Gained 25% Yearly Growth From This Law Firm Capacity Planning

Law firm capacity planning is how US family law firm owners stop coin-flipping hires and start forecasting them.

Learn the exact four-box system to predict when to hire, protect margins, and hit 25% yearly growth without burning out your attorneys.

This staffing model fixes attorney caseload management, sets your paralegal-to-attorney ratio, and holds labor cost percentage. 


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📄 CHAPTERS  

0:00 - Law Firm Capacity Planning: Whether And When To Hire
2:04 - The Core Metrics: Average Case Value Calculation And Case Length
12:47 - The Two Levers That Move Your Law Firm Hiring Forecast
15:13 - Finding The Window: When To Hire An Associate Attorney
19:22 - Protecting Margins: Labor Cost Percentage And The Financial Dip
28:34 - Live Demo: The Law Firm Capacity Planning Calculator

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Transcript

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0:00

The first step is really understanding where we are and how healthy we are, so we can make good adjustments within the firm and then make really good hiring plans based on where we are and where we can This is kind of how you avoid the pitfalls of hiring way too early or avoiding that, like not making the higher and it's understand your firm's health and the model so that you can then make good educated decisions that are really well calibrated in data. All right. This is not a lecture. What we are showing you today is the exact hiring Model that we run inside of our law firm. It's the same model that took us from two people to now over 80, which is kind of wild to think about how far we've come. My name is Tyler. Dolph. I am the CEO of Rocket Clicks. We are a hyper focused, family law firm only marketing agency that was built out of Sterling Lawyers. So very excited to be here. With me today is Tony Carl's, who is the co-founder of Sterling Lawyers. He built the waterfall, the operating system that has grown sterling to over$20 million in revenue and the engine for this whole hiring process. So he's going to teach us step one today. And then Todd Clower, we pulled our CFO out of the day to day of of the business and the law firm. We forced him to present to all of you today. So we got to give Todd lots of love for agreeing to be on this with us. Today is about whether you can hire and when you should. Right. So the first two boxes are check and forecast. That tells us whether we should hire at all. And then the last two boxes are Find and Protect. That tells us when again this is the exact system that we use. So step one is all about checking your firm's health. And I'm going to hand it over to the guy that built the system, Tony Karls. Thank you for being here. Take it away. yeah, the first step is we gotta we have to identify where we are at the firm. So before we kind of jump into looking at the waterfall a little bit, I want to kind of the most important figures that if you're not tracking, we need to start tracking. This is going to give give you an unlock for you. The the downstream impact of being able to forecast from from using the waterfall method that we we've talked about in the past. And there are several important metrics that you need to be tracking. So the first one is monthly revenue. It's pretty basic. So these are the way we built these is how do we how do we create this. So that anybody who is building any size firm can operate this easily. So we don't want to make this overly complicated. What is my monthly revenue target that I'm trying to hit. So it's a really important number for you to be able to identify. What are you trying to accomplish each month of the year? Second one is what is your average case value? How much is the actual value of the case from a lifetime value perspective. So not what's your retainer? It is how much is the case actually worth on average. So that's all of your cases. So if you do $3 million a year and you did 100 cases, your average case value would be $30,000, right. So like that's kind of what we're looking at. What is your average case value. And then how long does it take your average case to get through from start to finish. That is your case length. What is your average case length. So those three numbers are really important to start identifying what your forecast model is going to look like, because it's going to be used to predict what is your how many cases are flowing into your system. How long will would they be there and how. And then the fourth metric is how many total active files can your team handle at any given time. So this is not the files on the board. Typically in family law you're going to see between 40 and 60 is what an average attorney can typically handle. That would be their full on the board caseload. But how many active files do they are they actually working and what is their actual individual capacity. Because what what we're trying to identify is what how many files are going to be coming into the system that we can sustain in a good way, because that's going to help us identify our capacity number. And if we can identify those four metrics, our monthly revenue, our average case value, our case length, and then our active file count per per attorney. So like how busy can they all get? We're going to get a capacity utilization rate that's going to help us identify when we should start hiring. And then the triggers are built basically off of the waterfall within the hiring process, which is when should we start posting the job? When should we start recruiting and expecting to do interviews? How long is it going to take us to onboard a certain type of attorney versus others in terms of like their talent and experience? So this is everything is waterfall in my world, and this is kind of how we've built built the system is like what are what are our triggers. So Tyler talked about our