Though we hoped to avoid ever doing math again by becoming attorneys, there are a few numbers that are critical to know in order to be the CEO of your law firm and run your firm like the business it is.
Most solos are underearning and many are just barely scraping by. We want to grow but we don’t know how. We think we can/ should “market more” and “get more referrals,” but without putting a number on it, those goals are meaningless.
If you want to earn more money and build your practice, you need to know and track the following 4 numbers. Once you know these numbers you can do meaningful strategic planning and goal setting for your law firm. Perhaps most importantly it will give you a realistic picture of your earnings and the health of your law firm.
It may feel scary to “turn on the light” to your law firm numbers, but it is actually freeing and will allow you to build your law firm and achieve the amount of financial and personal success that you desire.
Are you ready?
1. Number of Consultations Each Month
The consultation is the heart of your legal business. You cannot build your practice without consultations since they are the origin of all new contracts. It is critical to know how many consultations you have a month. (The majority of attorneys do not know this!)
Once you know how many you have, you can plan your desired growth. For example, if you currently do 10 consultations a month, you can make it your goal to increase to 15 a month. Then you can put together a plan about how to get there.
2. Number of New Contracts Each Month
When tracking your new contracts, some important data you should know is how long it took to “convert” into a contract from the consultation and the source of the contract (how the person originally heard about your law firm).
This information will help you financially plan for your law firm. For example, if you look at a 3 or 6-month period and you average 10 contracts a month, you will be able to forecast earnings for the next 6 months or so. This is particularly important if you want to hire another staff member because you will want to have enough “guaranteed” cash flow in order to bring that person on while meeting all of your other monthly financial obligations.
Knowing the source of your contracts is also extremely important because if people continue to come in for consultations after seeing you on Facebook, for example, and 70% of your new contracts come from people who found you on Facebook, then you know that you should dedicate more resources (time and/or money) toward your marketing efforts there.
3. How Much You Earn Each Month
You may deposit every cent into your account but you need to track your earnings separately without any interference of seeing deductions.
In our firm, we keep a separate excel sheet logging all of the payments we receive along with who they are paid from and what they were for (New Contract, Monthly Payment, or Consultation). It not only gives an easy snapshot of each month’s earnings, it also provides a backup system to ensure all payments are logged.
4. Your Monthly Financial Obligations
This is the scariest number to figure out but once you know it, the relief that you will feel is indescribable. You can do this in word or in an excel sheet (or any format you like as long as you just DO it) and write every single expense for your firm. Don’t forget things like the monthly cost of your website, email, Dropbox storage, case management system, rent, phones, internet, payroll, taxes, and more. (Also, if you aren’t paying yourself a salary, you need to be. Check out Gusto for an awesome, easy payroll service: (Check Out Gusto Here)
This is referred to as your “bottom line” or breakeven point. The goal is to keep this number low while getting the other numbers high. When you’re just starting out, it may feel like it’s the other way around- the expenses are high and the earnings are low, but with the tracking suggested above and a little bit of planning, you will be well on your way to earning more.
What would you add to this list? What successes have you seen since you started tracking these 4 numbers?
If you can believe it, I have even more knowledge to share on this topic! If you’d like to learn more about tracking your numbers, sign up for my Six Figure Solo program! Six Figure Solo now comes in three tiers – Executive, Solopreneur, and CEO. Sign up here.