Through regularly working with and interacting with lawyers, I have begun to see two fairly distinct groups emerge in terms of how they manage their practices. A common theme seems to be that they either love to focus on one side of the ledger or the other. The two sides I’m talking about here are revenues and expenses.
Those that fall into the first group have fairly good revenues for the size of the firm; however they have no handle on the firm expenses.
We recently worked with a firm that was a lot like this. It was a solo practice and the annual revenues hovered right around $240,000. This isn’t anything exceptional, however that should be enough to keep the firm running and provide a reasonable standard of living for the attorney. The issue was that the attorney refused to anything on his own. He had staff for everything, regardless of whether they actually saved time or made the firm run efficiently. This ended up putting the attorney in a position where all the revenue was used as soon as it came in, if not before.
The scale gets tilted too much in this direction and the owner loses all the freedom and work/life balance that should come with a solo or small practice. Most people like the idea of staff working for them and doing all the things that they don’t want. The caution here is that you can quickly become handcuffed by rising expenses and end up working for your staff rather than yourself.
The other side of the coin then is those that are focused solely on running a lean / low cost operation. If I were forced to choose one extreme or the other, I would lean this way, however this side also has it’s disadvantages.
This attorney is the one that insists on doing everything herself because she doesn’t trust that anyone else can do it as efficiently or as well as her. She is proud of the fact that her only expenses to run the firm are her time. However, there also lies the problem. This type of attorney ends up spending significant amounts of time on administrative rather than billable matters. Even if she is efficient in those areas she is still missing out on the opportunity to increase revenues.
This group regularly loses sight of the fact that in some cases an increase in expenses is actually the best thing for the firm because it can allow for a greater increase in revenues.
So it’s obviously not a surprise or anything too complex, however the key lies in finding the right balance between handing off tasks and keeping expenses low.