How a 4-Step Law Firm Financial Forecasting System Scaled Us to 30+ Attorneys - #235

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Family law firms in the US hire on a hunch and burn their team out. This law firm financial forecasting system turns hiring from a guess into a calculation. 

This is the exact 4-step system we use to forecast hires at Sterling Lawyers and scale to 30+ attorneys without torching margin or burning out our team.

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📄 CHAPTERS  

0:00 - Law Firm Financial Forecasting: Why Hiring Timing Beats Who You Hire

2:45 - The 6 Metrics That Drive Every Law Firm Staffing Model

6:55 - Forecasting Law Firm Revenue 12 Months Out

7:55 - The 90–95% Attorney Utilization Rate That Triggers A Hire

8:43 - Your Hiring Window: New Grad Vs. Experienced Attorney

14:13 - Protecting Profit Margin When You Hire Ahead Of Demand

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Transcript

Law Firm Financial Forecasting: Why Hiring Timing Beats Who You Hire

SPEAKER_01 0:00

Hiring in family law is not about who you hire, it's about when. And most firms are guessing they're hiring timing. Today, Sterling CFO Todd Clower will walk you through the four moves that make timing a calculation instead of a coin flip. Welcome back to the Sterling Family Law Show, the show for family law firm owners who want to grow their profits, multiply their cases, and set a clear roadmap on what they need to do to build the firm of their dreams. Our episodes break down proven business growth, digital marketing, and revenue first strategies to help you scale smarter, not just busier. Back with us is Todd Clower, Chief Financial Officer at Sterling Lawyers. Every staffing decision at Sterling runs through one model, and Todd is the one who reads it. He interprets the forecast in real time to keep our $20 million law firm staffed ahead of demand and inside its margin. In this episode, Todd is going to lay out our actual four-step method. And we're going to dig even deeper into this on our free webinar on June 26th called How to Predict Your Next Hire: Hiring Secrets of an $18 Million Dollar Family Law Firm. And today we're going to take a deeper dive into the data component of hiring. Todd, give us some perspective on what metrics you look at when you're thinking about a hire or when your team says, Todd, we got a hire.

SPEAKER_00 1:42

Yeah, sounds great. Thanks for having me on again. You know, for me, it's really you can have data overkill where you have too many metrics to track. I've tried to boil it down to five or six kind of key metrics, right? That really make a difference for us. And if we're comfortable with those on a month-to-month basis from an actual perspective, so meaning we understand what they are, it makes the forecast process a lot easier because you start to trust the numbers that you see. So today we'll walk through kind of those six kind of key numbers that I was talking about. And number one is monthly revenue, right? What do we want to see from a monthly revenue perspective for the firm? Right? That's that's key, right? What do you want your growth to be? How do you want to measure success of the business? All those things.

SPEAKER_01 2:30

And Todd, it's a great way to look at that is to like look at the last 90 days or the last six months. Don't just guess or hope on a dream. Well, maybe we'll make double next month. That's not a thing.

SPEAKER_00 2:41

Exactly, exactly. And we'll see more about that, Tyler, when we get into the forecast

The 6 Metrics That Drive Every Law Firm Staffing Model

SPEAKER_00 2:45

side, right? Because if we're following the waterfall method, right, we're gonna see, hey, if I want to be at this from a revenue perspective, I got to get this many leads, I got to get this many consults, I got to get this many quotes, right? So if you're doing all that stuff, you'll see that that monthly revenue makes a lot of sense, right? So great, great ad. Um, second one I like to look at is the average case value because there's a there's a concept here, right? It it at the end of the day, it doesn't always matter how much you're getting from a case value because each case is gonna have a different amount of time and amount of uh experience or expertise that you're gonna need on that file, right? So it's key to understand what your average case value is. That gets into then case length, which I just mentioned, right? If you have a you know full, what we would call a three-stage divorce, right? It's gonna take a whole lot longer and a whole lot more resources than you know a simple post-judgment case or something like that, right? So you have to understand what that case length is. Um, split it into a number of different categories, right? Um, you know, what case types do you have? Therefore, that's gonna have a different case length. Uh next one is total active files per month. So how many files can your team A handle and B, how many do they want to handle, right? Because if you understand this by attorney, you can actually get to a point where you know you don't overwhelm your attorneys, right? I want to handle 50 cases a month, great, you can handle 50 cases a month. Hey, I'm I, you know, in the summer I want to spend more time with my kids. I only want to handle 25 cases a month. We can do that. As long as we know that, you can do that. So that's a key number for us to know. Um, the last one then is seasonality. And, you know, as you a small firm for sure sees a lot more seasonality as, and as you get bigger, the seasonality kind of takes care of itself. Although we at Sterling even still have seasonality, particularly in the fourth quarter, right? November and December are always low months, um, just because of that's you know, it's the holiday season, all those kinds of things. But you need to understand from your firm what your seasonality is. And if you can do that, then that helps you not only from that top line, it also helps you from your active files per month. It helps you for, you know, how the utilization and the efficiency of your attorneys are gonna be. So if you get a good handle on all those, that makes your life a lot easier because you start to trust those numbers and you start to understand how am I gonna forecast the business.

