Data Analysis for Fun and Profit

T. Greg Doucette

It’s no secret that the law attracts its share of control freaks. And if that segment of the legal population happens to include you, then solo practice may be a great career choice. You get to choose what clients you take or refuse. You get to choose whether or not to wear a suit on the days you’re not in court. You get to choose whether you’ll go to court at all.

But, one thing you can’t choose—at least if you want to stay in business—is to skimp on collecting and analyzing data about your practice.

Track data in the following three areas to help with your bottom line.

1. Time

Sure, alternative fee arrangements are all the rage with smaller firms; they provide greater cost certainty for clients and less hassle for lawyers. Quote a number, get paid, put the money in your account, and get to work.

But how do you know if the flat fee you just quoted on that traffic case is high enough to keep you afloat? Is the amount of time that you’re going to spend drafting that will in line with the amount Mrs. Smith is paying? What happens if things go south on that foreclosure defense case and you end up stuck in protracted litigation?

As much as we may hate to admit it, the old adage “time is money” plays a major role in the success (or failure) of your law practice. You can stick with flat fees and other alternatives, but you still need to track how much time you put in on each case and ensure that your rates are set accordingly. Otherwise, you are stuck with a heavy caseload and no profit.

2. Mileage

Do you have a mileage log? Do you know the current IRS rate for business mileage? Are you factoring the amount you drive into the rates you charge?

Mileage is a hidden expense that is easy to forget about, but can eat into profitability if you’re not careful.

For example, many solo and small firm attorneys here in the Research Triangle area of North Carolina, which is where I practice, frequently travel to court in three different counties. My home courthouse is in walking distance from my office, but the other two courthouses are 26 miles and 18 miles away, respectively. At current IRS rates—$0.56 per mile in 2014—that means I’m spending $29 per round-trip to one county and $20 per trip to the other. And that’s just auto-related expenses. I haven't even factored in the time spent in traffic—away from the office and my billable work.

If you’re in a practice area where multiple trips to the courthouse are common—traffic, criminal defense, family law—those numbers add up quickly. I averaged $527 in mileage per month my first year as a solo practitioner. That $6,000 would have been nice to have in my pocket, rather than in my car’s gas tank.

3. Client Sources

Track where your clients are coming from so you can determine whether your advertising dollars are being well spent. This is easy to do: simply include a line on your intake sheet, or whatever method you use to gather initial client info.

This is another lesson I learned the hard way.

Last April, activity at my firm cratered. I had been on a steady and sharply upward trajectory since opening my doors six months prior. Then the phone stopped ringing. Panicked, I took a dive into direct mail. Dozens of solo and small firm attorneys I knew were using different companies to contact people who got traffic citations and other criminal charges, and I thought that this would be a good investment to generate clients and cash flow.

At the time, it seemed like it worked. The phone started ringing again.

About eight months later, however, I discovered a problem.  I compiled a report on every client I had, identifying how they had found me, and I discovered that only 11 of my new clients were from direct mail (less than 7 percent of my caseload). The rest were referrals and clients who found me through other non-advertising-related avenues. When I compared how much I had spent on direct mail to the amount I had made on those 11 clients, I realized that I had lost nearly $2,000 over the past 7 months.

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Solo practice is a rewarding option, but it is necessary to be vigilant in monitoring your costs and expenses. Eventually you will figure out the most cost efficient means of advertising, client development and client maintenance. But the sooner you start to track and evaluate these items, the quicker your practice will be profitable. 

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T. Greg Doucette

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T. Greg Doucette, of the Law Offices of T. Greg Doucette, PLLC, in Durham, North Carolina, focuses on small business litigation and criminal defense.