6 Billable Hour Mistakes Your Law Firm Might Be Making

Hi, this is Ann Pearson, CEO and Founder of PRM Group, Inc. and Paralegal Boot Camp. 

I developed the Billable Hour Bootcamp course and coaching program for law firms to give their timekeepers training on the most important role in a law firm: generating revenue to keep the doors open!

I’m here today in the video to talk about something not a lot of people talk about. Now, what I should make clear for lawyers and managers listening before we jump in and talk about paralegal profitability is that this is not about how to suck the life out of your paralegals.

It’s about understanding that your paralegals can be considered revenue generators, profit centers, not expenses to the firm.

With the difficulties every firm has trying to fill open positions these days, this is not the time to tell your paralegals, “You need to just bill more hours, or we might have to let you go.” That’s not suddenly going to motivate the paralegal to work more.

I call this the overlooked profit centers at law firms. 

The reason I’m passionate about this is because, as a business owner myself, I get it.

Your business has to generate a profit or it closes, but also because I think if law firms could fix a few of the mistakes that I’m seeing in all size firms, solos to AMLAW 10 firms, I think if they fix these things and see for themselves how profitable paralegals are to the business, then maybe they could afford to pay them more money, which would be a win-win for everyone -the law firm owners and the paralegals.

The problem is that some firms still view paralegals as overhead, and that may be because that’s all that management has ever known. They see the numbers and think this is as good as it gets, and we’re lucky they’re bringing in a little money to cover some of their salary.

And so when they’re thinking about adding another paralegal, the decision on what to pay is based on the expense to the firm.

Let’s talk cold, hard numbers.

I think if most firms knew what they were leaving on the table, they might be more motivated to look at ways to fix this problem. Here are some of the numbers that I’ve seen over the last 10 to 15 years in the Billable Hour Boot Camp, and it applies whether you have one paralegal, 25 paralegals, or hundreds of paralegals.

Let’s start with a small firm, ten attorneys, and five paralegals. None of them were coming anywhere close to a thousand billable hours per year, but they didn’t really have a set requirement or a goal. The equity partners see them as an expense to the bottom line because they were. Fast forward less than two years, and they’re all exceeding 1500 billable hours per year, with a 98% realization rate, and bringing in a million dollars a year in revenue for the firm.

With an average bill rate of around $150 per hour, those extra 500 hours or more per year per paralegal were an increase of close to $400,000 per year, year over year. And they’re trying to hire two more paralegals.

Now, if you’re a solo practitioner, you might be saying, “well, I only have one paralegal, so that person doesn’t really affect my bottom line.”

It does when that one person starts generating $150,000 or more per year, they’re no longer an expense to you. After deducting their direct overhead and a portion of the office overhead, you see that your solo practice has added close to $100,000 to its bottom line without you doing the work.

Now, imagine if then you add two or more paralegals doing that, or five paralegals. You have to think of scalability and leverage when you think of paralegals, just like you think of that with your associates.

Jump into the video to learn the six billable hour mistakes that you might be making, and more importantly, what you can do to fix them.

If you want to learn more about the Billable Hour Boot Camp, click the link to read more about the training program or reach out to us to set up a phone call with Ann Pearson.