Planning for Business: The Metrics of Law Firm Financial Performance

by Elizabeth Lewis on July 14, 2011

As a business attorney and owner of my own law office, I frequently find myself with questions as to how to run my own business better.  To help work on the business side of practicing law, I attended the “Metrics of Law Firm Financial Performances” CLE earlier this month to learn more about how measuring financials can help my business grow.

I was hoping for more details about how to measure financials, but I did come away with three nuggets of wisdom that I felt were worthy of sharing:

  1. You need to have a business plan in writing.
  2. Law is a team sport – even if you are a solo practitioner.
  3. Never let your accounts receivable get out of hand.

In regards to the first nugget, I was surprised that only four people in the class raised their hands to having a business plan for their law firm. I work with new businesses every day, and I always tell them that they need to have a plan for their business, even if it is only a few pages.  I have a feeling that everyone in the class (or almost everyone) has a plan for what they want just like most business owners.  It may not be something that would need 20 pages to put it down in writing, but there is a plan there.  Whether it is to support their families, pay their student loans, or because they enjoy practicing law, each attendee went into the legal field for a reason.  However, by putting that plan into writing, it clarifies the reasons for opening your own law firm and where you want it to go.

Concerning the second nugget, and as a solo-practitioner, I can completely see how viewing what you do as a team sport would help you connect better with your clients and grow your business.  When your clients see that you are working with them, it makes what you do even more valuable.  You are creating a goal together – and working toward that goal.  Rather than being someone that sends a bill once a month, you are now part of their team.  Whether it is as a divorce attorney that helps a client through a scary and confusing time by offering advice and counsel rather than just arguing in court for him or as a patent attorney that walks a client through the long and complex road of getting a patent rather than just being someone who only talks to the USPTO, by making sure that you are a part of your client’s “team,” you provide a more valuable service than just being a document preparer or courtroom voice.

As for the third point, making sure your accounts receivable do not get out of hand sounds like common sense, but something that can easily be forgotten.  Much like getting a reminder from Facebook that a friend’s birthday is coming up or an email saying that tomorrow is trash day, having someone remind you occasionally that you should never end up $6 million in accounts receivable (okay, this number is somewhat unrealistic for most of us probably, but was used as the example by the presenter) is helpful.

Now to put these words of wisdom into action, writing that business plan is next on my agenda!

Here are few tips from Ed Poll:

Five Minute Mentor: Metrics of Financial Success from Colorado Bar Association on Vimeo.

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