You own a virtual law practice. You were tired of the long days sitting at a desk away from your family. And let’s not talk about the days in court that seem to suck the life out of you. But just because you opted out of Biglaw doesn’t mean that you still shouldn’t bring home big bucks. You can still make an impact in the market place. As a solo/small practice firm you have to be a little more strategic in how your handle your back-office functions, right? So, let talk about that. What do I mean? I’m going to go ahead and assume that you are wearing may hats in your firm. Working with clients, handling caseloads, preparing legal documents. That’s your bread and butter. The law firm first, business second. That’s not how you want it to be, but if you are honest with yourself that is exactly where you are.
What are some of things that are keeping you from posting big profits quarter after quarter? When you are in a law firm first mindset the first thing that usually fall off the plate first is … your accounting. If you have your banking system automatically synced to your accounting system to record transactions. Good for you. That’s a baby step in the right direction. But please do not think that will be enough to play in the sandbox with the big hitting law practices. I’m sure that when you decided that you wanted to start your virtual firm that you didn’t want to lose your quality of life. I’m sure that you still wanted to post amazing profits, right?
Consider this scenario. You are in a meeting with your team. On the table is a discussion and some disagreement on how to proceed further on a subject. A team member virtually raises his hand and calmly asks, “just show us the financial data and then we can decide”. Has this happened to you? If it hasn’t happened yet its coming. How will you answer this call to action? You can’t possibly tell your team that you have no idea how much the firm made last month. How fiscally irresponsible is that? Very.
What you need is data, and lots of it. Can you right now pull together a report that details billable time and the realization rate of work done last month? Can you run a report that analyzes realized and unrealized revenue, by client, by matter? What about that IOLTA account? Whose money is in there anyway?
If you are stumbling over the right answers, we already have a problem. Its time to stop and rethink your approach. How you handle your firm’s accounting and who handles it is just as important as filing that answer. You need good accounting practices which in turn will produce sound financial data (of course if recorded correctly) which in turn will allow you to know at a moment’s notice if money hemorrhaging out of your firm because you’ve failed to realize that what you are billing, isn’t enough. Or that your billing practices are out of date and perhaps you need to go to a flat fee. How can you make these decisions if you have no starting point?
What isn’t measured surely can’t be improved. Decisions can’t be made if you don’t have anything to base your decision on. Gaps can’t be filed if you don’t know they are there. You need a solution and fast. Take the time to decide what data you need that you can’t get immediately access to and why. After you figure that out, the hard part is, how do you get it? Can those reports come out of your current system? Heck, do you even HAVE a current system? Do you have a bookkeeper or accountant on staff that can help you? If not, what will it take to bring one on either in-house or virtually? These are some of the questions you will have to ask yourself and seek answers.
So, you see, you CAN post big profits, but without the systems in place you’ll be the hamster in the wheel.
Don’t be the hamster in the wheel.
Until next time,