Effective Billing to Minimize Lost Time & Revenue: How Do I Actually Make Money Doing This? Jeffrey S. Krause, JD Solfecta, LLC
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1 Effective Billing to Minimize Lost Time & Revenue: How Do I Actually Make Money Doing This? Jeffrey S. Krause, JD Solfecta, LLC
2 Jeffrey S. Krause, J.D. Jeffrey S. Krause is a Wisconsin attorney and is a founding partner of Solfecta, LLC. After beginning his career in private practice, Jeff began assisting other attorneys to better use technology in their law practice. Since 1998, he has assisted hundreds of law firms through custom configurations, training and general support. Jeff is a certified or authorized consultant for dozens of law office applications and is a frequent author and speaker on a variety of legal technology topics. Prior to embarking on his career as a Technology Professional, Jeff was engaged in the private practice of law. His legal background includes Plaintiff s Personal Injury, Insurance Defense, Real Estate, Land Use Planning and Corporate Law. Jeff is a 1996 graduate of the Marquette University Law School. He also holds a B.A. and M.A. in History from the University of Wisconsin-Milwaukee. 1
3 Our Love-Hate Relationship with Time and Billing Love Hate 2
4 LexisNexis Billable Hour Survey On average, attorneys billed 69% of the time they worked For every hour worked, 20 minutes was lost 3
5 LexisNexis Billable Hours Survey 4
6 Where are the non-billable hours being spent? Key findings: 1. The Biggest Culprit: Case Management and Administrative 2. Nearly 70 percent of survey participants reported that client development activities have relatively little impact on their ability to focus on billable client work. 3. Other Interesting Findings Overall, larger Firms Were More Efficient at billing than smaller ones 10% Of respondents claimed they couldn t accurately account for their time as a result of chaotic schedules coupled with disruptions 5
7 BUT Size Isn t the Only Factor for Effective Billing Of the top 25% most efficient firms, 56% of them were small firms with 1-5 attorneys So what are they doing right? 6
8 The Value of Time Time is Money Ben Franklin 7
9 The Value of Time But think about it If you spend your money, can you make more? If you spend your time, can you make more? 8
10 The Value of Time Lost time is never found again Ben Franklin Time > Money Jeff Krause 9
11 Two Approaches to Time Management Efficiency Effectiveness 10
12 The Math of Efficiency Task A paralegal must draft two complex documents. Each document takes an hour and you bill his/her time at $100/hr. You pay them $40 per hour in salary and benefits. You implement a document assembly program that allows the same paralegal to draft two documents in an hour. Nothing else changes. You implement the same document assembly program but charge a flat fee of $100 for each document. Value $200 - $80 = $120 $100 - $40 = $60 $200 - $40 = $160 11
13 The Math of Effectiveness Task Value Billable work. Rate $200. Salary $125,000/yr. $200 - $60 = $140 Present a one hour seminar that results in several new clients totaling $15,000 in work from those new clients. Assume four hours preparation for the seminar. Treat a client to lunch that results in $5,000 in new work from the client. $ $300 = $14,700 $5,000 - $110 = $4,890 Cleaning your desk for an hour -$60 Opening and sorting mail for an hour -$60 Answering Varies 12
14 We Often Do What We Ought Not Be Doing! Time is Finite Choose to use for: HIGH VALUE or LOW VALUE 13
15 Hierarchy of Tasks Highest Value Marketing / Client Development Maintaining Client Relationships Strategic Planning (Firm and Cases) Strategic Management of the Team High(est) level legal skills 14
16 Hierarchy of Tasks Legal High level legal skills Middle level legal skills Client service (Inform and Respond) Technical legal skills (Drafting, Discovery) 15
17 Hierarchy of Tasks Technical Client service (Inform and Respond) Technical legal skills (Drafting, Discovery) Systems documentation 16
18 Hierarchy of Tasks Administrative (also known by many as the stuff I spend a lot of time doing ) Systems documentation Office Management Mail and (Open, sort, forward) Attorney Desk and Office Organization Telephone answering Supplies Clerical Bookkeeping 17
19 Marketing/Client Development Client Relationships Strategic Planning Strategic Management High level legal skills Middle level legal skills Client service Technical legal skills Hierarchy of Tasks Move up the Ladder Systems documentation Office Management Mail and Attorney Desk and Office Organization Telephone answering Supplies Clerical Bookkeeping 18
20 The Time Target Distractions Not Urgent and Not Important Interruptions Demands Distractions Zone Urgent but Not Important Urgent and Important Important but Not Urgent 19
21 Why We Don t Delegate? No time to explain. Quicker to do it myself. They won t do it right. I can do it better. Fixing their mess will create more work for me. If someone else can do the task, I am less valuable. 20
22 How to Start Delegating Skill Required 2 Delegate Next 1 Delegate First Keep For Yourself 2 Delegate Next Enjoyment 21
23 How to Delegate 1. Prepare beforehand 2. Clearly define the task and ask the person to repeat it back 3. Clearly define the timeframe 4. Define the level of authority Recommend (Research options and propose best alternative) Inform or Initiate (Research best option, tell me why, then do it) Act (Just do it) 5. Identify Checkpoints 6. Debrief 22
24 Billing Tips For Efficiency Use tools that make it easy to track time, automate processes & consolidates information for better time management. For Effectiveness Focus on high value legal work - Delegate or outsource what you can Track all time billable and non-billable Plan your non-billable time Don t Undervalue Your Time 23
25 Case Management The Rules Follow These Rules For every matter, you should know: 1. The next thing that has to be done 2. The priority 3. The due date 4. Who is responsible for it 5. How long it is going to take 24
26 Professional Case Management: Getting it Done 25
27 How Much Do You Know About Your Law Firm? What percentage of time worked actually gets billed? Of the time that gets billed, what percentage actually comes back into the firm as revenue? What is the cost of servicing a client? 26
28 What numbers matter? Five key drivers of law firm profitability Production Value Utilization Realization Leverage The standard value of production Standard rate * standard hours = expected production from a partner, lawyer, paralegal or other timekeeper Measure of timekeeper efficiency (Actual number of hours worked * standard rate) / the production value Amount of receipts received net of Any write-ups or write-downs performed at billing Any credits or write-offs done at time of receipt Number of billable staff per partner Measures how much production you are receiving from your staff Margin Difference between your receipts and expenses How well do you manage your expenses? Blended rate = Average rate your firm charges for all timekeepers (from partners to paralegals) 27
29 How Much Do You Know About Your Law Firm? What percentage of time worked actually gets billed? Production & Utilization Of the time that gets billed, what percentage actually comes back into the firm as revenue? Realization What is the cost of servicing a client? Leverage & Margin 28
30 An Effective Law Firm 1. Understands where time is spent by everyone who works at the firm (billable and non-billable staff) 2. Knows the difference between work and results 3. Builds on the strengths of the team 4. Concentrates on minor areas where performance makes a big impact 5. Makes informed decisions 6. Uses systems where appropriate for efficiency 29
31 Q&A Contact info: Jeff Krause, Legal Technologist, Attorney and Partner at Solfecta Phone: Blog: LinkedIn: jeffreyskrause 30
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