Category Archives: Budgets

FREE DOWNLOAD: What does good performance look like for a legal practice like yours today?

NatWestDOWNLOAD:   NatWest’s 2016 Law Firm Financial Benchmark Survey Report

” … median profit per equity partner is £111,000, which is £4,000 higher than the figure from last year’s survey.”  BUT “If firms could focus more on profitability and perform at the upper quartile point for gearing, recorded hours, recovered rate and margin, they would achieve a profit per equity partner of £409,000.”

“… median profit margin steady at 24%, close to the long-term average of 25%. This suggests that the legal profession has now implemented the necessary changes to earn at historical levels.  Are firms going to be happy with this level of profit?”

… and much more to help you set expectations for your practice.  The survey covers 390 firms, delivering robust regional and national data reference points.

DOWNLOAD your free copy of this informative 2016 report here >>

This is the largest annual benchmark report to date from NatWest, with contributions up by 15% from the 2015 report which you can also find here. 

Share this – Make it easier for your lawyers to rate their performance and get agreement on how to improve it.

Natwest Benchmarks 2015 Snapshot - Profit per Equity Partner, PEPDownload this free series of slides which condenses the key financial benchmarks identified in NatWest’s 2015 survey of law firms.   Then share them with your fee earners to set achievable expectations and develop a better understanding of the potential improvements that lawyers can influence directly to put more money in their pockets.  The challenge then is to explore and agree how best to do that.

The opening slides introduce the key components that you and your people can pro-actively work on within your practice to improve profitability.

The remainder pull out the comparative numbers for firms of different sizes and levels of performance that enable you to compare your performance with others, highlighting medians that can help fix some measures in the minds of your people.

NatWest Law Firm Financial Benchmark report 2015Good information here to work with that includes:

  • Fees per Fee Earner
  • Fees per Equity Partner
  • Profit as a % of Fees
  • Profit per Equity Partner (PEP)
  • Gearing
  • Fee Earners as a % of total headcount
  • Recorded chargeable hours per fee earner
  • Recovered rate per hour
  • Business Model options
  • Lock-up –  Work in Progress, Debtors and combined (days)
  • Partner capital as % of fees
  • Bank Borrowings as a % of real partner capital
  • Client account balances as a % of fees.

There is a good chance that you will find that your lawyers need more help to understand how the way they work and manage client relationships impacts directly on financial performance – and what they should change to make a difference.  This is an area where we provide powerful training and ongoing support to help you improve the financial performance of your practice.


TO FIND OUT MORE about how we and our business partners can help you to engage your people in more effective financial management of their work, call Allan Carton in confidence to explore what might work best in your particular circumstances. Tel: 07779 653105 or email acarton@inpractice.co.uk


Tackle the Problem: Help fee earners get focused effectively on their own financial performance

Unlock CashThis is a big problem for many law firms, but here is one of our  solutions to enable you to address it effectively; capable of producing big returns for your practice.

Focused on results from the initiatives we introduce in law firms that include technology, client relationships, development of people and process improvement, we are very aware of the obstacles to performance improvement that result from fee earners not fully understanding the impact of their own day-to-day financial management of cases and clients.

Very significant benefits can be achieved if all fee earners understand the financial implications of their day-to-day actions.  However, this is an area often overlooked in developing the business and personal skills of lawyers … and support staff in contact with clients.  Appropriate communication with clients is a critical part of any improvements, so it’s not just about the numbers.

Fee earners have the potential to make the greatest impact on the financial performance of any law firm. If they aren’t aware of the financial implications of how they interact with clients and are not comfortable with having financial discussions with clients, how can law firm management teams expect them to demonstrate the right behaviours?

The Solution:  Inpractice UK has partnered with the co-authors of the Law Society toolkit on financial stability in law firms, Armstrong Watson, to help fee earners improve their understanding of financial management.  The key aim is to help them get fully in tune with what and why senior management want them to evaluate their own performance (and that of their teams where appropriate) and introduce very specific steps to help achieve better results; often the beginning of a continuous improvement process.  There will be some quick wins immediately but much more to gain by carrying plans agreed here through, longer term.

