this economic climate for a firm to double its revenue? 

Doubling your revenue: More about you, less about competition

These billing tips are more about your behavior than they are about your competitors and their actions. Boosting your income comes down to three best practices. 

1. Minimizing errors and mistakes 
2. Increasing your firm’s income 
3. Layering your firm’s income 

In my [previous post], I shared several strategies you can use to reduce billing mistakes. In this post, we’ll focus on the strategies you can use to double your firm’s revenues. 

Let’s take a look. 

Billing tips to increase your firm’s revenue

First, some important disclaimers: 

• The strategies I mention may require modification to work correctly. 
• Some of them may not work in your jurisdiction due to legal constraints. 
• For many of you, these strategies will work well, which may create a (different) set of problems. 

I’ve written comprehensive guides on each of these topics; I recommend that you take a look at them. 

You can increase your firm’s income in a variety of ways: 

1. Boost your firm’s utilization rate with utilization optimization. Your utilization rate is a reflection of your firm’s productivity and billing efficiency. The higher your utilization rate, the more revenue (and profit) your firm can generate. Here’s how you calculate your utilization rate: Billable hours/total # of hours recorded in a particular period = utilization rate. 
2. Offer online payments offer a simple solution to increase revenue flow by decreasing the time it takes to collect on client invoices. Clients are more likely to pay you faster if you offer a payment option they’re use to using in their everyday. Payment processors like Bill4Time Payments are built-in to your practice management software
3. Increase your firm’s productivity. Believe it or not, it is possible to 2x or even 4x your productivity. To boost your firm’s productivity, you’ll need to make the distinction between toil and productivity. Toil refers to tedious, exhausting, and repetitive busywork that’s never-ending. Productivity is work that rings the meter, taking you closer to your goals and objectives. 
4. Educate to attract new clients. Education is the key to attracting a steady stream of clients. While many firms have a problem with selling, very few have a problem with educating prospective clients. As it turns out, education attracts clients consistently because it does two things well. First, it identifies a problem clients have, and second, it positions you as the solution to your prospective client’s problem. Once you’ve educated clients, they’ll approach you as a prospect. This is when you provide them with information. When I use the word information, I’m referring to details like your billing policies, available AFAs, client references, practice areas, years of experience, cases won, etc. Information turns prospects into clients. 
5. Create win-win-win origination credit schemes. To quote Jim Cotterman, principal at Altman Weil, origination credit schemes are “the single most important determinative factor in partner compensation.” Origination plans are crucial to your firm’s survival. Research shows, when clients were served by three practice groups, revenues were 5.7 times higher than those served by one. Clients who were served by five practice groups generated fees that 17.6 times higher than those served by one. This also prevents poaching. When multiple practice groups serve clients, they remain loyal to the firm, rather than an individual attorney. This is the single, most effective way to boost employee morale, increase firm business, and keep clients. 
6. Promote your firm with the right tools and resources. You can use State Bar referrals, CLE credits, Facebook, PR, and other channels to promote your law firm and amplify business development. Using the right tools and resources, you can attract a steady stream of prospects from a variety of sources who are all eager to work with your firm. 

Each of these strategies can double your income on their own but that’s not the most efficient use of these strategies. 

A better approach? 

You double or triple up on these strategies; find the approach that works best for you, get it to a place where it’s working for your firm. Then you add another strategy from the list, then another. These are big problems, but they produce a disproportionately large amount of revenue for your firm when you get them right. 

It isn’t hard. It just requires hard work. 

The strategies I’ve shared above are conventional approaches you can use to double your firm’s revenue. In the next section, we’ll take a look at transformative results. 

Here’s the difference. 

• Conventional results create trust. Conventional results = doing your job exceptionally well. Being a great attorney, going above and beyond for clients and your team. Exceptional day-to-day performance increases. If you’re a real estate attorney, your documents and agreements are above reproach; your work is pristine, you’re fast, efficient, helpful, productive, etc.
• Transformative results build careers and firms. These are the extras, the above and beyond results that make things better for your firm, the industry, or clients as a whole. It’s doing what other attorneys or firms won’t or can’t do. Most real estate attorneys, for example, won’t take the time to run monthly webinars or workshops for real estate investors or corporate entities. 

See what I mean? 

Use these law firm billing tips to double your revenue

It’s not about them. It’s about you. 

As we’ve seen, these billing tips are more about your behavior and the way your firm is structured than it is about your competitors. Boosting your income comes down to following and optimizing your firm around best practices. 

