Selling, Billing, and Collecting the Law Firm Profitability Trifecta!

Selling, Billing, and Collecting the Law Firm Profitability Trifecta!

In the ever-evolving legal industry, law firms constantly face the challenge of sustaining profitability. Many law firm owners and attorneys struggle with the core pillars of running a successful business: billing, collecting, and selling. Understanding and optimizing these three financial drivers is crucial for law firms that want to increase their revenue to become eight figure law firms and achieve sustainable law firm profitability.

To be an eight figure law firm, you need practical strategies to increase profitability.  You need a deep dive into billing, collecting, and selling processes, specifically tailored for the legal industry. We’ll provide actionable tips and insights to help law firms navigate these complex areas while maximizing their profit margins.

Selling, Billing, and Collecting the Law Firm Profitability Trifecta!

1. Selling Legal Services: The Foundation of Profitability

Shift Your Mindset: Selling Isn’t Convincing; It’s Clarifying

The first key to making money in a law firm is learning how to sell your services effectively. Many attorneys shy away from selling.  They don’t think of themselves as salespeople.  Every successful business owner, however, MUST embrace the idea that they need to always be selling.  Extraordinary salespeople don’t “sell” they are solution architects.  They solve problems.  Sound familiar?  As lawyers you are solution architects and problem solvers.  You are already extraordinary salespeople!  “Selling” in the legal profession is about helping potential clients gain clarity on their legal issues and the solutions your firm can offer.

Tip: Selling legal services should focus on problem-solving. When a potential client walks into your office, they’re often in a vulnerable state, overwhelmed by their legal problems. Instead of diving straight into offering solutions, take the time to listen and understand their concerns. Ask probing questions that will help them see the true scope of their issue. By doing this, you help them realize that their problem is significant and that your firm is the solution.

Overcoming Client Objections: Address the Real Issue

It’s common for prospective clients to raise objections like, “I can’t afford it,” or “I need to think about it.” As an attorney, it’s vital to recognize that these are often surface-level concerns. Clients usually don’t fully grasp the magnitude of their legal problems, or they haven’t connected the dots between their problem and the value of your service.

Tip: Don’t try to convince clients by lowering your prices or offering discounts. Instead, focus on educating them about the long-term consequences of not addressing their legal issue. A common objection arises when clients want to hire a cheaper lawyer. Use this opportunity to explain how choosing a lower-cost attorney could result in more time and money spent down the line.

Related Resource: For more on addressing client objections, check out:

  •         Intake Mastery:  Perfect the Process to convert leads to clients

·         Creating an Effective Sales Process for Your Law Firm

2. Billing: The Connection Between Work and Revenue

The Art of Consistent Billing: It’s About Timing and Process

Billing is more than just invoicing for your time. It’s an essential part of maintaining cash flow, and it requires a structured, consistent approach. Many law firms struggle with late or infrequent billing, which can disrupt their revenue streams.

Tip: Bill more frequently. Many firms only bill once a month, but more frequent billing cycles (e.g., bi-weekly) ensure that clients are constantly engaged and aware of the work you’re doing on their behalf. It also prevents sticker shock from large invoices and keeps cash flow steady.

Tip: A law firm that handles both flat fee and hourly billing cases should implement a practice of tracking billable hours even in flat fee cases. This data can help you evaluate whether your flat fees are covering the actual amount of work being done.

Related Resources:  Check out these resources in the Law Firm Mentor Community

Capturing All Billable Time: Efficiency Equals Profit

Lawyers often lose billable time because they don’t track minor tasks like answering client emails or attending quick phone calls. These minutes add up, especially in hourly billing models.

According to the 2023 Legal Trends Report, lawyers record less than three billable hours per day on average, with the rest of their day going towards various non-billable tasks.  Making your law firm more efficient by automating and systematizing non-billable tasks, positions the firm to increase its billable hour production.  Adding one more billable hour per day can easily drive over $75,000 in additional top line revenue per year per fee earner.

Tip: Implement a robust time-tracking system. You can assign the task of logging smaller, easily overlooked activities to an assistant or file clerk. This ensures that all billable time is accounted for and maximizes your revenue.

Time tracking apps make it easier to record billable hours, streamline your business processes, and improve your personal productivity. Think about incorporating AI for a hands-off tracking process.

Check out these time tracking apps:

 

 

Related Resource: For more tips on maximizing your billable hours, visit Clio’s guide to law firm billing.

3. Collecting: The Final Step to Profitability

Establish a Collection Process: Don’t Let Money Slip Away

It’s one thing to send out invoices; it’s another to collect them. Many law firms lose money because they don’t have a systematic way of following up on unpaid invoices.

Tip: Establish a clear collections process. This should include reminders, late fees, and consequences for unpaid bills. Additionally, set up regular payment schedules at the start of the client relationship, so they’re accustomed to making payments consistently.

Law Firm Example: A criminal defense attorney may require a monthly payment plan for a client’s retainer, setting clear expectations from the start. This ensures that the client isn’t surprised by large, unexpected bills and helps the firm maintain a steady cash flow.

Related Resources:

Payment Plans and Communication: Make It Easy for Clients to Pay

For clients in long-term cases, like ongoing litigation or divorce proceedings, payment plans can be an effective way to ensure consistent cash flow and reduce the burden of large one-time payments.

According to the 2024 Legal Trends Report for Solo and Small Firms, firms that offer online payment options get paid twice as fast as those that don’t.

“Solo firms using online payments recouped 60% of payments within 11 days (compared to 22 days for those going without), 70% of their payments within 21 days (compared to 33 days), and 80% of their payments within 37 days (compared to 57 days).

Small firms using online payments enjoy similar benefits: they recouped 60% of payments within 13 days (compared to 22 days for those going without), 70% of their payments within 23 days (compared to 35 days), and 80% of their payments within 46 days (compared to 64 days).”[Clio Report].

Tip: Offer flexible payment options and communicate regularly with clients about their bills. It’s important to stay in touch with your clients regarding their financial obligations, so they don’t feel blindsided when payments are due.

Maximize Profitability by Mastering Billing, Collecting, and Selling

Making money in a law firm requires more than just being a good attorney; it requires running your firm like a business. By mastering the art of selling your services, streamlining your billing processes, and ensuring effective collections, you can significantly boost your law firm’s profitability.

Remember, each of these areas—selling, billing, and collecting—works in harmony. Selling drives revenue into the firm, billing ensures that clients understand the value of your services, and collections make sure that you’re paid for the work you’ve done. Implementing strong, consistent processes in these three areas will set your law firm up for long-term financial success.

If you’d like to learn more about law firm profitability and how Law Firm Mentor can help you systematize your business, schedule time with one of our Growth Strategists today.

By focusing on these core areas and adopting the strategies outlined above, your firm can experience greater financial stability and growth, setting the stage for future success.

Want to dive into more detail about how to help employees overcome law firm PTSD?

Check out this episode of the Crushing Chaos with Law Firm Mentor podcast.

Looking for guidance and support? Schedule a no-pressure, 15-minute call with our growth strategist and let’s talk.