Most lawyers don’t define success. They define what success is not.
Instead of focusing on the things they can control to build the practice they want and make the money they want, they view success as eliminating sources of stress and aggravation.
In other words, “Success is when I don’t have to do X, Y and Z anymore.”
Most of the lawyers I talk to are lifestyle lawyers. I say that without any of the negative connotations of the idea. It's not that they want to check out, or work occasionally. They want to do meaningful work and have a comfortable life without working 100 hours per week.
Of course, there are a few who have visions of building an empire.
In either case, you need to define what success means for you and your practice before you can think about how to achieve it and measure it.
The number one metric used by lawyers to measure success is, “Did I survive today?”
Not very scientific. And not very useful.
There are three core metrics that every law firm – regardless of goals, regardless of size – should be paying attention to every month.
Metric 1: Lead Flow
You could be the best lawyer in the world, but if nobody is knocking on your door, it won’t matter. Because you won’t get paid.
Every lawyer needs to meet with a certain number of qualified prospects in order to acquire a certain smaller number of clients. Without sufficient lead flow, you can’t build the practice you want.
Whether you want to be a lifestyle lawyer or an empire builder, you need enough lead flow to produce the right clients that help you make more money (and work less, because you can charge more with more leads coming in).
That’s why marketing is so important. Without marketing, there aren’t enough leads. Never forget that your leads today are your income tomorrow.
Your Action Plan:
1. Make lead flow a priority.
2. Find out where the good leads are coming from and develop a plan for finding more leads. (Need help? Our Practice Growth team can point you in the right direction: http://freedominpractice.com/session)
3. Every month, make sure you know how many leads are coming in.
Metric 2: Cash Flow
Cash is king. You can’t exist, much less grow your practice, unless you have cash flow.
If you’re always in a cash crunch, always running up the “down” escalator, you’ll just get exhausted and burn out.
You need to watch your cash flow. Know your expenses. Know how much you have to pay and when. Fix your collections issues by right-sizing your retainers, and not taking on clients who'll stiff you later.
Create a plan for increasing cash on hand to minimize or eliminate outstanding invoices. You can have a multimillion dollar firm and go bankrupt if you don’t have a handle on cash flow. Fix it.
Your Action Plan:
1. Understand exactly what you're spending each month
2. Create a forecast for when you'll get paid, what. Update it monthly and look for trends
3. Use this to adjust your strategy for pricing and collecting retainers
4. Set a target for cash on hand, and use these levers to get there within a year
Metric 3: Average Fee
One of the most underused strategies for creating a better practice, whether you want to increase profits or free time, is the fee lever. Maintaining the right average fee is critical to making money by working less.
Most lawyers don’t charge more because of fear ... fear of losing business because they increase their rates.
This is the result of an imaginary competition among lawyers on the Internet. In reality, increasing your fee is much easier than you think. The reality is much different. If you're afraid of increasing your fees, it means that you're fishing in the wrong pond. By raising them you'll immediately start getting rid of bad-fit clients, and signaling to premium-paying clients that you aren't a commodity.
I've written on this extensively elsewhere, but the bottom line is this: the biggest barrier to increasing fees is you, not the clients.
Your Action Plan:
1. Make a decision not to compete on price. Now promise yourself. Write it down. It sounds trivial, but it's not. Until you truly decide, and take action on it, it'll be a vague idea. Or, you'll back off at the first sign of resistance from a cheap prospect (when the right answer is, "next please").
2. Commit to finding premium-paying clients. Create a marketing plan to find them (again, our Practice Growth team can help you with this if you're unsure where to start).
3. Set targets for you average fee in 90 days, 180 days, and next year
4. Track your average fee every month. Are you on target?
All Three Metrics Work Together
If your lead flow is strong, you’ll have the confidence to ask for money upfront.
If you have more money upfront, you have better cash flow, and you’ll have the confidence to increase your average fees.
Even if you have very few leads, terrible cash flow and a low average fee, you can still achieve your goals. Start paying attention to all three metrics – and commit to improving all three metrics – and you’ll step onto the up escalator.