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By Jared Correia, IndyBar Law Practice Management Consultant
2022 is almost over. It’s difficult to recall a time when a “new year” was so sorely needed.
One thing that won’t change in 2023, however, is the focus on law firm revenue. In fact, that focus will likely only be heightened following the events of the last year. The No. 1 business concern for attorneys remains law firm revenue, but lawyers don’t often take control of that metric.
The extent of financial management in most law firms is to express wonder over how revenue continues to come in, and to make broad proclamations about ‘”helping as many people as possible” and “making as much money as we can.” However, those goals are so broad as to essentially become meaningless.
So, with a new year in the offing, attorneys are provided yet another opportunity to become more focused about financial management. One thing that can be accomplished is the development of “revenue projections.” In most cases, law firms let revenue wash over them; creating revenue projections is about establishing hard targets. It’s something large corporations do on a recurring basis, and something law firms almost never do.
Using revenue projections allows for law firms to squarely aim for a target. And, even if that target is aggressive, the fact that it’s been established at all makes it more likely that it can be reached, and surpassed. If your law firm, for example, aims for a 40% increase over last year’s revenue, that may not happen; but, if you strive to make it, don’t and still hit a 30% increase, that’s still a win.
Law firms don’t establish revenue projections mostly because they don’t have a consistent mechanism for doing so. Lawyers avoid business management topics with all their strength in favor of substantive work: mix in math, and it’s all over. But even if you’ve never done it before, building revenue projections it not an impossible task. You’ll just need the right ingredients.
First, you need to understand your current practice mix. What areas are you focused on? Next, you’ll want to have an idea of an average case value, or an hourly rate. How much do you charge now? Now, take some time to understand what everyone on your team has done recently: Understand your timekeepers, and their contributions. From there, at a basic level, it’s fun with math.
Start to experiment with the numbers. How much of a particular case type did you take in last year? Do you want more or less of those cases? Will you raise your rates this year? How much does that change affect your bottom line? If you think you can bring in a certain amount of annual revenue, how does that break down in terms of monthly requirements? Create an aggressive model and a passive model. Establish a percentage increase, but tie it back to specific case origination numbers.
Grab your spreadsheets. It’s time to make 2023 your best year yet!•
Jared is available for no fee consulting support to IndyBar members. Contact him at [email protected].
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