Moneyball webinar where we really went through the waterfall method, and it's what everything's based off of. So it's it's the overall health of your firm. What is your lead flow look like and how many of those how many of you? How many of the users that are interacting with your brand in the marketplace are turning into potential conversations, whether those are phone calls or web leads? What's the quality rate of those interactions that's going to dictate how many sets you can. You can set on any given interaction. Then how many show how many of those shows turn into actual quotes that we can deliver to clients, and how many of those actually close? That's going to give us really a health health scorecard So this was part of the toolkit from the Moneyball webinar. This is an expanded toolkit that we're going to deliver to you after we kind of go through and teach this a little what it's going to show you is here's the monthly targets that we aim for at the firm. Those are all the black cells. And they identify what are what we've identified as kind of industry standard benchmarks to aim for, for each of those throughput, throughput items that I mentioned on the previous slide. So how well are we doing that? So you're going to you just have to enter two numbers. The first one is your monthly revenue, which we just talked about. Second one is your average case value which we just talked about. And then that's going to output for you all of the targets for all of those other numbers. How many users should I have on my website. How many inbound calls should I be expecting if I'm performing to target? And then you can input your actuals where you actually are performing and see where your opportunities are for growth and optimization with your current, with your current flow, without spending any additional dollars. Just how where are opportunities to optimize so that we can grow our firm without spending more money, just having intentional effort. So those are those are really the first. The first step is really understanding where we are and how healthy we are, so we can make good, good adjustments within the firm and then make really good hiring plans based on where we are and where we can go. Because if we're really over performing in one of these metrics, say we're say we're closing really, really well over the last four months, but the rest of our waterfall isn't necessarily performing in a great way. If we decide to make it higher and then our closing dips, we might have the exact same number of case files coming into our firm. And then we just made a really bad hire. So not knowing where our firm is from a health perspective or where we're like way over indexing and it would be a bad assumption to assume it's going to continue that way. This is kind of how you avoid the pitfalls of hiring way too early or avoiding that, like not making the higher and it's understand your firm's health and the model so that you can then make good educated decisions that are really well calibrated in data. So Todd's going to kind of take us through kind of what we do next with this. Awesome, Tony. Thanks. You know, I'll just echo some of the things that Tony said. I mean, it's super important for you as a firm and me as a, as a CFO to understand where the business is. Right. And that's a key metric that you have to know. And the waterfall is a fantastic way to do That's one thing, though. Actuals are the past, its history. It is what it is. Right. What I'm going to talk about a little bit today is where are you going. Right. What's your forecast look like? How are we going to take this business to the next steps. Right. What do you want to do better. What do you want to do? You know more efficiently, more effectively and specifically today. How do you determine when you're going to hire people? So I'm going to run through a couple of key slides that talk about some of these forecast variables, and then we'll get into a quick demo of how it works and what the levers are that we can pull in it. So if we go to the next slide we can kind of see the the three main things that we look at in this forecast model. Number one is caseload right. What is caseload. Caseload is split into a couple different formulas. And I have those here at the bottom monthly case. Well monthly total case files funded agreements times your average case link. So Tony talked about those where we have to know those couple inputs. We get that. That gives us our monthly case files caseload capacity. Kind of the flip side of this right. How many attorneys do we have. How many active case files can they each do. Right. That'll give us what our total case load capacity is. So if we know those two, those are the main things that we have to know in order to determine what caseload is from a people perspective, those metrics that we just talked about on caseload will tell us how many attorneys do we need, right. If we have more cases than we can handle with our average attorney caseload file, that tells us that we got to hire, right? So we got to hire an attorney. What do we have to do for paralegals? Right. Obviously, paralegals support the attorneys very well and very, you know, substantially here at Sterling, we say two to maybe three attorneys for each paralegal. So if I'm hiring one attorney, I'm probably not going to hire a paralegal. I'll probably wait till I hire that second one. But it's somewhere in there. Right. And it depends on the type of attorney. If it's a, you know, a high performing attorney, maybe you're only going to have two attorneys to that paralegal, but you might also have three. Next one is intake. Intake is truly based on call volume. So all those metrics that Toni kind of pointed out on the waterfall kind of show, hey, how many calls am I going to get right? How many interactions am I going to have? What we tend to do is look at that on a monthly basis. You divide it by the workdays, right? Say 