Six-Month Revenue Challenge

Clio’s 2017 Legal Trends Report Has Scary Lessons for All

By Dustin Cole | Oct.30.17 | Billing, Daily Dispatch, Law Firm Management, Money, Small Law Firm

Clio gets to see us with our pants off.

With data on the billable and nonbillable activities of more than 60,000 lawyers, Clio sees what users of the practice management platform are doing on an everyday basis. And, as with last year’s report, conclusions from Clio’s second Legal Trends Report are striking.

Here is the meat:

Lawyers spend only 2.3 hours daily on billable tasks (29 percent of an eight-hour workday).
Lawyers collect on average only 1.6 hours daily when collection and realization are factored in.
Lawyers spend nearly half of their day (48 percent) on office administration (billings. bookkeeping, technology and so on).
They spend about one-third of their time on marketing, which “suggests earning new clients is a constant concern.” (Well, duh.)

Statistics Lie – Sort Of

Clio’s data shows us results, which are important, but not the whole story.

The abysmal collection rate is real, but there is often a “marketing” issue behind it: attorneys accepting dubious clients because “some income is better than no income.” It’s a dangerous misconception that can strangle a practice. Also (surprise), many lawyers simply don’t like asking clients to pay their bills.
To help figure out how lawyers are spending those lost billable hours, Clio conducted an additional survey of almost 3,000 lawyers. Those results show that “administrative” time is split between licensing and CLE, office administration, billing tasks, and configuring technology, with a smaller amount spent on collections. Experience suggests they’re right on. Lawyers often think it’s cheaper to do all their own stuff rather than hire someone. And frankly, some hide out from their work, their marketing and their worries by sticking their heads in the sands of office stuff. What they miss is that every hour they spend here is an hour they’re not billing — or marketing for billable work.
Do lawyers really spend one-third of their time on marketing? Or are they recording their social media time — unstructured, undirected, haphazard as most of it is? My cynical suspicion is that if these statistics were available pre-social media, then “marketing time” would be 10 percent at best. Most lawyers hate marketing (because they don’t understand how to do it well) but love social media. But, doing social media marketing well requires focus, planning and structure.
In my experience, and based on past ABA statistics, the average lawyer loses 20 to 25 percent of their potentially billable time to distractions and interruptions. So, what’s recorded isn’t necessarily what really happened. Indeed, Clio’s survey data says 25 percent of legal professionals are interrupted more than 10 times per day, and 30 percent are interrupted between six and 10 times per day.

There Are Aha’s in the Numbers

Over the years I’ve observed that when lawyers set huge goals — doubling their revenue, say — they often get overwhelmed and discouraged. They fall back to “yeah, but I’ve got work that needs to get out” and the quest ends.

You make the most progress when you set smaller, easier to understand and easier to achieve goals. The Legal Trends Report offers some specific places to start.

No matter how your numbers compare to Clio’s, “kaizen” is a word you need to know. It’s Japanese for “change for better,” but it has become a buzzword for “continuous improvement” — or the constant tweaking of your operation. Continuous improvement is the cornerstone of some of the world’s most successful companies, like Toyota (Google Toyota Kaizen), and you can apply it to your practice.

A Six-Month Challenge to (Reasonably) Improve Your Practice

Here are small goals you can focus on to make a difference in your revenues, your efficiency — and even the quality of your personal life. Over the next six months, I challenge you to:

Identify your real collection rate (most lawyers only have a guess) and improve it by 5 percent.
Reduce your “admin” time by 10 percent.
Commit to tracking your production time more carefully and increasing it by 30 minutes a day. By the way, waiting to record time until the end of the week or month loses you money because you forget lots of bits — essentially, it’s lying to clients because it’s not actual but a reconstruction.

Reasonable, unfrightening goals? Doable? Sure. And that’s the idea.

Now Comes the Big Idea: Never Stop Improving

Toyota achieved its success by producing some of the highest-quality products in the world. They did it 1 percent at a time. The company measured quality at every step of production, then set about improving the level of quality just a bit. One to 2 percent, maybe. And when that was finished, they started again, with another 1 percent. And another.

You can do the same. Measure where you’re at in each area of your practice: billable hours; utilization, realization and collection rates; hourly rates and fees; client communications — including phone calls and email handling; document generation; and marketing. Start with your one or two most visible, most important or most troubling areas. Set about to tweak them, not revolutionize them. Then do it again next month, and the following month … and the following month.

Make it a habit to hold up one specific piece of your practice regularly, and find a way to improve it just that 1 percent. You’ll be surprised at what changes you can accomplish and how you can recruit others in your office to the kaizen mindset.

Note: The 2017 Legal Trends Report uses data from three sources: 1) aggregated and anonymized data collected from more than 60,000 Clio users; 2) a survey of 2,915 legal professionals representing both Clio users and non-Clio users; 3) a survey of 2,002 consumers.

Dustin Cole is President and Master Practice Advisor with Attorneys Master Class. For nearly 25 years, he has delivered CLE programs on practice management, marketing, risk management and succession planning for bar associations and organizations. He has keynoted and trained at nearly all of the nation’s solo and small firm programs, worked with more than 400 individual attorneys, and conducted operations and marketing analyses for more than 100 firms. Email him at dustin@attorneysmasterclass.com.

Related: “Clio’s First Trends Report Paints an Alarming Picture of Small Firm Practice” by Jared Correia.