As the SRA CPD regime is changing, we are finding that more law firms are getting a better grip on training; being pro-active to identify gaps in competence – then planning a blend of the most cost-effective training to develop people with knowledge and skills better aligned to improve the performance of the practice.

In this area, there are very significant benefits to be achieved by arranging training that is very specific to your practice in small workshop sessions in-house.  Fee earners can then be introduced to very specific opportunities to improve (and the potential direct financial benefits that can be achieved) in the context of your practice and their work.

Armstrong Watson currently provide this in-house training to partner and fee earner teams within law firms to:

  1. Make them more financially aware,
  2. Increase productivity and recovery rates,
  3. Reduce lock up to free up cash.

If you think your people could benefit from these interactive workshops please contact Andy Poole at Armstrong Watson on 07828 857830 to discuss how this could be designed to work most effectively for you – no obligation.  Quote our partner reference: INP10.

If you want to speak to us first for more background, please complete this contact request form or call us on 0161 929 8355.

Is there a place for more e-learning as part of a “blended” approach to training and development – engaging more people?

Blended LearningThinking about how law firms can introduce more effective and comprehensive training, not just for lawyers, but for management and support staff too; we have been tracking options to use a blend of traditional face-to-face training supported by more affordable and manageable e-learning.  

If we can find effective ways to develop more skills in law firms and increase the uptake, we should be making it happen now as there is still a significant gap that needs to be filled. Particularly for support staff; but also to develop and embed more personal skills at all levels.

How is e-learning developing? 

There are reservations in the legal sector about the effectiveness of e-learning to be weighed up against the benefits;  more affordable, more accessible anytime, anywhere, with manageable options to plan and track progress.

I don’t envisage e-learning being the only solution for any practice, but there are many benefits in an e-platform (Learning Management System) to plan and track learning in all it’s guises – and there is potential to be more innovative and make more use of what are now more effective and engaging e-learning options too.

The experience that can now be delivered through e-learning, which can include challenging simulations, is moving fast, with improvements in relevant technologies.  The success of Lynda.com discussed below is just one significant indicator.  It is therefore well worth exploring some of the new developments in e-learning that might make it more attractive and effective for you in more situations as part of the blend of training available to your people.

Learning Technology’s Summer Forum – Top 3

Ask any three people at June’s Learning Technologies Summer Forum what the hottest topics in eLearning were and you would probably get three different answers.  Yet there are some definite ‘buzzwords’ that get repeated out there as the ‘must haves’.

The ‘Top 3’ things people were talking about there:

Gamification

The use of ‘game thinking’ and ‘game mechanics’ in e-learning and simulations was unquestionably one of the hottest topics. Whether it’s a game used in an assessment at the end of some e-learning, a mini-game through the e-learning, or a standalone game, 40% of the top 1,000 firms now claim to use games for staff learning. Reflecting this, e-learning providers have seen a 35% increase in requests for ‘gamification’ in the past year.

The beauty of gamification is that learners can learn while having fun, learn from getting it wrong, see how they compare to others, check progress and improve.

The trick is simply to get the user immersed in the game (or simulation) from the start. But beware, there are tricks to getting it right with gamification. If you don’t, you may leave the learner wishing they just had the information on an A5 sheet!  It works best when combining skills in designing fun games with experience in learning design.  As a taster, you can discover some of the principles behind learning games from Dan Mascall here.

Video Learning

If gamification is high on the priorities for some commercial business, others cite one of the hottest trends in this areas as the end of dull and daunting ‘point and click e-learning’.  In tthe past, this has often taken months for the various teams to get together, with panels of people ‘sucking the life out the content’ before it’s published. Instead, people now realise they could quickly and cheaply listen to experts by pulling bite-size videos together, creating discussion boards and sharing links.

It takes only a few hours for an expert to publish a video on a subject. Once published and readily available, it has a higher chance of staff listening to it – possibly even in their own time, on their own mobile.

