I don’t know about you, but no part of law school taught me about business development and financial planning and management. But the truth is, if you own a law firm, then you’re not only a lawyer, but also a business person. Most law firms put servicing clients and new client development at a higher priority than financial management, but lack of business and financial planning can lead to a poor financial outcome.
Creating your firm’s annual budget is only the first step in “financial management”. As it turns out, budgets themselves do not produce results, but managing them does. Without regularly tracking your progress, your budget doesn’t stand a chance. Have your accountant generate an income report and a cash flow statement at the end of each month and set aside time in your schedule to analyze your budget before the next month begins.
Practicing a monthly budget review not only allows you to stay within your budget, but also allows you to set new benchmarks that will increase your monthly profit. Here are a few things to keep in mind as you review your firm’s budget each month:
- Compare different practice areas to see which are more profitable. Maximize those areas that are bringing in cash and re-evaluate or consider eliminating those that are not. If nothing else, consider spending less on marketing those areas where your ROI is less and more where the ROI is greater.
- Increase monthly cash flow by decreasing the time it takes for cases to reach conclusion. Measure the number of cases you turn over each month and review your processes and procedures to ensure that your firm is returning phone calls, obtaining and reviewing medical records, and sending out demand letters to insurance companies in a timely manner. Doing so could increase your monthly case numbers and, therefore, cash flow.
- Evaluate your marketing expenditure to date vs. case intake to date. Compare month to month and year to year. Are you taking in more cases than you were last year this same time? Are you taking in more cases this month than last month? What about your expenditure? Are you spending more or less this month or last? This year or last year?
- Now compare your attorneys. Which attorneys are your “rainmakers”? Which ones are your best trial preparers? You best “litigators”? Can you maximize their strengths and minimize their weaknesses? Can you help them help the firm be more efficient and effective? Would restructuring the firm in a different manner allow for better profits based upon the strengths of your attorneys?
- Take a look at where you’re spending money. Some credit card companies “group” expenses to help you track them. Or create your own groups.
- Look at your staff personnel and employee performance vs. salary. Is everyone producing? If you have anyone who is idle a portion of the time, consider hiring a contract employee for specific tasks or making the role part-time.
Finally, I encourage you to ask employees for input on ways to generate more revenue or reduce expenses. You might even want to make it a contest where the winner gets a week’s paid vacation or something even better. You may get some really great ideas!
As you set new goals this year, please let us know if we can help you with any of your firm development and marketing needs. Contact me at Lauren@LawyersMarketingAssociates.com. I look forward to working with you and making 2012 your most sucessful year yet!
Lawyers Marketing Associates, Inc., President