In law school, you were trained to win. You started your career to win. And you started your own firm to prove you could win as a business owner — not just as a lawyer. Yet, years into practicing law, many firm owners do not feel like winners. You could turn that around with this formula for making $1 million as a law firm owner.
Table of contents
- Applying the Formula for Making $1 Million
- Getting to $5 Million in Revenue
- Build a Predictable Revenue Engine: Optimize Marketing and Intake
- The Bottom Line: Put in the Work and Reap the Rewards
The Bureau of Labor Statistics shows that at $135,740 per year, a lawyer’s median pay is above average, but that is nowhere near the winners’ circle. Yet this is the norm: Most law firm owners are not high-income earners but they work more — and have more stress — than their peers.
For many law firm owners, winning comes down to making $1 million a year or more. A goal most will never accomplish, although it is not nearly as hard as it may seem. Here’s how.
Applying the Formula for Making $1 Million
As an owner of a small — I repeat, small — law firm, you do not need to be a character on “Suits” to make $1 million. All you have to do is get to $5 million in gross revenue.
Let’s Review the Math
You may think getting to $5 million is impossible, but when you just got out of law school, generating eight or nine cases per month was also just a dream. Yet here you probably are.
As with any other professional services company that is fairly well managed, you want an approximately 20% pre-tax net profit margin — that is $1 million on $5 million in gross revenue. In addition, if you manage your firm, you’re going to pay yourself another $300,000 to 400,000 in salary for that job.
So, if you’re the sole owner of a $5M law firm, you can make $1.3 million to $1.4 million in combined pre-tax profit and salary as an owner-CEO.
Now, here is how to get there.
Getting to $5 Million in Revenue
Let’s imagine you practice family law and your average case value is $10,000. You have 100 clients a year — eight per month — that generate $1 million in revenue. To get to $5 million, you need to increase your cases by 5X — to roughly 42 cases per month.
You probably doubt you can jump from eight to 42 cases, but if you look around in your geographical market, there’s a high probability that thousands of new cases come up every month. It’s just a question of who’s going to get those cases, you or your competitors.
Build a Predictable Revenue Engine: Optimize Marketing and Intake
To increase case flow, you must have a predictable revenue engine that consistently attracts more prospects and converts them into retained clients.
There are two components to your revenue engine: 1) marketing, which attracts clients, and 2) intake, which converts some prospective clients into retained clients.
What does it take to generate more cases? It’s more efficient marketing that attracts all of those prospective clients (qualified leads) and a more efficient intake process.
How Do You Improve Marketing and Get More Qualified Leads?
There are two rules you have to satisfy to get there.
- Be where and when your prospective clients are looking for the services that you provide.
- Give them exactly what they need for them to give you what you want.
Let me break down why these rules are so important:
When most people look for an attorney, they use Google search. Google gives your law firm five opportunities to show up in search results and attract those clients:
- Pay-per-click advertising (PPC)
- Local service ads (LSAs)
- Local map pack
- Organic search results
- Lawyer directories like AVVO and SuperLawyers.
Once they find you on Google, prospective clients usually visit your website. This is where you need to give them exactly what they want: answers to the basic questions that prospective clients want answered before they reach out to you by phone, email, text or chat.
What are those questions? Easy:
- Can you help me with the type of legal problem I, your prospective client, have?
- Are you good at it?
- Do other people confirm that you are good at it (reviews)?
- Can I afford you?
- What is the next step I should take?
How do you show up on Google in five different places? Simple:
- Pay-per-click and local service ads require advertising dollars, the fuel for your business. You may say that you don’t have the budget for it. Baloney! Find the money because there will be a solid return as long as ad campaigns are done right.
- Showing up in the local map pack and organic search results requires hiring the right team to guide your search engine optimization strategy. Be patient. It’ll take time, but you will be impressed by the results.
- Pay attention to legal directories. Make sure that you have sponsored listings in Avvo, SuperLawyers and other directories where people look for attorneys who do what you do. Do not rely on free listings — you want to be at the top of the list; otherwise, most prospects will never find you.
In conjunction with efficient marketing, you need to make sure that your intake process is optimized. Otherwise, much of your marketing investment could be wasted as prospects ultimately sign up with your competitors.
How Do You Optimize Your Intake Process?
Focus on the fundamentals:
- Whenever somebody calls, make sure that a real human being answers the phone. Don’t use an automated attendant. Make sure somebody is covering the phone lines at all times of day. Prospects respond differently to a human than a machine.
- Don’t just hire a receptionist or an answering service. Make sure they know how to ask the right questions and tell the right stories to those prospective clients so they actually convert.
- Make sure a lawyer is there to take the call after the intake specialist is done. This will maximize conversion.
- Require your intake specialists and attorneys go through sales training. This is a game-changer. Sales training is not about convincing people to do what you want them to do but rather helping them decide whether your firm is the right choice for them. And, yes, you need to know how to do this effectively.
The Bottom Line: Put in the Work and Reap the Rewards
In summary: Optimize your marketing and intake efficiency and within a few months to a year, your business will multiply, helping your income catapult into the seven-figure range.
A side point: Managing a $1 million law firm is infinitely harder than managing a $5 million firm because with more money coming in, you will have more and better resources to take care of more things.
All of this may seem hard and even foreign, but it is infinitely easier to put in the work and get there than to suffer from unrealized potential for the rest of your life.
Image © iStockPhoto.com. Updated from a post originally published in 2015.
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