Keep It Simple: Very Basic Law Firm Finance

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I talk to so many lawyers who make this whole thing so complicated.

They lease space (sometimes more than one space), they hire people, and they buy things. They build this amazing structure before they have revenue.

Why? I can’t tell you why. I can tell you that it doesn’t make much sense.

Building a law practice is a pretty straightforward exercise.

First of all, you need clients. That’s the hardest part since most of us don’t have any experience or expertise in generating business (that’s why we talk about it so much here).

Once you have clients, you need to do the work and make sure you get paid for it.

So let’s keep it simple. Let’s work through a basic model for a law practice that will feed you and your family.

Once you’ve figured out the getting clients piece of the equation, here’s what you need to do.

You should bill for your time (don’t get fancy with fixed or alternative fees when you’re learning this stuff). You need to bill 25 hours per week. That’s five hours per day, five days per week.

If you’re billing at $200 per hour, you’ll gross $21,000 per month. Who is going to run to the courthouse, handle the billing, buy office supplies, etc? You are: that’s what you’re going to do with the other 5 to ten hours per day when you aren’t sleeping.

Should you hire someone? Nope, not if you’re only billing $21,000 per month.

Will you need to bill more than five hours some days? Yes, if you want to go on vacation, spend Labor Day with your family, or take any other days off (other than weekends).

Take the $21,000 in revenues and spend roughly $2,000 on rent, $3,000 on other stuff, and $3,000 on marketing.

That leaves you with $13,000 to take home and spend on paying back student loans.

How many clients do you need to make this work?

Let’s assume you need 20 hours to take care of the average family law case (your mileage may vary). That’s an average fee of $4,000 (I’m using very rough numbers here on purpose).

You’ll need five clients per month to hit your revenue target.

If you convert 50% of your initial consultations, you’ll need ten consultations per month (which, by the way, should contribute at least $2,000 to your revenues—no freebies).

That means you’ll need to find about two consultations per week.

Get the clients, do the work, and take home the money.

Simple enough?

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