In our last post, we began our discussion about the Clio 2017 Legal Trends Report. and all of the bad, awful and not-so-good news that it has for small firm lawyers. So, now, guess what? We’re going to take this from bad (and all that other stuff), to worse. Because, yes, it gets worse.
Hourly rates = some good news, but plenty of bad news too
The numbers for average matter value, hourly rates and the like in the Report that have been reported by the press are, of course, the averages, and thus, of course, the specific numbers vary. For example, page 30 of the Report discusses hourly rates by location. The average hourly rate of $260/hour is exceeded in states such as New York, Nevada and California, where the average in-state rate is well over $300/hour. In contrast, in states such as Iowa, Maine and West Virginia, the average rate in the state is under $150/hour. New York and California are a whole heck of a lot more expensive to practice in than Iowa or Maine . . . but not by more than twice as much.
Yet the differences between locations are dwarfed by the differences between practice areas. Page 34 of the Report contrasts the rates above or near $300/hour for law firms and lawyers for work in areas such as Corporate law, Bankruptcy and IP versus rates near or even below $150/hour for Med Mal, Workers’ Comp and Criminal matters. Do you do Juvenile law? Then you already know that you will be lucky to break $100/hour.
Hourly rates are just the beginning of how your practice ends up
But as you know, hourly rates are just the beginning of the calculation that determines how much you, the lawyer, are actually earning. Utilization, realization and collection rates all greatly impact how much you earn; if any of those rates are bad, it’s going to be bad for you. Unfortunately, the Report shows that all of those rates are, on average, bad. Page 10 of the Report shows that average utilization is just 29%, which means: “For lawyers working an 8-hour day, this amounts to just 2.3 hours of billable time.” Wondering why you are working way more than an 8-hour day – and, per the Report, 71% work more - this is why.
Realization and collection rates are dreary as well: at 82% and 86%, respectively. Yet the cumulative impact of realization and collection rates at these levels means that you are only getting about 70 cents on the dollar for each of those hours (2.3 per day?) that you were able to bill to a client.
So, that's the bad news, what can you DO about it?
Now that we’ve got you out on the ledge, wondering why you ever decided to go to law school in the first place, let’s try to get you off that ledge and to a better place. As we promised to discuss in the previous post, Woodpecker can help you. How? Here’s just a few ways to start – don’t worry, we’ll have more in future posts:
1. Re-use your best work product examples as templates. Just take your sample pleadings, contracts, memos, whatever and turn them into templates with just a few clicks – all without leaving Microsoft Word. It takes just minutes. It saves you hours.
2. Create a workflow. “Workflow” is one those terms that sounds complicated, technical even, but it’s not. In fact, you already have a workflow for your matters and your documents within those matters. Whether it is first finding a prior example document somewhere on your harddrive (or, worse, in a binder full of paper up on a shelf somewhere), then going through the document to Find and Replace (or worse, just scrolling through) prior case references with new ones, and so on. The most important thing here is to take your existing workflow and make it more efficient by cutting out the stuff that takes too long (like finding that binder or scrolling through that document). Sure, we can help you create newer, better workflows with Woodpecker, but let’s first take what you’ve got and make it better.
3. Reduce errors. When you are only able to bill 2.3 hours out of your day, and then get paid for only about 70% of that time, you don’t have time to make – and fix – mistakes. If you can get the client name, party name, jurisdiction right the first time in your documents you can get it right every time with Woodpecker, because it populates your templates for you. And no worries about missing finding/replacing a client name or the like in your documents when that information is all automatically updated as well.
So, what are you waiting for? You can take a few minutes of those 5.7 hours (or likely more) per day that you are not billing and sign up for Woodpecker. In just a few minutes more, you can start to cut down on that non-billable time and start making more money.
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