SPEAKER_01 5:26

This really allows you to create that foundation of understanding your business on a high level, understanding the free cash flow that you have to make an offer to a new hire. So we have our numbers, we have our foundation, we're now gonna think about the future. We're gonna look into the next 12 months, help us understand the forecast.

SPEAKER_00 5:46

Yeah. So there's really a couple key things that I look for here. And I'll really talk about two steps of kind of this four-step process, right? Number one is forecasting that hire. And then the second part of it is understanding the window of when you have to hire. Because you can't just say, oh, I need to hire tomorrow, and therefore today I'm gonna go out and hire somebody. It doesn't, it's not that simple, right? Um, so the first thing is forecast, right? You get your actuals, you know your drivers of your business. And some businesses might have those six that I talked about. Maybe in your firm you might have four, right? Or somebody may have 12. Whatever. However, many drivers you want to you want to focus on for your business is key. Once you have confidence in those, then you start building in the waterfall model, and it'll start to tell you here's how many cases you can handle with the with the people that you have today. And when you start getting to the you know, 90 to 95% full, it's time to start hiring, right? And that's your threshold.

SPEAKER_01 6:47

It's not 70%, it's 90.

SPEAKER_00 6:50

Yeah, I think you want to push as high as you can. You know, 95 is probably the

Forecasting Law Firm Revenue 12 Months Out

SPEAKER_00 6:55

outlier, right? Because there's always gonna be time sucks, right? There's meetings, there's you know, whatever, right? People aren't gonna aren't you're never gonna be 100%. But if you get if you keep it over 90 to 95 percent, that's kind of the perfect window. So once you trust your actuals and you trust the waterfall, it's gonna start to tell you, hey, in four months, I'm gonna be at 98%. Well, that's probably too much. It's probably start to type. So it's time to start hiring because it takes time to hire that person, right? And that's the next part is how do you find that window, right? And this is gonna really, I've found that this really depends on what type of attorney, what level of attorney am I looking to hire. If I want to hire a newbie, a new college graduate, it's pretty simple, right? I mean, there's a thousands of them graduate every May, thousands of them graduate every December. Let's go find some of those, plan on those, and get those

The 90–95% Attorney Utilization Rate That Triggers A Hire

SPEAKER_00 7:55

into the business. Pretty easy to find, pretty easy to hire. You even might have them as an intern for a period of time and then turn them into a hire, right? That's a that's a really good pipeline. Um, those individuals have a have a longer life cycle, right? If I'm gonna be 98% full in four months, it's probably almost too late for me to go hire a new attorney, a brand new attorney that's never tried a case because there's ramp up. They don't understand what the process is, they don't understand what the business is like, they don't even know how to work with a client, probably, right? Um, so you might need six to 12 months, right, to kind of get those guys up to speed. So think about that. Now, obviously, it's a much cheaper hire. We'll talk a little bit more about the the gross margin impacts, right? But obviously

Your Hiring Window: New Grad Vs. Experienced Attorney

SPEAKER_00 8:43

a brand new attorney is much cheaper than an experienced attorney, right? Um, so the other side of the coin is if you want to hire an experienced attorney and you don't want a newbie, you don't have anybody that's going to be able to mentor them or whatever it might be, you just want to go and get somebody that's been practicing for three or four years or whatever it is, takes longer to find that person because they've got a job. They've got a job, they're probably happy. If they're not happy and they don't have a job, you probably don't want to hire them. But, you know, they're, they're, they're not necessarily actively looking. You've got to go farm them. Um, so that takes longer, but the day they start is probably the day they start being productive, right? Because they're gonna know how to handle a client, they're gonna know how to talk to a client, they're gonna know how to how to find a new client, you know, all those kinds of things, right? So that's the that's the balance that you have to play between do I want a new person or a an experienced attorney? And if so, that might change the time period of my window of hire.

SPEAKER_01 9:41

And your window of starting to look, right? If you're if you're 70% capacity or 75%, but you feel like that trend's gonna continue and ramp up to 90, well, you may want to start looking for that experienced attorney at 75% capacity because you know it's gonna take a while. That's exactly right.

SPEAKER_00 9:59

And that's why the forecast is so powerful.

SPEAKER_01 10:01

What if you're always hiring three months too late and you don't even know it? By the time you think you need another attorney, the damage is already done. Your team's burned out, cases are piling up, utilizations through the roof because hiring was never about gut feel. It's about data. Sterling lawyers built an 80 employee family law firm by forecasting our hires every single month. We're teaching the exact method to predict your next hire in a free webinar. When to start recruiting, what roles to fill each month, and how to protect your profit margins. The link is in the show notes below. I'm interested in Tony, you and Todd's perspective here on I can imagine that if you have a firm with multiple attorneys and they're talking to you about how busy they are and they think that it's time to hire right now. How do you manage that from a culture perspective and a management perspective to help them understand? Listen, I hear you, but we're only at 80% and we're not gonna hire until 90. Yeah, Todd, y'all at you though.

