Last week, I wrote to you all about how NLBM lawyers get paid more by their clients than other lawyers, and why that’s so important.
Today, I want to follow that up with some practical law practice money math, and how to use it to predict the future of your practice and determine where to focus.
Because here’s the thing, if you are anything like me, you went to law school at least partially because you aren’t a big ‘numbers person.’
I wasn’t either. I was a criminal justice major, and finite math was the highest level of math I took in college.
When I got into business, figuring out the numbers of my law practice was one of the most challenging parts for me.
I spent hours trying to understand spreadsheets, and how to do cash flow forecasting, and not knowing the critical numbers I was supposed to be tracking.
For a while there, I just gave up and decided I would earn as much money as possible, and then I wouldn’t need to think about the numbers.
That was a huge mistake. I found that the more money I made, the scarier (and worse) the money parts got. And, because I didn’t understand the money math of my law practice, I made some costly mistakes.
Because I didn’t understand this law practice money math, I often focused my energy and attention in precisely the wrong places.
Example: In the early days, I focused on trying to get more prospects into my office when I didn’t know how to efficiently engage and serve the people I did have coming in; this created enormous stress for me, my team, and my family.
All that to say, it’s super important for you to understand the numbers of your law practice.
And, it’s not that hard, once you know where to focus.
The very best part is that, as lawyers, we can get paid really well to provide an extremely valuable service. And when you know how to get hired by every person you meet with who needs your services, the numbers start to look very good.
That’s not to say it won’t be scary each time you need to invest in your law practice to get to your next level of growth. It will be.
When you are looking at the right numbers, you can focus your energy and attention on the right things at the right time, and stay focused on your next level of learning and growth, with the least amount of risk.
So here’s the law practice money math for you to consider:
When you know how to get hired by every client who needs your services at a flat fee that’s high enough for you to deliver an excellent service, you can afford to invest wisely in your practice and create a life and law practice you love.
Imagine your average fee is $3,500 per client. And that’s on the low end. Most of our lawyers happily receive, on average, $4,000 or $4,500 per estate plan. And $2,500 upfront and then $750 – $3,000 per month, per business owner they serve.
But, let’s imagine it’s just $3,500 each.
How many new clients would you need to serve each month to pay all of your personal + business expenses?
For now, consider the math of that.
Next, look at how many prospects you would need to meet with each month if you had a near 100% engagement rate.
Now, most lawyers can’t even imagine that, because it’s so far from their current reality, but it’s one of the things that makes the most significant impact on the use of your time and energy.
If 2 out of 4 people who need your services leave your office without hiring you, you need to see double the number of prospects each month to hit your goals.
In that case, your focus should be on increasing your engagement rate, not on getting more people in your office because the more people you get in your office, the more wasted time you’ll have.
If you are already great at getting hired, but you are still charging hourly, or your average fees are too low, you’ll likely need to serve too many people each month, and won’t be able to do a great job for the clients who do hire you — stress city.
In that case, your focus should be on learning to get hired for a flat fee that is high enough for you to provide a service you can confidently deliver. That might require you to learn how to provide that service first.
And if you already know how to deliver an excellent service, it may be as simple as re-learning how to quote your fees.
So, what does your law practice money math tell you about where to focus next?
- Learn to deliver an excellent service that clients are happy to pay, on average, $3,000 – $5,000 for you to provide?
- Learn to get hired by everyone who comes into your office who needs your services?
- Get more people into your office?
Would you like support looking at your law practice money math, and where having a New Law Business Model can exponentially increase your results, with the least amount of wasted energy possible?
Schedule a call with one of our Law Business Advisors, who will help you map out a customized plan that will set you on the path to creating a life—and law practice—you love.