Do you know the key numbers you should be on top of for your law firm?
I recently met with RJon Robins, founder of HowToManageASmallLawFirm.com – one of the leading solo and small law firm management advisory services dedicated exclusively to the unique needs of the owner of a solo or small law firm.
RJon shared with me ‘The 6 Key Numbers Equity Owners Should Be On Top Of‘ and why attorneys need to pay attention. Many lawyers are used to operating their law firm without knowing what’s really going on – they don’t realize how much better their law firm could be if they paid attention to these numbers.
You wouldn’t drive with your eyes closed, would you? For that same reason it’s critical to have a handle of what’s going on in your business, otherwise your business will end up out of control.
So what are the 6 numbers? Check out this informative audio interview below and listen as RJon shares what you need to know and how it impacts the growth and success of your law practice. I even managed to squeeze out one more number as key #7 — listen to what RJon shares about this.
** This is just a small sampling of the incredible information RJon shares at his “How To Make More Money With Your Small Law Firm” live events. **
Click the play button below to listen to this interview:
Here’s a quick summary of the key points RJon shared:
Key #1: Budget
You must have a written budget. If it’s not written down, it’s not a budget. If it’s just you know it, it’s not a budget. If it’s not on the back of a cocktail napkin or an envelope, it’s not a budget. It’s written budget — sources of income, expenses.
Key #2: Budget Variance Report
A comparison between
- what you guessed as the expense or the income for this particular category,
- what was the reality at the end of the month,
- what’s the percentage difference
and then we get to figuring out why there is a difference. This is where you really start taking control of your life.
Key #3: Cash Flow Projection.
You should always have a six-week rolling cash flow projection so you know what the cash flow coming in and going out. Be proactive instead of running home and freaking out because the cash flow blew up in your face.
Key #4: Accounts Receivables Report
Aged 30, 60, 90 days and you need to be looking at that cash A/R report and making plans every month for how you’re going to reduce it.
Key #5: WIP report.
The first time someone said WIP report to me 12 years ago, I said, “A what?” And they taught me. It stands for work in process or work in progress. This means how much work is the firm doing today that’s not yet ready to be built, but when it does get built it will produce this much value for the firm. Think of it like an assembly line in a factory and the different stations where the car is coming together.
Key #6: Cash On Hand
Cash in your operating account and cash in your trust account. Start looking at your work in process. This is part of the job of a chief financial officer or the managing partners – to make sure this doesn’t go wrong and crash the law firm.
Bonus Key #7: Balance Sheet
Until a law firm is grossing consistently about $40,000 to $80,000 a month, which is about 500,000 to a million, the balance sheet is a distraction. Don’t look at the balance sheet. The balance sheet is not nearly as important as the cash flow projection. Cash flow projection is like life or death for your law firm and maybe your marriage.
Ready to get a grasp of your key numbers and start making more money with your small law firm? Check out RJon’s live ‘How to Make More Money With Your Small Law Firm‘ tour, coming to a city near you.
Here’s just some of what you’ll learn at this event:
- How To Identify & Understand The Causes & The Effects Of “Profits” In A Small Law Firm.
- Identifying, Prioritizing & Learning How To Liberate Yourself From The Day-To-Day Grind So You Can Focus On The High-Value Activities That Will Grow Your Law Firm.
- How To Comfortably Sell Seven Figures Worth Of Legal Services (or more, or less, depending on your goals).
- The Six Key Numbers The Managing Partners Of The MOST Successful Law Firms Are Always On Top Of.
- Understanding & Anticipating The 4 Stages Of Law Firm Growth.