SPEAKER_00 11:01

Go after that. I can I can start with that because uh as you were asking that, I just started smiling because it's it's a real problem. It could be a problem, right? But here's what we try to do is we try to keep those attorneys in the know on what we use for a forecast, right? Because if you're honest with them and you tell them, here's what I'm planning to do, here's where we're growing, here's you know, how we're gonna expand the business or whatever it might be, um if they get confident, they see they're confident in you because you know what you're talking about, you know how the business works, you start comparing to that forecast, all those things, it becomes a much easier conversation, right? Because you're saying, hey, here's what the numbers are showing me. This is what we're gonna actually do. And they buy into it and they believe it and they trust it just like I do.

SPEAKER_01 11:54

Yeah, so if they're in the know and they're seeing the same metrics that you're looking at on a regular basis, they're not gonna come to you and say we have to hire right now because they're gonna know we're only at 80% capacity.

SPEAKER_00 12:04

Exactly. Exactly. But they're also gonna be able to say, hey, what's the what's the plan, right? When are you when are we thinking of growing? Because I feel like I'm really busy, right? It's that it's that feel word, right? That's really hard. You might feel busy any given day, but it's like, hey, trust the numbers, right? Trust the history, trust what we've built in this firm and how we look at the firm.

SPEAKER_02 12:26

I would say too, those aren't it's not one meeting. That's like what I think what Todd does really well is he has ongoing forecasting meetings with and all the parts of the business are in it. It's shorter, shortish meeting, but it's can it's ongoing, and every single time it's we're reviewing the same thing, and Todd's walking us through through the numbers and what to expect and asks different questions depending on what what the data is showing. Um and that teaches everybody how to use it and to stay how to stay informed and how to get it it builds confidence in the whole team because we understand what we're talking about.

SPEAKER_00 13:02

Yeah, it's amazing. That's it's a good great point you bring up, Tony, right? When I first started having those meetings here at Sterling, right? It was like a thousand questions. Todd, why'd you make that decision? Todd, why did you do that? Why did we change that number? But as you talk about the same things over and over again, it becomes second nature to everybody, right? And they're like, get it. And they're probably in their head doing the exact same thing that I already did because they're they've seen it so many times.

SPEAKER_01 13:30

Great point. Okay, so now the kind of the final piece of this uh discussion is around like, can we actually afford this person and how much can we pay them?

SPEAKER_00 13:40

Yeah, yeah. Great point. So there's there's two things, two things that drive it, right? Which attorney are you hiring, right? Is it that new guy right out of school or that new gal right out of school, or is it a seasoned attorney, right? Totally very, very different cost perspective there. Um the issue comes in is you have to be willing to take that maybe little bit of hit in gross profit or profitability for a couple months because you've hired a brand new attorney

Protecting Profit Margin When You Hire Ahead Of Demand

SPEAKER_00 14:13

out of school that is gonna take some time to ramp up. And that's okay. It all comes back to the confidence in the forecast. Really, it does, right? That's gonna sound like a broken record. But if you are confident in what your numbers have shown you yesterday, what they're showing you today, and what you believe wholeheartedly that they're gonna show you tomorrow, it becomes easier to swallow that pill and to go to the CEO or the owner or the leader of the firm and say, Hey, yeah, we're gonna take a little bit of a hit this month because we want to go and hire this, because here's what our forecast is telling us. We need it, otherwise, we're gonna burn everybody out. So it's a it's a decision, it's a tough decision, right? That first couple times you do it, you really like, you know, I don't really want to do this because I want to make as much money as we can for the firm. But it's an investment, right? That's the other way we I I constantly talk about investment in the business. And people is an investment in the business.

SPEAKER_01 15:12

Well said. Yeah, so that is the four-step hiring head start, right? You're gonna check your firm's health, you're gonna know whether you need to hire at all. Uh, you have to forecast your hires so you know what the next 12 months look like before you make that investment in another person. You have to find the window, so turning that forecast into a date on the calendar. And then finally, you have to make sure that you can protect your margin and make sure that the firm actually has enough cash to be able to make the offer. If this is interesting to you and you want to know more, on June 26th, we will show you exactly how to apply this inside your firm and give you free tools to do all of it, including the hiring needs calculator, the full hiring head start guide, and the waterfall scorecard. We go live at 11 a.m. Central, and that is your final opportunity. Sorry, we go live at 11 a.m. Central, and this is your final opportunity to join us. Click the link below and secure your spot. Gentlemen, thank you so much for your time today. We look forward to seeing you again.