Learning & Development could find themselves with a growing role in collating videos and other packages for their Learning Management System (LMS).  It’s interesting that Lynda.com – often quoted as the market leader for producing bite-size, expert videos – was bought  up recently by LinkedIn for a staggering $1.6bn; perhaps the most dramatic sign of the times. This trend has important implications for Learning Management Systems too.

Integration of published videos as trackable SCORM objects in any LMS is increasingly a key differentiator between learning providers now.

Adaptive Learning

The training industry and the learning platforms available are behind other sectors in terms of customising and personalising user experience, where things are beginning to move faster.

Take Amazon – they predict what you might like based on what they know about you. Training can operate in this way too. You could tailor training to what the user needs to know depending on their job role, competency and development needs.

You would now want your LMS to include diagnostic assessment and performance support tools, that can create personal learning paths.  That should be on their development roadmap if they don’t already deliver it today.  If not, you would probably want to start looking around at alternatives.

Imagine a process that leads staff to study the gaps in their learning most relevant to their current role and future prospects; and equally importantly, relieves them from having to sit through irrelevant learning on areas they already know and understand well?

I am interested in your thoughts on training and the role that e-learning and simulations can play in law firms going forwards.  Would you want to try these options further for your practice in the future as part of a blended mix of training options?

FREE DOWNLOAD: New 2015 Financial Benchmarking Report from NatWest on UK Law Firms

NatWestWell worth reading so you can draw your own conclusions on key areas of interest to you.  It’s easy to read and there is a lot of valuable information here to let you compare how your practice is faring with others like you; also highlighting how you might be able to do better.  We can help you make some of the changes that make a significant impact on bottom line profits.

The survey is a substantial review of law firms with fee income of up to £35 million. From across England, Wales and Scotland, 339 firms, employing 15,200 people, took part in the survey.

Download the 2015 report here.

Key questions asked here that the findings and conclusions can help you answer in relation to your practice:

Fees

  1. What do we need to do to enable fee earners to become more productive?
  2. Are we training our fee earners properly so that they maximise their fee earning potential?
  3. Are we confident about our pricing, and can we charge more if we get the service right?

Profit

  1. Have we benchmarked our performance against comparable firms and have we identified where we are below the upper quartile point?
  2. Are we under-recording how we spend our time and therefore not showing clients the full extent of our efforts?
  3. How can we get a better rate per hour for what we do, and do we understand creative fees?
  4. Do we use matter planning tools which help us to understand the profitability of the work we are doing?
  5. Do we have a clear strategy?

Lock-up

  1. Given that clients don’t want nasty shocks when they are billed, why do we wait so long before we talk about money?
  2. Do fee earners have the necessary management information available to manage lock-up?
  3. Are the appropriate ‘carrots and sticks’ in place to deliver improved lock-up?

Finance

  1. Do we have sufficient capital to run the business now, and will we need more capital if the firm grows again?
  2. Is it time to look again at our legal structure and how capital is to be retained within the firm?
  3. Is it right that we aim to fully distribute profits?
  4. Do we need to reconsider how quickly new partners are asked to contribute capital and how quickly departing partners can extract their capital?

For a complete picture and recent trends, you can also download previous reports below for:

Call us on 0161 929 8355 or complete this form if you want us to help you identify AND IMPLEMENT ways to improve the performance of your practice.

Transform the Profitability of your Law Practice – Little Used System Reduces Overdraft by £675K!

KPI Dashboards (missing from many legal practice management systems) can enable you to focus on transforming the profitability of your practice, providing access to live, meaningful financial information you can see, share, talk about … and ACT on!

For Example:  Through better financial management – and without generating any new business at all – you can readily:

  1. Reduce your overdraft.
  2. Generate extra cash and profit.

But you need some objectives to work towards and to monitor your progress against – so here are some hard numbers to get your teeth into.  Do these returns justify an investment that equates to a few chargeable units per month per fee earner to get these systems running in your practice?

To achieve this you need firm-wide engagement, to monitor performance and work together on a daily basis to keep up the momentum and stay on track … but that’s what this is all about.

