Double Play: The Simple Math Behind Law Firm Growth

You’ve heard the phrase often from busy lawyers, law firm owners particularly: ‘If only I could clone myself’.  It’s wishful thinking; but, it gets to the heart of the one barrier to law firm expansion that you can’t fake: In order to grow your business, to scale it . . . you have to hire.

Of course, that’s a hard thing to do, especially for solos, who’ve never had an employee before, or who have only used contractors previously.  Lawyers, even lawyers who have started their own businesses, tend to be highly risk-averse.  They crave safety, surety, over all else.  But, there’s not a whole lot of surety in expanding a business.  And, that’s mainly why it’s so difficult for attorneys to move forward on this score.  Since most law firms bill on an hourly basis, the only way to increase your revenue beyond a certain point is to increase the numbers of hours you can bill, and there are only two ways to do that: become more efficient (so you can do more work in less time) or hire staff (so you can have more people working more hours).

Adding staff is necessary to scale your law firm, but to do so effectively, you need to know how much each person who works in the law firm makes for the business.  The simple math is that this doesn’t work unless each person you hire is a profit center for you.  But, taking the leap is important, because you’ll not know (kind of for sure) how much value a particular type of employee (associate, paralegal, bookkeeper, etc.) has, until you hire one.  So, when you hire an associate, set a number of billable hours that reflect a certain amount of revenue, establish a personal overhead figure for that associate, and then track the viability of numbers.  Realize that, as an associate’s skill level increases, they’ll work faster, and produce more revenue.  Understand that, as you add modern technologies and efficiencies to your business, everyone (including your associate(s)) can work faster, and that you can reduce overhead per staffperson.  If you can arrive at a profitability number for an associates for years 1 through whatever, you’ll have a good sense of how much money your firm is making for every hire you bring on.  Do that for each position within the law firm, and you’ll be hiring intelligently, and more regularly.

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If you need help figuring out the hiring equation, we can help.

The Wyoming State Bar offers free law practice management consulting services through Red Cave Law Firm Consulting.  To request a consult, visit the Wyoming State Bar’s law practice management page, and start running your law firm like a business.

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