lexisnexis moneyball for lawyers
DESCRIPTION
This presentation covers examines the business management side of law firms, including metrics for law firm marketing, law firm technology spending and law firm profitability. It is broken into the following sections: - Six Numbers Law Firm Stakeholders Should Know - Investing time in your law firm - Law practice vs. Law firm business - Developing a roadmap - Evaluating Clients - Working within your budget constraintsTRANSCRIPT
Moneyball for Lawyers: How to Build a Major-League Law Practice
Presented April 23, 2013 Christopher T. Anderson, J.D.
LexisNexis Firm Manager® Product ManagerDad & Pilot
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Christopher T. Anderson
Christopher Anderson, J.D.Product Manager for LexisNexis Firm Manager®, LexisNexis •Mr. Anderson is the Product Manager for the LexisNexis Firm Manager application in Cary North Carolina. •Firm Manager is a web-based practice management system that keeps the attorneys and staff of small law firms connected to all the details of their clients, cases, matters and firm business. •Christopher has presented at various State Bar associations, Law Bulletin Ethics Conference, National CLE conference, ABA TECHSHOW, and draws several hundred to webinars where he presents various topics, including running a law firm; effectively using technology and leveraging staff; and technology and trends.
Formerly:•Managing partner of a full-service law firm in Georgia. •Assistant district attorney in New York City, and in Georgia•Associate General Counsel and Director of Client Services for RealLegal, a legal software company. Mr. Anderson is a graduate of Cornell University, and received his Juris Doctorate from the University Georgia School of Law in 1994. Christopher Anderson is admitted to practice in the federal and state courts of New York and Georgia.
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Moneyball – The Movie
Inspiration – the movie, Moneyball In 2001 Oakland A’s $40M vs. $115M, limited budget
compared to other ball clubs Billy Bean (Brad Pitt) was a baseball player that
turned General Manager Braintrust – Statistics – Reinvents the Game
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Agenda
Six Numbers Law Firm Stakeholders Should Know
Investing time in your law firm
Law practice vs. Law firm business
Developing a roadmap
Evaluating Clients
Working within your budget constraints
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Why You Should Care
Source: Altman Weil 2012 Law Firms In Transition
Permanent Change 2009 2012
More Price Competition 42.4% 91.6%
More commoditized legal work 25.5% 83.6%
More non-hourly billing 27.9% 80.0%
Fewer equity lawyers 22.8% 67.6%
More contract lawyers 28.3% 66.2%
Lower PPP/Slowdown in PPP 13.2% 47.7%
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Metrics Law Firms Should Measure
What is your law firm's overhead?How do you determine what it is?• Overhead analysis (1) fixed and (2)
incremental)• Infrastructure cost (What it takes to stay in
business – fixed costs)• Cost per client acquisition (CPA -
incremental cost to bring in a client)
What does it cost you to service the client?• Salary Costs• Direct Costs
Cost Of Servicing A Client
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Metrics Law Firms Should Measure
2Profitability sliced and diced
By Firm
By Practice
Area
By Partner
By Client
By Billing Staff
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Metrics Law Firms Should Measure
According to a LexisNexis market research conducted with law firms with 1 – 100 attorneys in May 2011
» Most Solos and Duos limit their marketing to personal networking and through their website. Larger firms also leverage email lists and directories.