1. Productivity (Utilisation)

Take, for example – 40 fee earners charging 1,000 hours each.

  • Suppose each charges just one more hour per week which is billed at the average £125 across 45 weeks.
  • Creates extra £225,000 income, profit and cash.
  • Net profit from 25% to over 28%.

 > Reduces overdraft by £675,000 over 3 years

2. Expenditure

  • You probably already have significant fixed costs, so in the short term – attack the variables.
  • Assume £1.75m of £3.75m costs are fixed in short to medium term
  • Reduce remainder by 3% each year over 3 years – not too radical

  > Extra cash and profit of £175,000

3. Work in Progress

  • Examine procedures for moving work through quickly
  • Terms of business aimed at billing WIP at the earliest opportunity.
  • Aim to reduce WIP balances by only 5% over 3 year period.

  > This will release £200,000 against your overdraft

4. Debtors

  • Agree billing period with clients – monthly if possible.
  • Communicate overruns before sending a bill.
  • Set standard collection procedures which partners cannot easily override.
  • Aim to reduce debtor period to 2 months in three years.

  > This will release £500,000 against your overdraft

5. Disbursements

  • Paid disbursements are the issue.
  • Adopt “Zero tolerance” on unfunded disbursements where possible.

Ensure processes are followed in areas (such as Personal Injury and Litigation) where some funding is possible.

Now you know why KPI Dasboards are so important. CLICK HERE to find out the next steps to Make it Work for YOU!

What can you achieve and do you want to make happen? We can show you how and help you do it.

Unlock CashRunning a workshop for a group of partners and fee earners for one of our clients on Friday reinforced the need to quantify the benefits that can be derived from new initiatives aimed at improving the business. 

What does that really mean?  What can really be achieved and what needs to be done to achieve it? 

Which reminded me of these numbers produced by Jon Miller from his real world experience as an FD in a law firm and consultancy work since then.

Example:  Through better financial management – and without generating any new business at all – a typical 40 fee earner practice can:

      • Reduce your overdraft by £675,000 over 3 years
      • Generate extra cash and profit of £175,000.
  • Release £200,000 against your overdraft.
  • Release £500,000 against your overdraft … and more.

Double these numbers if you are 80 fee earners etc.

Here’s how – but you need to be able to get firm-wide engagement, monitor performance and work together on a daily basis to keep up the momentum and stay on track.

To find out  how this can work for your practice, contact Allan Carton or Jon Miller on 0161 929 8355 or complete this contact request form.  We won’t charge you or require any commitment from you for a free, confidential consultation. 

Productivity (Utilisation) Take, for example – 40 fee earners charging 1,000 hours each.

  • Suppose each charges just one more hour per week which is billed at the average £125 across 45 weeks.
  • Creates an extra £225,000 income, profit and cash.
  • Net profit from 25% to over 28%.

⇒ Reduces overdraft by £675,000 over 3 years.

Expenditure
  • You probably already have significant fixed costs, so in the short term – attack the variables.
  • Assume £1.75m of £3.75m costs are fixed in short to medium term
  • Reduce remainder by 3% each year over 3 years – not too radical

⇒ Extra cash and profit of £175,000.

Work in Progress
  • Examine procedures for moving work through quickly
  • Terms of business aimed at billing WIP at the earliest opportunity.
  • Aim to reduce WIP balances by only 5% over 3 year period.

⇒  This will release £200,000 against your overdraft.

Debtors
  • Agree billing period with clients – monthly if possible.
  • Communicate overruns before sending a bill.
  • Set standard collection procedures which partners cannot easily override.
  • Aim to reduce debtor period to 2 months in three years.

⇒  This will release £500,000 against your overdraft.

Disbursements
  • Paid disbursements are the issue.
  • Adopt “Zero tolerance” on unfunded disbursements where possible.
  • Ensure processes are followed in areas (such as Personal Injury and Litigation) where some funding is possible.

⇒  There are savings to be made: not added as they are variable

 If you want to find out how to make this happen in your practice, contact Allan Carton or Jon Miller or complete this contact request form.