5 Insights and Takeaways from Clio's 2018 Annual Legal Trends Report
Today, data is more valuable than oil because data tells us a story about the world, the society, or the industry we live and work in. Oil does not. What story does data collection from 70,000 legal professionals in North America tell us about the legal industry? What kind of trends are we seeing and expecting for 2019, and beyond?
The 5 insights I’m about to share are only a few of the findings from Clio’s annual legal trends report. You can read the entire report here.
Indicators of law firm success:
84% of the firms believe that increasing firm revenue is important to their firm’s success and is the highest priority
Only 34% believe that growing their client base is the lowest priority
Only 23% believe that billing more hours is even less important than growing their client base
Despite most firms recognizing that increasing revenue is an important metric for the firm’s success, 34% believe that growing their client base is the lowest priority, and 23% believe that billing more hours is even less important than growing their client base. Not only are these metrics critical inputs for generating revenue, the fact that their importance is overlooked suggests that law firms aren’t focused on the critical success factors for driving growth and revenue.
Strong goals are crucial to any business:
Only 25% of lawyers say they are highly satisfied with their goals
Only 26% are highly satisfied with their plans to achieve their business goals
Only 23% are confident they can measure their success in working toward their goals
Without strong goals, law firms run the risk of stagnating or failing to compete in today’s marketplace. Even worse, if you have no way to measure your activities or KPIs, you have no way to measure your success. Having collecting this data on your firm, your firm will be able to focus its efforts in reaching the goals set.
Lawyers struggle to dedicate time to billable work:
Average utilization rate of 2.4 hours for every 8 hours
Only 1.9 hours realized and only 1.6 hours collected
To understand firm revenue, you must begin by looking at how billable work contributes to the firm’s revenue. It is no news that the more time you can dedicate to your billable work, the more earnings you’ll see for your firm. The fact that lawyers miss out on nearly 5.6 hours of billable work every single day should drive some healthy discussion around the firms workflow, operations, and efficiency.
Effective hourly rates:
Hourly rate (x) % realization rate = $ realized
Hourly rate (x) % collected = $ effective rate
Highest effective rates in the industry go to: IP law ($258/hr), Trust law ($248/hr), Mediation/Arbitration ($240/hr), Corporate law ($238/hr), and Tax law ($227/hr). The lowest effective rates in the industry go to: Medical Malpractice ($119/hr), Insurance defense ($108/hr), Criminal law ($92/hr), Personal injury ($91/hr), Juvenile ($60/hr).
Does your practice measure up or exceed these effective hourly rates?
Lawyers’ time gets eaten up by daily administrative tasks:
Below is the average hours legal professionals can spend on a given task in a day
Billing & Financials:
Processing client payments: 0.5 hours
Preparing and sending invoices: 0.5 hours
updating client trust ledgers: 1.4 hours
Bookkeeping and tax preparation: 1.4 hours
Recording and summarizing time entries: 1.2 hours
Day-to-day expense and payment banking duties: 1.1 hours
Marketing & Business Development:
Networking to meet new clients and build referrals: 1.4 hours
Tasks related to advertising: 0.9 hours
Managing online social and review channels: 0.8 hours
Updating your firm’s website: 0.7 hours
Dealing with client questions unrelated to a legal matter: 0.7 hours
Firm organization and administration:
Organizing firm information: 0.8 hours
Transferring information between software: 0.7 hours
Trouble shooting technology: 0.7 hours
Organizing physical and electronic work spaces: 0.6 hours
Managing and coordinating staff: 0.5 hours
Lawyers’ time can be consumed in non-billable work that can be preempted or better managed at a lower cost by non-lawyers or legal allies that take on professional capacities in managing the firm. Given the amount of time lawyers spend on non-billable work in the 8-hour work day, they’re constantly playing catch-up outside of work, bringing their files home or putting in extra hours to keep the file on track. The consequence is that 39% of lawyers say work negatively affects their personal life. Efficiency is needed not only for the sake of protecting profit margins of the firm, but also for protecting the health (emotional and physical) and sanity of their lawyers.
Leave a comment below and let us know what you’re doing at your firm in efforts to boost efficiency, increase revenues, and improve the workplace experience.