|Through his coaching, Dan has helped thousands of people find a better work-life balance – something that we believe is incredibly important. We invited him to explain how you don’t have to sacrifice your firm’s profit to spend more time with your family, or vice versa.
Law firm profitability differentiates firms that risk burnout versus those who learn profitable delegation to achieve success. Success and higher profits are available to you should you make improvements to the way your law firm works.
Which ones are you?
1. Are you and your partners heading for exhaustion and burnout due to unsustainable work routines?
2. Are you a highly profitable firm that enjoys success through profitable delegation?
I’ve seen a clear differentiation between the law firm owners who tolerate exhausting business running routines for years before having to give up versus those who prioritise their law firm’s profitability and take home over £500,000 in profits a year, enjoy their work and have free time to do the things they love.
The problem is that most law firm partners and owners hit a phase they are not aware of and think: “Working such long hours is normal for law firm owners.” Or they think. “I just need to employ more people.”
The Invisible Wall
If you are a law firm owner and regularly have such thoughts, then you’ve likely hit this invisible wall.
If you continue trying to break through this by working longer hours and by employing more people you’ll likely one day end up having to give up from a lack of fulfilment and exhaustion. Instead, you need to focus your energy on learning what I call profitable delegation.
How to achieve law firm profitability through delegation
As a law firm partner you are likely one of the highest fee earners in your firm and bill the most hours so you probably think that ‘working less means earning less’ so you continue to carry out over 20 fee-earning hours per week instead of learning how to profitably delegate your fee-earning work away right?
With simple maths let me show you another way
Based on averaging out what many firms charge from junior to senior lawyers, if you charge £300 per hour and you work that one hour to earn this, that’s the most you can ever earn in that one hour. You’ll also hit a limit on how much you can earn because it depends on you physically doing the work.
Instead, if you have someone else billing £300 for your firm and they cost your firm £100 per hour (being very generous), that means your firm makes £200 NET. I say NET because this is before you pay out your business running expenses which are easily covered in this HOURLY NET figure and still leave you a take-home profit.
While this happens, you’ve worked zero hours or at least had that time made free to focus on business development.
On this basis, you are earning £100 less than when you did the work yourself but if you have two people billing as so, that’s £600 billed for that one hour, minus £200 for their wages for that one hour leaves your firm making £400 NET and still you’ve not had to physically do the fee-earning work.
What are the results for my firm?
If you scale this to a team of say 10, that’s your firm billing for £3,000 for that one hour they all work, minus £1000 for their wages leaving your firm earning £2000 NET for that one hour and you’ve still not done any fee-earning work.
If all 10 of your fee earners are billing 20 hours per week which is 100 hours per month each (and reasonably achievable), that’s 1000 hours multiplied by your service fee of £300 totals £300,000. Remove their wages which are (being very generous again) £100,000, your firm has £200,000 NET per month.
Multiply this by 12 months that’s £2.4M NET per year and your business running costs will be less than £200,000 so this easily gives your firm £2.2M profit.
If there are you and another partner to pay out of this after tax (depending on where your firm is set up) that’s over £700K in take-home profit for each of you per year and neither of you have still not done any of the laborious fee-earning work.
Tried and tested
I have some clients who also increased their service fees and are now taking home well over £1M each per year while they now have the freedom to travel and work the hours they choose.
Because most law firm partners and owners are unaware of how much more profit they can make by delegating away their fee-earning work they continue doing a lot of their firms fee earning work themselves and I’ve seen this happening even with law firm partners who lead teams of over 20.
By not creating time for business development, workflow refinement, reviewing client work before release, or training their team to improve performance, they fail to increase the profitability of their firm.
Most law firm partners also find it frustrating to explain how to do things to others so they think. ‘It’s easier if I do it myself’.
Other firm owners I’ve spoken to have zero room for error in their client work so they fear another team member doing their client work so much that again, they end up doing the work themselves and remain resentful towards their team for not supporting them effectively.
Many of my clients have now broken through this invisible wall by learning primarily, how to profitably delegate away their fee-earning work.
Top 3 Secrets for law firm profitability
To do this here are 3 secrets to profitably delegating your fee-earning work at a manageable pace:
1. Requesting that your key team members do not call you unnecessarily by having set weekly video call times will ensure your workflow will remain more consistent and focused. Every firm and every employee is different so it’s about providing the right, manageable level of support.
2. All law firm owners worry that their employees will be releasing mistake-riddled work if they aren’t reviewed. If you want peace of mind, ensure all client work is correct before submission by scheduling time for reviewing work.
3. To make clear requests, learn to have a specific result you want to achieve within an agreed time frame. Without these basic two elements, it’s not a request, it’s just vocal noise which leads to not being able to track team members’ performance and being their word, the foundation of a supportive team.
If you’d like to know how skilled you are at profitably delegating and focusing on your law firm profitability then take Dan’s Profitable Delegation Assessment which only takes 60 seconds.
Whilst these strategies will help to increase your fee-earning potential, there are strategies you can implement to ensure the fees you are earning work harder for your firm. Read here to find out more.