I need to hire someone. I’ve got more work than I can handle. Thankfully, the phone is ringing off the hook.
That’s a good problem to have.
I love lawyers who tell me about having more work than they can handle. Those are fun phone calls.
Too much work invariably leads to the question of how to pick the right new employee. It’s predictable. “I’ve got money. How can I spend it?”
They ask:
- Whom should I hire?
- Should it be a lawyer or a paralegal?
- How should I advertise the new position?
- How much should I pay?
- What kind of person should I hire?
- And on and on.
Hiring is scary. We don’t want to screw it up.
Hiring Calculus for Lawyers
Hiring might be the right decision. However, it could be a big mistake.
Let’s keep this simple. Here comes some math:
The lawyer who called me is grossing $30,000.00 per month. She’s taking home about $15,000.00 of those dollars. The rest she spends on marketing and overhead.
She believes that, with the increased work she could take on, she could increase her revenues from $30,000.00 to $50,000.00. She thinks the associate will gross $20,000.00 a month.
Using the generally accepted “law firm accounting wisdom,” we can calculate the increase to her income of hiring the associate. The “wisdom” is that 1/3 goes to the associate, 1/3 goes to overhead, and 1/3 goes to the law firm owner.
With that math (and generally, in my experience, things don’t work out quite that well), the owner bumps her income up from $15,000 per month to $21,600 per month (an increase of $6,600, representing 1/3 of the associate’s $20,000 in revenue).
So, she hires this associate, and BAM! Her income goes up by $79,000 per year. Sweet (unless, of course, it doesn’t).
Here’s what’s coming. She’s going to go out and
- interview and hire an associate,
- train the associate,
- supervise the associate,
- deal with the upset clients who get handed off to the associate,
- repair the damage done by the associate, and
- lose sleep worrying about what’s happening to her reputation when the associate isn’t performing in quite the way that she does.
Oh, and then (according to the many e-mails I get), the associate is going to quit and either (1) go to work for a competitor or (2) open an office across the street and become a competitor.
I’m not overselling this, am I?
Is that associate worth the additional $6,600.00 in monthly income?
The first thing that I would do is push her, hard, on whether hiring the associate is the right move.
I’d ask her whether she wants to scale her business by adding people. Is this about hiring one associate, or are we feeling our way toward hiring many associates? Is she going to transition from doing the service to managing others doing the service? Is she planning to scale the business by adding people? Does that fit with her vision?
I’d push her on her vision of where we’re going and how this new hire fits into that vision. The vision is the key. What is the hiring about? Why are we doing this, and how does it fit into the larger picture?
It’s fairly common, when I’m pushing, for the attorney to explain that she just wants some help, some vacation coverage, or someone to return a call when she can’t stand it anymore. She’s not looking to grow dramatically. She just wants to release the pressure.
Then, we’d do some more math.
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I’d ask her to consider raising her rates by 20%. That will have the exact same economic impact as hiring the associate. If she raises her rates by 20%, her revenue goes from $30,000.00 to $36,000.00. Her income goes from $15,000.00 to $21,000.00. She takes home about the same amount as she would with the associate.
What Is Your Overall Vision?
If she raises her rates, some of her clients will leave. Some people will not hire her. However, she’s already busy, and she’s getting more calls than she can handle. That’s why she originally said she was contemplating hiring an associate.
The higher rates will get paid by the clients who don’t go elsewhere, and there will be plenty of them. I’ve watched it happen time and time again.
Hiring is an option. Raising rates is another option. Both paths get us to the same income. What’s the vision? That’s where we find the answer.
If you’re so good that the phone is ringing off the hook, then you need to take action. You can either hire someone to take on the additional work, or you can raise your rates and tell more people no.
What is your vision? What do you see? What do you want?
Do you want to manage associates? Do you want to do client work?
Do you have mad management skills? Do you have mad legal skills? What’s your thing?
Do you want to learn about management? Do you want to learn about the law?
What do you want?
Hiring people is sometimes a wonderful way to scale your business. Sometimes, however, staying small and charging a premium makes a lot more sense.
Don’t automatically assume that hiring is the best decision. Force yourself to think first, and then take well-considered action. Consult your vision before you find yourself driving hard in a direction you never intended to go.