Most firms don’t want to do the work. 

It’s annoying, tedious, and occasionally difficult work. But this is also your opportunity. The research shows many firms are experiencing a decline in demand for legal services. Realization rates have dropped significantly and continued to decline since the Great Recession. 

Law firms need to adapt to survive. 

You have the blueprint; double or triple up on these strategies. Find the approach that works best for you then get it to a place where it’s working for your firm. Then, when you’re ready, add another strategy from the list. 

Doubling your revenue isn’t impossible. 

With a structured plan and clear steps to follow, you’ll find you have everything you need to double your firm’s revenue year-over-year. 

It’s an attorney’s nightmare.

Imagine working harder but producing less each day. This nightmare is an unpleasant reality for the majority of attorneys in the legal industry today. 

This isn’t speculation. 

A recent study found the average utilization rates, the number of hours spent on billable work, was only 31 percent. The average attorney is only paid for 2.5 hours of work per day. According to the National Association for Law Placement, the average attorney works 2,081 hours per year or roughly 40 hours per week. 

That’s reasonable, right? 

Why attorneys are only getting paid for 31 percent of their work

Joan Williams, the director of the Center for WorkLife Law at U.C. Hastings, exposes the reality of work you’re probably already familiar with. When attorneys bill 40 or 50 hours per week, they’re actually working 60 to 70+ hours per week. 

Where does this extra work come from? 

It’s nonbillable work. It’s attorneys preparing to do the work they will actually be paid for. These routine concerns sap your workday, ensuring you only have time for one thing, work. 

Here are a few examples: 

• Gartner found that most law firms are missing almost 50 percent of their data. Eighty percent of the intellectual property a firm handles is communicated with or stored via email. What does this mean? It’s data your team will need to dig through to find what you need. 
• An IDC whitepaper found knowledge workers wasted 11.2 hours a week sorting through document management (DMS) challenges. This whitepaper calculated the loss at $19,732 per knowledge worker, per year, or a 21.3 percent loss in the firm’s total productivity.
• A growing number of law firms expect their associates to deliver 2,300 to 2,500 billable hours each year. Remember, nonbillable work is on top of this figure. Those who fail to meet these predetermined thresholds find their compensation and professional future is in jeopardy. This is complicated by the fact that 19 percent of the time, the billable work an attorney does, does not make it on an invoice. 
• Interruptions at work can cost you as much as 6 hours per day. Researchers at the University of California, Irvine, found after careful observation that the typical office worker is interrupted or switches tasks, on average, every three minutes and five seconds. And it can take 23 minutes and 15 seconds just to get back to where they left off.

No wonder so many attorneys are burned out. 

Most are struggling to meet their billable targets, but they’re asked to deliver more billable hours each year. On top of that, they’re bombarded by the nonbillable demands that increase with time. 

It’s worse for law firms. 

According to the 2019 Report on the State of the Legal Market, realization rates for law firms are stagnant or declining. Firms today are fighting for a shrinking piece of the pie; there are too many lawyers and not enough clients. 

This is why law firms need legal workflows

The demands placed on attorneys and law firms are getting heavier. Here’s a direct quote from The State of the Legal Market. 

“Given the tepid growth in demand for law firm services, the increased willingness of clients to move business to lower cost firms or alternative service providers, and the continuing client push back on rate increases (as reflected in declining realization rates), it is counterintuitive that firms would propose aggressive rate increases or that clients would accept them. But that appears to be what happened.”

As firms increase their rates, clients push back, refusing to pay or demanding more for less. An example of this is the fact that many clients are unwilling to pay for research costs. 

What’s the solution then? 

One solution to this complex problem is improved workflows. 

I realize this sounds ridiculous. 

How can improved workflows boost the survivability of your law firm? It’s simple, with the right workflows in place, you’ll have the tools and resources needed to deal with a continual increase in demand. Here’s a breakdown of the benefits. 

• Your utilization rate will increase 
• Nonbillable work will decrease 
• Your realization and collection rates will increases 
• Work-life balance is easier to achieve and maintain
• Your firm will be able to keep up with client expectations and demands
• You’ll be able to attract more clients with less work
• Your productivity will increase as you build consistency into your services
• The quality of your services will increase

This is why your law firm needs workflows to survive. Gone are the days where law firms can rely on the status quo to survive. 

Workflows are the key to long term survival

If you’re an attorney, you know the truth. 

