Lemonade and Law
Every law firm, whether a solo practitioner or a large firm, needs to track its performance to ensure long-term success and growth. The challenge is, and always has been, the material burden of cost associated with maintaining the financial accounting for your company. Allocating capital away from client facing, revenue driving resources could dilute profitability and create an unnecessary risk of eroding the top line. But what if you only needed a fraction of that capital to fund financial accounting that produces a return instead?
Evan Wesley can help identify underperforming areas of your business that would be undetectable otherwise. Imagine, if you will, a lemonade stand. It is obvious to understand when your sales aren’t keeping up with your supply of ready-made lemonade. The space on your table is visibly taken up by the growing number of unsold cups of lemonade. It’s easy to understand, at that point, the need to stop making lemonade and focus on selling the cups on the table first. Unfortunately, complex businesses, such as law firms, don’t have the luxury of simplicity that comes with a lemonade stand.
However, several metrics can be produced to create the simplicity and transparency needed to identify when to stop making the lemonade. Productivity, as an example, is just one indicator of a law firm’s profitability. Productivity is typically defined as the number of billable hours a lawyer works in a given time period. It’s not really so much a metric about how much work the lawyer has done, but rather a measure of how much time the lawyer spent doing it. The higher the productivity, the more that lawyer is contributing to your profit. Realization rate is another metric that provides law firm management with information related to attorney productivity. Realization is the measure of how much time an attorney records in comparison with the fees that are collected. Expressed as a percentage, anything less than a certain threshold (say 75%) may indicate existing problems such as clients challenging the value being received, aggressive write-offs, inefficient work, and more.
As clients push more and more for lower legal costs, the problems facing law firms today are numerous, and declining realization rates reflect that pressure. According to The American Lawyer, in 2023, Am Law 100 firms saw their lowest realization rates in five years. The average rate was 80.93%, down from 82.2% in 2022 and 83.11% in 2021, when industry observers expressed hope that firms would remain vigilant about collections for their own sake. The median rate followed a similar course, decreasing from 83% in 2021, to 81.2% and most recently, 79.65%. And these are firms utilizing large amounts of capital to create and monitor metrics. Imagine where your rates might be with zero visibility!
Realistically, it is not feasible to employ someone full-time, to prepare these Key Performance Indicators (KPIs) to mitigate risk and facilitate informed business decisions. By utilizing the right data, Evan Wesley Business Evolutions can provide visibility to give law firms a fighting chance to maintain or increase their realization rates and profitability in the face of today’s fixed-fee billing and pricing pressures. The difference with Evan Wesley is you can secure the high-level sophistication of a trained finance professional at a fraction of the cost allowing you and your team to focus on time better spent taking care of clients and increasing the top line.
By tracking essential KPIs, you can:
Monitor your firm's performance against set targets and objectives
Identify trends and patterns that may impact your firm's success
Hold your team accountable for their performance
Predict and mitigate potential issues in advance (i.e. RISK MITIGATION!!!)
Enhance client satisfaction, employee productivity, and overall efficiency
Call today for further information. We are more than willing to discuss a trial period arrangement as well to demonstrate the value of going with EW.