Although non-lawyers like to think that attorneys swim in pools of cash, most law firms’ profits aren’t nearly as high as they should be. Sometimes, it’s a major failure causing the problem. In many cases, it’s the little things that add up over time.
Here are three strategic mistakes I see all the time that could be killing your firm’s profits:
1. Not delegating to the most affordable, competent person in the firm
Firm owners wear a lot of different hats. With everything going on, you need to be sure you’re not doing work you should be doing. It’s good to help out, but if you make a habit of it you’re giving away all your profits.
Let’s say your hourly rate is $350. What happens if you spend two hours a week on admin tasks that could be delegated to a legal assistant? It adds up! Not delegating is costing you $36,400 per year in profit! Not to mention the added stress of multitasking.
2️. Not tracking your key performance indicators
Your bottom line is the 50,000-foot view of your firm’s health. Additional key performance indicators such as new client conversion rates can tell you WHY your profit isn’t where you want it. The right key performance indicators (KPIs) can tell you about your cost to acquire new client, average profit per client, the productivity of the lawyers in your firm, and much, much more.
If you want actionable insights into why your profit is where it is, you need to identify KPIs for your firm and track them regularly. They’ll show you why your profit fluctuates and what you can do, midstream, to fix it. You should be discussing these with your accountant in monthly or quarterly reviews to help you make better business decisions.
3. Not knowing your profit per matter type
Any business with more than one offering is going to have different profit margins between offers. The same is true for professional services, even if your hourly rate is the same. You likely have different profit margins based on the matter type.
If you don’t know which matters are most profitable for your firm, you can’t focus on attracting the right types of clients. Once you know, you can aim your time, your energy, and your marketing on the most profitable work and see a very quick increase in profitability.
If these or any other mistakes are holding your firm’s profitability back, it’s time to take control. We can help you identify the problems and find solutions with our Business Diagnostic Review.
Once you pinpoint the problem and take steps to resolve it, you’ll finally be earning the profit you deserve for all your hard work!