You’re working harder and harder each day. Utilization, realization and collection across the industry are down. The research on this is clear; attorneys are working hard with less to show for it. 

This nightmare is avoidable. 

With the right set of workflows, you can produce stable growth for your law firm and your employees. You can increase firmwide productivity and boost revenue. It’s all possible if you have the right systems and procedures in place. 

What are the right systems?  

In my next post, I’ll discuss the workflows your firm needs to produce extraordinary results.

Are your coworkers your enemies?

Infighting, rivalries and competition hurt law firms. Research tells us when clients are served by three or more practice groups firm revenues are five times higher. If they’re served by five practice groups revenues are 18 times higher!

Collaboration is profitable.

If it’s so profitable for firms and their clients, why is it such a  rare occurrence for most law firms? 

It’s your compensation model. 

Does your firm have the wrong compensation model? 

It’s not always apparent. 

It’s easy to focus on the fact that a compensation model works. It’s rare for firm leadership to ask themselves the question, “is our compensation model working well?” or “how much is this compensation model costing me?” Is there an easier way to determine the value of your compensation model? 

There absolutely is. 

Here are six warning signs your law firm may have the wrong compensation model. 

1. Self-serving client selection

Paul has just lost his biggest client. He’s desperate for work so he eagerly accepts a new client who puts $200,000 a year in his pocket. This client is bad for business though – their conflict waiver policy limits his firm’s ability to take on new clients in tangential markets. 

2. Irresponsible rainmaking

Sue realizes she’s an incredible rainmaker. She enjoys the origination credit she receives from her business development efforts. She’s even more fond of the fact that she doesn’t have to do any of the work. She recruits clients indiscriminately. As a result, she’s brought on several bad clients who cost the firm and other partners a significant amount due to write-offs. Those write-offs hammer those doing the work. 

3. Ignoring business development

Patrick feels his time is better spent working on client matters. He can’t be bothered with business development activities, recruitment interviews or public speaking. While it benefits the firm, he gets nothing in the short term, so he prefers to ride on the coattails of his partners and associates. 

4. Partner end arounds

Stephen has a client who needs help in Geoffrey’s practice area. He doesn’t want to share the origination credit or additional fees with Geoffrey, so he goes to an associate in Geoffrey’s practice group and tells a young associate to do the work. He tells this inexperienced associate that he’ll let Geoffrey know, only he doesn’t. He keeps things quiet, so he doesn’t have to share the credit or fees for his hard work. 

5. Matter bartering

Sue needs help with a client matter. She knows Stephen is the best person for the job, but she decides to go with Patrick instead who doesn’t have much experience in the desired practice area. Her reason? He’s the partner who’s willing to accept the lowest share of origination credit. The client gets a second opinion after seeing Patrick’s subpar work. The client eventually decides to take their business elsewhere to a competitor. 

6. Origination sculpting

Geoffrey has brought a new opportunity to the firm. The problem? Geoffrey doesn’t have the skills, experience or acumen to take on this new opportunity. Geoffrey knows Paul is a specialist in his target practice area, but he refuses to share the origination credit. Geoffrey decides to approach this pitch meeting alone; he loses his opportunity to a competitor who’s better prepared. The firm loses an opportunity worth $23 million. 

The list could go on. 

Client, file and matter hoarding, turf wars, partner silos, poor succession plans, these are a small sample of the many problems firms run into when they have a poor compensation model. 

What’s the solution? 

Peter J. Winders, General Counsel at Carton Fields Jorden Burt, suggests that there are only two options. 

1. Create a framework of rules. For example, corporate attorneys cannot dabble in litigation. The idea behind this rule is simple; keep attorneys in their practice areas.  
2. Change employee motivation. As far as solutions go, this one is much more difficult. Firm leadership decides ahead of time what is best for the firm. The compensation model is redesigned to reward what is good for the firm and punish what is bad for the firm. 

Both have their pros and cons. 

Which of these plans is best for your firm? Can you use both? I’ll tackle that in my next post. 

The wrong compensation model comes with signs

Many firms refuse to collaborate. 

While it’s upsetting, this isn’t their fault entirely. It ultimately comes down to your firm’s compensation model. Compensation models that produce hoarding, infighting, end arounds, competition – they’re bad for business. As we’ve seen they cost firms a tremendous amount of money. 

Collaboration is profitable. 

But it all depends on the compensation system you choose. This is why it’s such a rare occurrence for firms today. It doesn’t have to be that way. In my next posts, I’ll present you with options you can use to improve your firm’s compensation models.