If you're involved in the legal space, you've probably noticed the industry changes that have taken place in the past few years. If you aren't constantly working on scaling your law firm, you will most likely fall behind the competition. To ensure that your firm is headed in the right direction, it's essential to harness the three forces that will help you scale your business. The first force is financial alignment, the second is operations to keep your law firm running, and the third is the marketing/sales force involved in easily and quickly scaling your law firm.
Incorporating financial alignment into your law firm's business model and strategically reinvesting into your company are just some of the essential steps towards successfully scaling your law firm. There's a way that you can quickly and easily scale your law firm without spending extra time or cash. To make sure that you're on the right path, it will take daily, continuous effort on your part.
Financial forecasting is a crucial tool in terms of keeping financially aligned. Your law firm needs to have a financial goal that you are working towards. You'll also need to define a timeline for you to accomplish this goal. Once you've got your end goal in mind, you can work backward and provide solutions for any gaps or issues that emerge during your scaling journey.
Tax budgeting is another tool that is important for financial alignment. Reinvesting in your business is an excellent way to grow and create more profits in the future. However, it can be a common mistake to overdo this and not have enough money for your tax bill. Opening a separate account for this purpose will ensure that the money is still there when it's time to pay Uncle Sam.
Another aspect of scaling your law firm deals with financial optics and Key Performance Indicators (KPIs). After our law firm accounting team helps you set up a 12-month forecast, it's essential to ensure that your financials stay aligned with your goals. Service companies like law firms can find it beneficial to use Labor Productivity KPIs. It would be best to watch real-time information on a per attorney, per unit profit basis. This will allow you to see if your KPIs are getting out of alignment. The Labor Productivity KPI takes the gross revenue generated by an attorney divided by their labor costs and produces a number, which should be between 3 and 4 for the legal industry.
The second aspect and force that needs to be addressed deals with operations. It would help if you had specific processes in place for every facet of your organization.
Operations Keep Your Law Firm Running
It's imperative to develop specific processes for every area of your organization. When these processes are well defined, they help your law firm run smoothly and efficiently, which helps cut waste and generates profits. For example, if you look at your hiring method, can you identify the exact process you use to recruit and bring new talent through the door? You can end up wasting a large amount of time and money if this single facet of your company doesn't have a well-defined process. To remedy this situation, you have to have a process in place that defines technical ability, culture fit, personality, references, etc.
The Track, Measure, and Adjust (TMA) process will help you run your processes more efficiently. Do you currently have a system in place for documenting when cases are coming into your law firm, estimating their completion date, and what the deliverables are? Knowing how to do this and who is in charge of handling this process is your first step towards efficiency.
Once you have documented your cases and have a good grasp on their completion date, it is vital to measure the success rate of meeting internal and external deadlines. Do you need to add any extra parameters to your documentation to make the process go even smoother? Measuring your goals' success rate will provide you with valuable information that you can adjust if needed.
Being agile enough to adjust is another vital tool. When you take the time to track your cases and go in-depth with your documentation, you'll start to see patterns emerge that are both positive and negative. By taking the negative patterns and adjusting them, your operations will become even more efficient. When this is done consistently, negative factors will be removed and replaced with ways to create more efficiency in your operations. We think you'll be surprised at how quickly this can make your tasks easier. It also makes forecasting much more tangible. When you need to adjust specific areas that you are unsure about, you can always utilize our experience and expertise to your benefit. Our law firm CPAs have assisted several clients with this aspect of their business.
The third force covers the marketing/sales force involved in easily and quickly scaling your law firm.
Marketing and Sales
Marketing has radically changed due to the internet. There are many ways that you can promote your law firm such as social media marketing, search engine optimization, pay per click ads, and video. Not knowing which option is the best for your law firm can lead to wasted expenditure. It's crucial to analyze your marketing and sales efforts to understand where your conversions come from.
Our law firm accounting team can help you integrate these three forces to quickly and effectively scale your law firm.