How Attorneys Like You Are Doing Better Than You
Feeling like other law firms are growing faster than yours?
We can walk you through the exact steps the best firms are taking to succeed: www.thelawfirmsecret.com
You’ve built a business, but sometimes it feels like the weight of it all is on your shoulders. You’re working hard, but where’s the freedom you’d always imagined for yourself?
In this week’s episode of Your Practice Mastered, we break down the proven framework used by our members to achieve their best year ever. This system has helped countless law firm owners track their growth, evaluate what’s working, and make real, actionable changes.
We also introduce our Entrepreneurial Attorney of the Year (EAY) contest, which inspires law firm owners to take massive action, report their results, and compete to show the biggest improvement.
What You’ll Discover:
- How to review your past year to identify what’s working and what’s not
- The key metrics every law firm owner should track (gross sales, net income, and owners benefit)
- Actionable tips for making your next year your best year ever
- The EAY framework and how it encourages real progress through community and accountability
Equip yourself with the tools to grow your business without adding any more work to your plate. If you’re looking for more support, visit www.thelawfirmsecret.com
Transcript
YPM EP099 - How Attorneys Like You Are Doing Better Than You
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MPS: [:MPS: You don't know who to turn to when big decisions come up. Here's the good news, though, the most successful law firms, don't do it alone. they surround themselves with.
MPS: The right people, the right community, the right systems, the right advisor.
MPS: That's how they do it,
MPS: Law firm owners, welcome this is episode 99 of the Your Practice Mastered podcast. We're your hosts. I'm MPS.
Richard James: I'm Richard James
Richard James: MPS We're gonna unpack what is EAY entrepreneurial attorney of the year. Why is it
Richard James: so
Richard James: important to our members, and how can they leverage it to just go back over the last year and
Richard James: actually
Richard James: do a review of what has worked and what hasn't worked
Richard James: we're about to teach
Richard James: you
attorney of the year or EAY [:Richard James: Right NPS.
MPS: The EAY
MPS: entrepreneurial attorney of the year
MPS: contest gives you a full picture of, hey, from the year before to this year, how did my business improve? How did my law firm improve and what did I do, and what were the key metrics that actually improved?
ews of our EAY finalists from:Richard James: but we don't wanna make you
Richard James: wait for that.
Richard James: We thought we'd
Richard James: actually
Richard James: give you a practical application of what they're looking back at to start to move their firm forward in this year.
Richard James: so you're going to want to write down these different views or this framework that you should look at your practice from one year
Richard James: as compared
Richard James: to the next
Richard James: year,
Richard James: They'll tell you a lot about what's working and about what's not working, and you can hyperfocus on fixing the things that aren't working and doing more of the things that are working, and you too can have your best year ever.
ycle, and that's part of the [:MPS: There's more than just the PCLC that tells us the health of the firm and,
MPS: one of those things is gross sales. This is your firm's total revenue. So how much revenue did your firm generate? And you wanna look at from an overall perspective, what did that look like for this year? and How does this year compare
MPS: to last year?
MPS: One of the other ones,
MPS: rich,
MPS: is net income, right?
Richard James: Yeah, absolutely. We just had, David Marta, and he had said, after learning what I learned from you, and I look at what were my gross sales this week, over the same week last year, or this month, over the same month last year.
Richard James: That's really what you want to be looking at. It's called a comp in retail world, like if you were in a retail store business, and that's so important. Now, the next one is, as you said, is net income. Gross sales, minus expenses equals net income,
financial reports until it's [:Richard James: We recommend you start looking at this more often so you can be ready at the end of the year to review it and, seeing your profit and loss statement on a regular basis, which really leads over to this next thing of, you know, you have your net income, but then you have this plus on top of that, Michael, that we call owners benefit, right?
Richard James: And
Richard James: owners benefit, this is for you.
Richard James: Think of like
Richard James: a broader scope from. Your net income. how much did you actually benefit from your business
Richard James: in this
Richard James: last year?
Richard James: This number reflects
Richard James: that
Richard James: net income,
Richard James: it reflects
Richard James: your salary, it reflects your distributions, and then any other personal draws that you might have taken from the firm as a net benefit to you.
Richard James: So this looks at the fuller picture of
Richard James: how much
Richard James: net income plus, owners benefit you derived from the firm, again, both this year and comparing it to, what was that, the year prior.
a square feet because [:Richard James: You run your cars through the business, but you don't really use your cars for the business. That's owner's benefit. You have money come in via cash into your business, and that cash doesn't reach the bank account and doesn't reach the p and l. That's owner's benefit. I'm not gonna give tax advice, but just suffice it to say anything that comes through the business that is not required for the business to operate and you benefit from is part of your owner's benefit.