20 days in a in a month, and then divide by about 25 ish calls or interactions that an intake person can handle. The, the, the output of that. That's how many intake people I have. Right. So that that also drives off of all of those same metrics that we talk about. The fourth category, specialized support. So this is people that support the paralegals. So it does not include paralegals. It includes people like, you know, back office accounts receivable billing, you know, HR, all that kind of stuff that kind of support the entire team. There's a there's a metric here that we kind of use to write for each two paralegals that you hire, you probably need to hire something in a specialized support area. It's really hard to say that it's exactly this kind of a person or this kind of a person. It depends on your firm makeup, how you're doing it. But think of it from that perspective, right? So to go back to the beginning, if we hire five attorneys, we're probably going to have to hire at least two paralegals. That would obviously be driven by intake. So we'll have additional intake hires and then we'll have specialized support or additional support items. So it's kind of like it's a waterfall. It's the same exact waterfall that we kind of use throughout this whole process. That's the people side. If we look at capacity. So this is a key one two because you know, if you think of an individual, what do you want your attorney to be 100% utilized? Right. Everybody wants to be 100% utilized. Well guess what? The world is not a perfect world. Nobody is 100% utilized. We use as a goal somewhere between 90 to 95%, right? If we start getting the 99, 95% or more, it starts to raise the flags that are current. Team can't absorb the caseload, right? That is super important because what does that lead to? Leads to burnout leads to turnover. You get turnover all of a sudden you're hiring even just to keep where you are right, versus hiring for growth. So that's a key metric. And keep that in mind. The 95% utilization. Right. That's where we really want to say, hey it's time to start hiring. Right. And I'll talk a little bit more about what that means from a start. Hiring concept. Because it's not that I want to start hiring there. It's I want to have a person in the seat doing the job. So if we go to the next slide, Tony talked about six numbers, right, that are really important to this forecast. He walked through the first four of them. I'm going to talk a little bit right now about the last two lovers. And they really are lovers because you as you're as you know your firm better than anybody else, right. You will be able to affect these two numbers and they do have an impact on the forecast okay. One is growth rate. How aggressively do I want to grow right. At Sterling we start with a with a 3% per month growth factor right. Doesn't sound like much. But 3% a month consistently is a really significant growth. If you want to be super aggressive and you're saying, hey, I'm at the early stages and I can grow my firm 5% or 10% per month. Awesome. Keep in mind, it's not a feeling, right? You got to trust it, right? You can say that you want to grow 10% anytime you want, but unless your numbers in the waterfall and Moneyball process tell you that you're actually doing that, that's where the actuals come in. It's really hard to just focus on feelings, right? So trust the numbers, watch your numbers and trust your numbers. The second one that you can change is the seasonality, particularly with small firms. You definitely feel peaks and valleys okay. Certain months, certain times of the year are going to be stronger than others and certain are going to be weaker than others. As you get to be larger and larger, that may smooth out a bit. But even at sterling's current state, we feel a couple valleys. It's really one valley and that's in the November and December time frame, right? So we see that our our case volume slows in November and December, a whole bunch of reasons for that. And we can go through all the history of, of what that is. But the point of this is you have to or you should try to build in some seasonality in your forecast so that you don't react to a blip. Right? You don't want to react to a blip. You want to react to trends. Right? That's the key thing. And that's what that second bullet kind of points out. So really those are the two key additional factors that we want to watch and levers that we can I'm going to now jump in a little bit to actually what we call finding the window. It's step three of the metrics of the forecast process. And what we've done is we've highlighted a section here that's in amber. And it kind of says, hey, this is when you have to have people in the seats. So we'll go through the demo shortly. But basically we filled out some information, it pulled out and it said, well, geez, you're in the yellow. So or the amber in this case, it's probably you got to have some more people because you're going to burn people out and you're going to experience turnover and you're going to have a whole nother issue. What this means is not when you hire or when you start hiring, it's when that person is fully productive. So what does that mean? There's two types of attorneys that I like to think about that you can hire. You can either an experienced family law attorney who's been there, done that, knows exactly what they're doing, knows how to handle a case, knows how to build, knows how to, you know, you name it, right. There's also fresh unicorns and they find. Is that right? They are much harder to fight. So that's actually another point that how long does it take to fight each one of these pieces. But yeah, you're right. Everything that I'm going to talk about today, the rest of the as we go through this model and the demo is not, hey, it's time for me to start thinking about hiring somebody, but it's that person needs to be in the seat and actually producing. Okay, so