Last year, Clio announced its first Legal Trends Report, based on the copious amounts of data Clio has gathered (and anonymized) over the years. The headline is that, on average, lawyers bill less than 30% of their time. And they only collect on about 20% of their time. But the drop off from hours worked to hours billed is huge.
After an update based on another year of Clio data, those numbers are holding steady. Lawyers get paid for less than a third of the time they work, on average.
Now, there are a few caveats. Most obviously, the data only covers Clio users. But since Clio has 150,000+ users, that’s still a solid sample size. It’s interesting even if it isn’t comprehensive.
Hours billed—utilization rate—goes up quickly as the firm grows. For solos, it’s about 25%. In firms of 4–7 lawyers, it goes up to about 40%. Above 10 lawyers, the average utilization rate is about 50%.
So what are lawyers doing with that unbilled time? According to the survey Clio added to its report this year, about half of that time goes to administration. About a third of it goes to business development (marketing) activities.
This year Clio also did a consumer survey to try to figure out how clients find lawyers, decide to hire a lawyer, and evaluate the attorneys they hire. They found out that word of mouth and search are the main ways consumers find lawyers. When it comes to deciding who to hire, responsiveness, free consultations, and fixed fees are priorities.
That all suggests a few things every firm should be doing:
- Hiring staff. You are more efficient when you have help. Solo practices are the least efficient law firms.
- Hire administrative staff first. Especially for accounting, billing, and general administrative tasks.
- Focus your marketing. Be strategic about your word of mouth marketing (don’t forget that many words are exchanged online, through messaging apps and social networks). Develop a search-engine marketing strategy.
- Get more efficient. It’s time to start acquiring project management and productivity skills.
- Be responsive. A policy of responding to clients within 24 hours is so 1995.
- Offer free consultations and fixed fees. Find a way to offer free consultations and embrace fixed fees.
I know. I can feel your objections coming over the internet tubes. But Sam this doesn’t apply to my practice. Maybe not, but it probably does. This is data, not opinion. If you’re going to insist on billing hourly, it seems to me you would be wise to do some A/B testing in your own practice to make sure your practice really is an exception.
This is not to say that lawyers should be all about making money. That’s not the point. The point is to serve your clients. To serve them so well, in fact, that they refer you to their friends and family.
Most lawyers aren’t doing that. Most lawyers are spending two-thirds of their time on administrative tasks and chasing new business, not serving clients. But if you get more efficient at marketing and administration, you can spend less time doing it, which means you can spend more time serving clients. And in the course of getting more efficient, you can improve the level of client service your clients get. The best use of your time is not on marketing and administration, it’s on serving clients and figuring out how to serve clients better.
And if you do that, you’ll also make more money.