Richard James: And oftentimes that makes up a reasonable percentage. of the overall business and makes this total owner's benefit, give you a true picture of what you earn. And, just to be clear, you should be, owner's benefit keeping somewhere between 25 and 35 at a minimum, depending on practice area.
Richard James: We have many firms that are keeping 40 50. We just interviewed a firm that's keeping 62% owner's benefit
Richard James: If you're not keeping a big percentage of the gross revenues, something's wrong and you're missing an opportunity to fix that
The problem is, if you don't [:Richard James: but MPS, we actually need to get into marketing and start looking at lead flow, right?
Richard James: Yeah, we do.
Richard James: and I just wanna come back for a second,
Richard James: just to be clear.
Richard James: Growing for the sake of growth means nothing to you if you're not keeping that
Richard James: right.
Richard James: And that message has propelled so much in this industry right now is
Richard James: grow, grow, grow, grow,
Richard James: grow. And then you look at it and you're like, huh, I've got a $5 million firm and I kept 200 grand this year.
Richard James: That's a problem, right? Would you rather have a $500,000 firm and keep 300, or would you rather have a $5 million firm and keep 200, right? Growth for the sake of growth means nothing. make sure you've got that owner's benefit number on lock and be careful about what you're listening to out there.
t to you this last year that [:Richard James: We talk to hundreds of attorneys every month and you would be shocked as to how many of those attorneys, when we ask them how many new leads they had they'll say, well, I don't know. Let me look at my calendar. And I'll go, what does your calendar have to do with new leads?
Richard James: well, the new leads are on the calendar. I go Every single new lead. Schedules an appointment. He goes, oh no, no, no. We, don't track them if they don't schedule an appointment.
Richard James: [:Richard James: Not my goal, not my intention. I'm trying to help you move to the next level. So counting unique qualified leads. As a lead, somebody who raised their hand that said that they have a legal matter that you can help them with, that they're qualified for. We need to be tracking those as compared to the next metric, which is the number of new appointments we set, called the set rate.
Richard James: The number of appointments compared to qualified leads that come in during that period of time is your. Set rate, and so you wanna be tracking how many appointments the phone team or your marketing is getting scheduled for you. It tells you the health of your conversion. So many firms are focused on spending more money on leads and pay no attention whatsoever to their intake process.
Richard James: Or they don't have an intake process and they just assume that it's right because they have a process. Not all processes are right. your job as the owner of the firm is to make sure that is maximized.
Richard James: You wanna maximize your set rate.
bout those who decide, oh, I [:MPS: I don't like hot transfers. hot transfers historically underperformed compared to Setting an appointment that gets someone to show up, which is the next layer of this.
MPS: So you've got leads coming in,
MPS: Qualified leads or maybe not qualified. You gotta track that too, by the way. It's your intake person or team's responsibility to set those leads into appointments. That's step one on the totem pole. Step two is now we've gotta get them to show up to their appointment, which is AKA, our show rate.
MPS: So out of the appointments we set how many of them actually showed up and the goal here is to make sure that in the setting we're sticking the glue, we're getting them to commit to showing up we have no chance of them becoming a client if we can't get them to show up.
MPS: so showing up is now the next layer on the totem pole, which brings us to the final layer. Just hires, right?
hind. So if somebody says to [: es: Yeah. So if I'm comparing:Richard James: So the number of appointments that were set, and then what was the set rate, then what is the set rate now? And then of the appointments we set, how many showed what was the show rate, then show rate Now. Which leads us to this idea of how many retained the firm, what was our hire rate, then what was our hire rate and of course, how many new hires do we have now versus how many new hires do we have then? And so when you're looking at this information. It tells you whether you are growing, whether you're moving in the right direction or you're not.
Richard James: And once
Richard James: you understand that,
you should make, you should [:Richard James: Is that correct? NPS.
MPS: That's correct.
MPS: And to give you a good baseline for this. What does that mean statistically?
MPS: your set rate. It should be
MPS: somewhere
MPS: between. 65 and 85% of leads turning into set appointments. Then about 65 to 85% of those, even upwards of 90 if we're doing paid consults, showing up to their appointment.