that's super key to remember and keep that in mind. This is true for kind of almost any firm right. It doesn't matter how big you are or how small you are, you're going to have these exact same issues or opportunities. Right. And experienced attorney anywhere isn't going to be better at one firm versus another. They're going to come in and it's going to take them a couple of months, but they'll be ready to go fresh graduates the exact same way. So that's super So if you think back to our our four points right check forecast find and protect this is that protect piece. This is where you have to take a little bit of risk right. Because you need to build out a forecast for your business. You need to learn that forecast. You need to trust that forecast. And once you trust that forecast then you can say, hey, as long as I'm within these windows or this range, I'm going to be able to go and hire that next person, right? I'm going to make the decision for my business tomorrow, today, which might be three months in advance. It might be eight months in advance. Here's the key metric that we watch. It's labor as a percent of revenue okay. So and by labor I'm really specifically talking about attorneys paralegals intake and support. Right. It's those four groups of people. And when we set metrics, we try to keep with at about 60% of revenue as our labor cost. Again, it's just a metric that you got to keep in the back of your mind to know, hey. Am I overspending? And it's not going to mean that you're going to continue to spend that 65 or 70%. You want to get that number back down to 60 and kind of keep it around that 60% number, okay. That's super important for the business and super important for you to make sure that that you're hiring people at the right time and for the right time. If you can show that your confident in it, and you can show that your actuals actually reflect what your forecast is, your team's going to see that your team's going to trust you. They're going to see that you just hired an attorney, but they're going to know there's a reason that you hired that attorney, right? It's not to take work away from them. It's to plan for the future. Right. And that cultural payoff is huge. You can't even put a number on it. Right. Because it eliminates or really lowers your turnover. Because turnover is a whole nother issue with with a law firm, you lose an attorney, you're way behind the eight ball, right? Not only do you not have somebody in that seat, but you've got to go find somebody and take 2 to 4 months maybe to get them ready to go. So keep that in mind. You have to be willing to take that financial dip. But with the with the forecast model, you have the confidence that you can do that and you will recover from that very quickly. Just one thing to add. Yeah. One thing to add is as it relates to the forecast because like it might it might sound daunting and like maybe, maybe you understand it and but your team doesn't. So like part of part of your job as the leader of your firm is like, bring them along through the process so that you can get the cultural payoff. So one thing Todd does really well is every two weeks, we review the forecast with all the departments within the organization, and we review what how have we performed? What is how is the trending? Is there anything that we need to know to adjust the forecast. And we do it as a team. That way the team understands what we're doing, the team understands how we're making decisions and like that's really what leadership looks like through through forecast is how are you? How are you communicating this to the team and essentially teaching them how this works so that they can participate. And then they're they're less likely to feel on an island when they're, you know, at really high capacity numbers, or they're going to start understanding how the business flow works, and you're going to have a very different culture as a result of being open and sharing the information and talking to the team through how it works. It's, you know, we're a significantly larger, significantly larger organization than we were when we started. And the more we've done, the more we've done that and done it well, the better the firm has performed versus being more closed off and less informative. Those years we performed less, we perform worse in at at a lower level and the culture was more difficult. So like there's that that might sound like a small nuance, but it's actually one of the biggest magical pieces of this is like, how do you how do you bring the team along in it and have them help Owen own it and drive it and participate? Because that's where that's where magic happens culturally. All right. So we've talked a little bit about the, you know kind of what the inputs are. And you know what. You know what's important to us. One of the key things I want to talk about is how this model kind of works. So you'll see the two key metrics that are there with zeros right now are that monthly revenue target in the average case value. And these are the things that Tony talked about. And let's for now let's put in I think we said like a $4 million firm. So say $300,000 a month. That would get you about three and a half to $4 million average case value, I think. Let's put in like $8,500. I think it depends on your case mix and all that kind of stuff. But let's just throw an $8,500 in there. So then look what happens, right? It calculates the targets for you. Right. As Tony mentioned. And you walk through so and then you put your actuals in there which we've got some actuals kind of plugged in here. And you see. Hey how am I doing. Right. That's awesome. That's that snapshot. That's that point in time. That's that. You know here's what what what here's what we're doing today. Here's what we've done yesterday and here's what we're doing today. Now we're going to talk about the forecast piece. Right. So let's jump into the next tab. And