ALM Legal Intelligence and The National Law Journal 2012 Survey of Law Firm Economics shows:
» Only 3% of law firm revenue is spent on marketing
3Client development / marketing % of total revenue
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Metrics Law Firms Should Measure
Technology Spend as a % of Total Revenues
• ABA Technology Basic Trends Report shows law firms have increased their technology budget year over year with a 5% increase from 2011 to 2012
• On average 58.7% of law firms overall have a budget
~ 2-4% spent on technology as a % of firm revenues
• The average capital budget per lawyer “sweet spot” was a range between $8K – 17K
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Metrics Law Firms Should Measure
1. how much you work vs. bill2. how much you discount/write-down (before
you bill3. how much you write-off (after you bill)4. how much you collect5. life-cycle of AR (time of service to payment)
Realization
PROCESS IS A FORM OF TECHNOLOGY
Not Rocket science all in your control
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Five Key Drivers of Law Firm Profitability
Production Value
Utilization
Realization
Leverage
Margin
• The standard value of production• Standard rate * standard hours = expected production
from a partner, lawyer, paralegal or other timekeeper
• Measure of timekeeper efficiency• (Actual number of hours worked * standard rate) / the
production value
• Amount of receipts received net of• Any write-ups or write-downs performed at billing• Any credits or write-offs done at time of receipt
• Number of billable staff per partner• Measures on average how much staff supports each
partner
• Difference between your receipts and expenses• How well do you manage your expenses?
Recommend:Calculating Profitability, By James D. Cotterman
Copyright © 2011, Altman Weil, Inc.
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Metrics Law Firms Should Measure
In order to measure against a benchmark, you must have a baseline
• Develop a budget that includes all cash inflows and outflows
• Determine Partner Net Income (compensation, fringe-benefit costs, retirement plan contributions)
Industry Benchmarks
So What is a Good Benchmark?
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Benchmarks
SOURCE; Managing Partner Forum – 2012 Law Firm Economic Survey http://www.managingpartnerforum.org/tasks/sites/mpf/assets/image/MPF%20-%202012%20Survey%20of%20LF%20Economics%20-%20Exec%20Summary%20-%209-20-12.pdf
Joint ALM Legal Intelligence & The National Law Journal Survey of Law Firm Economics 2012
• For law firms with 1 to 75 attorneys:• The average total expense as a % of revenue is: 55%• The average income per lawyer as a % of revenue is: 45%
• 66% of law firm expenses are from salaried lawyers, paralegals and staff (36% lawyers, 30% staff & paralegals)
• 10% of law firm expense is for occupancy costs• 4% for equipment (?Technology?)• 34% of law firms said 10% of billings come from AFAs
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Investing Time In Your Law Firm
Do you know how you spend your time that you are not billing?
Are you investing your time wisely on your business?
Investment in the Business
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Developing A Roadmap
•What project to tackle first?
•Calculating an estimated ROI
•Use a rating system to help prioritize projects
Getting Started
Policies
People
Procedure
Systems
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Hierarchy of TasksYour Goal: Move up the Ladder
• Marketing/Client Development
• Client Relationships
• Strategic Planning
• Strategic Management
• High level legal skills
• Middle level legal skills
• Client service
• Technical legal skills
• Systems documentation
• Office Management
• Mail and email
• Attorney Desk and Office Organization
• Telephone answering
• Supplies
• Clerical
• Bookkeeping
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Client Evaluation
All Clients Are Not Equal
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www.lawyermoneytour.com
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Budget Constraints
Measurement = Performance
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Believing in Success
What you know is comfortable.
Is that truly what you’re working for?
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Q & A
Conclusion – Question & Answer Period
Moneyball for Lawyers: How to Build a Major-League Law Practice
Christopher T. Anderson, [email protected]
Sponsored by: LexisNexis Practice Management
Visit us at: http://www.lexisnexis.com/law-firm-practice-management/
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Sources
Altman Weil 2008 Economic Law Firm Survey -http://www.altmanweil.com/dir_docs/resource/41ff6ad2-da67-406e-9999-ca2aaae63539_document.pdf
Managing Partner Forum – 2012 Law Firm Economic Survey http://www.managingpartnerforum.org/tasks/sites/mpf/assets/image/MPF%20-%202012%20Survey%20of%20LF%20Economics%20-%20Exec%20Summary%20-%209-20-12.pdf
2011 ILTA/Inside Legal Technology Purchasing Surveyhttp://insidelegal.typepad.com/files/ILTAInsideLegalTechnologyPurchasingSurvey2012.pdf
Calculating Profitability, By James D. Cotterman Copyright © 2011, Altman Weil, Inc.
For Your Reference and Reading Pleasure