MPS: And then once you get them to show up to the appointment, 60 to 80% of those retaining the firm and taking the next step. So that gives you a good picture on. Do you have a lead problem or do we have a conversion problem? And I will tell you, most law firms we work with have a conversion problem, but it's easy to have that disguised and think we have a lead problem because we have a conversion problem.
majority of the time we have [:MPS: Referrals. Referrals is another important thing to track,
Richard James: if you're not very good at what you do then people are gonna find out. And if you're really good at marketing and sales and you're not very good at what you do, you're just gonna speed up the pace at which everybody finds out you're not very good at what you do. Conversely, if you are very good at what you do, you will get referrals.
Richard James: Now you want to build systems, so you get referrals on purpose, but you do wanna review. The number of referrals you receive this period over, last period, and review your referral rate. of the new hires what percentage are from referrals
Richard James: and what is
Richard James: that percentage,
Richard James: this period, and
Richard James: what is that percentage
Richard James: last period?
dn't advertise. Now that you [:Richard James: Feels
Richard James: fairly
Richard James: healthy.
Richard James: There are
Richard James: some firms that have a higher referral rate and it does depend on practice area, when you're investing money on advertising, you should still get a healthy rate of referrals. It's a signal that you're doing good work. It's also is signal that you've built an excellent system to ask for referrals because it's really important.
Richard James: Just like asking for referral is important. Asking to get paid is important, right? NPS.
MPS: It's usually one of the sneaky ones, right?
MPS: Because
MPS: if everything else is looking good in that PCLC, but something's not lining up with how much we're
MPS: actually
MPS: generating, likely it has
MPS: to.
MPS: To do with your realization rate or how much you collect. Versus the actual gross sale value you bill, this is where realization rate comes into play.
MPS: How much money are we
MPS: actually
llecting? this is actually a [:MPS: it's set up on autopay if we're doing things optimally and an autopay fails, but we don't catch it and so we don't end up collecting it, right?
MPS: There's a lot of reasons we run into collection issues or realization rate issues, but this number is
MPS: really, really
MPS: important
MPS: because
You can do everything
MPS: else
MPS: right on the front side.
MPS: But if you get this wrong and we don't actually collect and realize what we've actually sold, then you're in no better position today than you were yesterday. Would you agree with that? Rich?
Richard James: Oh, absolutely.
Richard James: Quick story. I met with somebody, just the other day, brand new client. they're doing $1.2 million in revenue.
Richard James: They're
: a fee-based hourly billing [:Richard James: they generated $2 million in business, but only did $1.2 million in revenue, which means there was $800,000 of work they did that they didn't get paid for.
Richard James: So
Richard James: if they billed at $500 an hour. They're actually only billing at $300 an hour the first thing we needed to do was to help them put a system in place
Richard James: to understand how
Richard James: to manage their accounts receivable or collections department. We're making sure we get paid. the interesting thing is that person, when they fix this, won't have to spend any more money on advertising.
Richard James: They want to do anything and they will voila, create
Richard James: another
Richard James: $800,000. Theoretically, if that's the opportunity, I think the more likely it'll be $600,000 in revenue that they'll create, that wouldn't have been there otherwise. Without changing the number of hours
Richard James: that are
Richard James: billed,
Richard James: the number of
Richard James: clients that come in,
Richard James: the number of
s, none of this will change, [:Richard James: when you get your collections right, it makes an awful lot of cash awful quickly. That's why it's so important to watch it. Period over period.
Richard James: So
Richard James: either year over year, quarter over quarter,
Richard James: or what have you,
Richard James: so
Richard James: that
Richard James: you can see. How is your realization rate changing? Realization rate is
Richard James: pretty
Richard James: simple.
Richard James: It's the amount of money we get paid divided by the amount of money
Richard James: we were supposed to get paid. And so that's your realization rate, to be clear, your realization rate. Within, most fee-based law firms is gonna be somewhere between 95 and 85%. Like bankruptcy is oftentimes in that 85, 87, sometimes 90, but tough in that 85, 87 range.
Richard James: But like family law should be in that 95% range, right? So it depends on your practice area. Some can get even higher than 95%. Estate planning is certainly one of those that can get that high. But if you're not in that range. You're just leaving an awful lot of money sit out there that you'll never realize
Richard James: it will always be there
Richard James: and your accounts receivable will just grow.
dance all the way through of [:MPS: we walked through what those gold star metrics should be in percentages. And by the way, props to you if you're here, but for example, if the range is 60 to 80% close rate and you're at 60, congrats. Does that mean there's nothing to optimize?
MPS: That means there's still, an additional 60 to 80%, right? So we still have room to grow
MPS: in there.
MPS: So
MPS: I tell you that because great, that might be one that you hit that key threshold at, but there's still room to grow now that you've got these numbers, assuming you went through the exercise, it's time to dig deeper into these numbers and do three things to dive deeper.