this will show us it pulls forward that monthly revenue target. It pulls forward that average case value the 300,000 in the 8500. Let's put an average k length in here. You can obviously do this based on what your case types are and what your case you know, your case history is. Let's put ten months in there just for for now. And then, you know, active files which kind of said 45 is kind of a decent number to start with. So that's 45 in there. Those are all kind of the key first metrics. The next two lines here that you see here are the growth rate and the seasonality. Right. And you know I've we've kind of front and loaded these. We just kind of 3% growth kind of throughout the the the year a little bit less in in January. And then seasonality is the next one. You look at seasonality. And we basically got one for seasonality, which means there's really no ups and downs until you get to the November and December timeframe. These are levers that you can switch at any point in time with that you want, right. If you wanted to say, hey, I'm going to grow 5% for the first three months of the year, and then I'm going to go down to 3% later. You can do that. And this will automatically go back and recalculate the numbers. And ultimately what you'll see at the end here is kick out. Here's how many attorneys I have to have. Right. So if we do that we just hit that one section. Let's go and change the growth rate just for kicks right in April. Right now take just kind of focus on that April column and change that to 5%. See all those numbers change. Actually it was probably 500.05 because or yeah because otherwise it'll look really big. But you saw how the numbers changed, right? That's the key thing that I wanted to point out is this is an interactive model. So if you feel like your business, you want to be more aggressive and you want to grow faster, go ahead and put that in. So let's undo that that change here. So we get back to the 3%. And then you know we can see how that then moved back to where it was. So the step ones are really the check your current health right. We're not going to spend any more time talking about those. What I want to talk about is the step twos here that you'll see there's some hidden columns or hidden rows here that will and hide these kind of one at a time and kind of walk through them a little bit. What this is doing is this is your forecast. So where do I think I need to be? Where do I think I'm going to be from a total monthly case perspective, that's what that first section is. That's your caseload. Second one then talks about how many people. So I want to have that many cases. And I have, you know, six attorneys in this case. What happens. Look at what happens in the May through the August timeframe. Everything turns amber or read write my utilization. That final number in that bottom row is over 100%. What does that mean? That means that your your attorney is more than 100% utilized. Guess how many attorneys like that? The like it for a short period of time, but they aren't going to like it for a long period of time, right? So this is where the strength of this model comes in, where it says, hey, by that month, by month of May, I'm going to start burning out my attorneys. So think back to our model of the unicorn versus the new grad, right. If I'm going to go higher unicorns. And that's just what I want to do because I'm at that stage in my firm, I got to hire somebody 2 to 4 months in advance of that. Right? So I'm probably starting to hire that in January, if not February at the very latest, so that I can get that person on board and let's say in March. And, you know, they learn my firm, they learn our processes, whatever. Through March and April May, they're hitting the ground running. And I can say, yep. Now I've got seven attorneys. Right. And that would change my numbers significantly. So that's the power of this model is it tells you when you have that issue. But it indicates the the key key thing to keep in mind is it doesn't say start hiring then because every firm, every area of the country, every, you know, you name it, they're all different. Right? It might take me two months to find somebody in Illinois, but it might take me six months to find somebody in Nebraska or whatever. Right. So you have to understand that process of of who you hire and, and how it takes to hire. So those are kind of the key things. That's the power of this model. You know, the the the inputs that you have are very small. Right. It's really, really small inputs. We talked about six things right. You put those in. You make sure you get your your growth rate, what you want to kind of focus on and how you want to get there. And then I'll get you to the, you know, to the right magic number of here's what I need to hire. This isn't going to work day one, right. It's not going to be like, oh wow, I know all the answers, right. It's going to take a while, right? Because you're going to learn how your business works. You're going to really get your seasonality knocked down. You're going to understand your growth rate. As you get better understandings of all of those things. This becomes like the crystal ball and it really stops. You know, that coin flip, right, that Tyler was talking about. And you don't have to just say, what do I feel like today? Should I hire or shouldn't I hire? You can go back to here and you can go. I love when, you know, I get a request from our team that says, I need to hire an attorney. And we go back to this and we say, well, should we? Yeah. Looks like all of our metrics are showing that we're in the right spot. Therefore. Yeah, we needed somebody yesterday. We should hire somebody yesterday. Gentlemen, thank you so much for presenting and being here. Everyone is on the call today. Really appreciate your time. I hope it was valuable. Sounds like it was. If you have any questions, please reach out to us and we will see you on the next one.