MPS: first is
hat take an actual deep dive [:MPS: Rich, anything you wanna add on what's working?
Richard James: Just this. Look, if you are that firm that's sitting there going, guys, that's great, but I don't have any of this data.
Richard James: Like
Richard James: I don't track anything. I've not heard of these things
Richard James: before.
Richard James: It's not part of my DNA. Our firm never did that. I get it. You're not alone. here's my advice Just pick one.
Richard James: one
Richard James: or slash two
Richard James: Easiest for you is like. What is your hire rate? Because you should generally know based on your calendar who showed up. and you should know how many clients retained your firm. So you should have a general idea of what your hire rate is.
Richard James: the set rate might be,
Richard James: harder if you haven't been harvesting your leads. your p and l might be harder if you've never worked with a bookkeeper
Richard James: or gotten your bookkeeping before. So if I can just get you to
Richard James: start with one piece of data, and say, okay, from this point forward, I'm gonna start tracking this piece. From this day forward, I'm gonna start tracking this piece.
if that's you and you don't [:Richard James: go back and
Richard James: recreate some of it, but don't try to recreate all of it.
Richard James: Just recreate one piece of it
Richard James: and start there.
Richard James: Does that make sense?
Richard James: NPS.
Richard James: It does. and, once you've
Richard James: got your data, once you
Richard James: identified, what's working, you also have to look at, okay where did I fall short? Where did the firm fall short? Was it your higher rate? Was it your set rate? Was it your realization rate? And then figure out, is there anything that led to it falling short?
Richard James: And did it fall short compared to the previous year, as in the previous year was. Better and you did something differently, or was it that this has consistently been falling short and there's just something that we're not doing that can be a carburetor adjustment, which kind of flows into the third point
Richard James: of what we have to do
Richard James: once we take a deeper dive
Richard James: at this.
Richard James: But
Richard James: we have to identify where we fell short. look at this holistically and the third layer of this is, okay, what can be improved? So now that we've got our baseline, we went through where percentages should be. You take a look at your numbers, you identify what's working, you identify where you fell short.
at can I do to improve Is it [:Richard James: We gotta look at what can we start to do to improve this? Is it cutting back expenses to get our profitability number where it needs to be? Our total owner's benefit number where it needs to be
Richard James: rich?
Richard James: Anything you wanna add?
Richard James: No, I completely agree with you. you, you nailed it on the head. I mean, top side numbers are for vanity. Bottom side numbers are for sanity, which means that profit is so important
MPS: okay, you've got all this, what you do next is very simple. First, you gotta start setting some realistic goals. So identify where you were at in some of these metrics and where do you wanna get to, every increase. Is an increase.
MPS: So sure, maybe you're at a 20% higher rate and you wanna get to 80% but let's go from 20% to 40%. That alone, you've doubled your business,
MPS: right? So,
MPS: let's set realistic goals
MPS: that you can start
MPS: to strive for.
MPS: But in order
MPS: to accomplish a goal, you need an action plan.
MPS: So you also
make sure, okay, I've got a [:MPS: on that goal?
MPS: What's my action plan? What's my implementation plan?
MPS: So you
MPS: have to
MPS: create an action plan, and use numbers to tweak your systems.
MPS: So
MPS: now you've got your goal,
MPS: you've got
MPS: your
MPS: action
MPS: plan, you go out, you start to execute. Now you've gotta actually use these numbers and use that as your metric, your North Star metric, to actually go out there and start to tweak the systems to get there.
It's simple. It's not easy, right? And this isn't something that's easy to do alone. Would you agree with that?
Richard James: Yeah, for sure.
Richard James: In the upcoming episode you're gonna hear from the EAY finalists and, some have been with us for as short as less than a year.
Richard James: One of them, has been with us for a very long time, almost from
Richard James: the beginning. And, if it was easy, everybody would do it.
Richard James: The reality is that there's a lot to this, a lot to learn. you're trying to change the brakes on the car as you're driving down the road, when you're trying to be the lawyer and run your business. And it's gonna feel hard and cumbersome.
barriers that you're facing [:Richard James: take it one step at a time and you just start with reviewing where you are at, taking stock of where you are right now, it's gonna put you on the path that's gonna change your life forever.
If you're hearing all of that and you're like, whew, then that's a lot to do on my own. You can take the tools that are here on the channel through the website, through the podcast, and go make it happen. But if you'd want some help in this and you do want support of a community and people that have been there and done that, we'd be happy to discuss that.
You could go to the law firm secret.com and we'd be happy to help out.
