Andrew McDermott

Research shows attorneys spend two-thirds of their day on non-billable work. If attorneys are struggling to meet their quotas, law firms may notice they’re missing revenue goals. However, there could be other factors that can play a role in lost revenue. Here’s why law firm utilization and realization rates matter and steps to boost them.

How minimum billing increments impact revenue

Daly & Sorenson represented Gabrielle Manigault, their client, in 97 legal matters over the course of 16 years. They had a long-standing relationship.

However, Manigault owed more than $84,500 in unpaid legal fees. She disagreed, so her firm declined to litigate her case and sued to recover their fees. Manigault stated in her appeal that her fee should be reduced because her firm billed in 15-minute minimum increments. She believed her firm would “routinely charge her for work that took far less time to accomplish, and speculated that the firm was billing for unproductive casual conversations between attorneys and paralegals.”

This scenario stems from the absence of a written fee agreement and miscommunication with the client regarding the law firms minimum billing increment policy. Minimum billing increments are a great way to boost law firm utilization and realization rates but it’s important to outline your billing process to clients during the onboarding process.

Using minimum billing increments to boost law firm utilization and realization rates

There are several strategies attorneys can use to boost their utilization rates. Here’s the great news about these strategies; what’s beneficial for your clients is also helpful for your law firm.

1. Make minimum billing increments a part of your intake process

According to According to Lexis-Nexis’ Age of the Client, your client’s number one and number three concerns in the attorney/client relationship is oriented around your fee.

“Provides clear indication of likely costs/works to fixed fee” and “explains charging system clearly at outset” are two of the most important factors listed here, revolving entirely around money. This should be part of your client intake process.

Show your clients the fee arrangements and minimum billing increments you use (if any). Treat this conversation as an opportunity to discuss any objections or concerns they may have ahead of time. Reassure your clients that it’s okay to say “no” so you can be confident in their “yes.”

2. Avoid ambiguous billing practices

Extensive overbilling, block billing, billing for meaningless or unproductive conversations — are all important areas to avoid.

They can come look unprofessional and leave clients with more questions about your billing such as:

• When did this bill come in, and why are all of these tasks lumped together as a single line item?
• Why did it take so long to do this?
• Are you overbilling so you can ring the meter and justify more fees?

These poor billing habits could lead you to a billing dispute and a potential loss of revenue.

3. Enforce timekeeping for billable and non-billable work

If you want to increase your firm’s utilization and realization rates consistently over time, there’s one ingredient you’ll need above all else. You’ll need to review your timekeeping policies and how employee’s are tracking their time.

With utilization optimization, you can:

• See how your employees are spending their time: Is there an administrative process that’s eating away at billable time? Are specific employees struggling with specific matters? Accurate timekeeping gives you the intel you need to assess time management and identify the root cause.
• Find billable leakage sources: Are attorneys spending an unreasonable amount of time searching for the documents and tools needed to do their jobs? Are attorneys under quota and unable to produce the volume of billable work needed to sustain the firm (due to an excess of non-billable work)? With proper timekeeping finding the answer is simple.
• Set billable targets and financial goals: Look at your current situation; do you have the tools and resources you need to hit your billable targets or financial goals? With time tracking software, you’ll be able to give a clear and accurate answer.

Boosting law firm realization rates

By developing good habits, you’ll be able to get more value from each of your employees. You’ll able to identify revenue leaks before they spiral out of control. You’ll finally be able to achieve consistent, year-over-year growth. Morale will improve, making it harder for competitors to poach key employees.

Your clients will be eager and willing to pay the fees that you ask. If you’ve taken the time to keep them in the loop, it’ll be easier to earn and maintain their trust. By taking the time to explain your fee structure clearly, you ease their fears about being abused.

Your realization rates will begin to climb.

Start with clear communication and clean billing practices to boost revenue

Billable leakage can come from a variety of factors within your law firm. Taking a look into your billing practice and having a conversation about minimum billing increments with your team is a simple way to resolve the problem.

Implementing a practice management software is another way to remedy many of your law firms pain points from billing to time tracking. Begin with timekeeping, continue with minimum billing increments, and your poor utilization rates may become a thing of the past.

Your law firm could attract more clients and increase revenue by 53 percent or more by selling both products and services —attorneys billing hours by the day, selling legal products by night.

According to Mark Cohen, speaker on law firm innovation at LegalMosaic, “The traditional law firm economic model is predicated on high-intensity, high-priced labor as opposed to products, but nonetheless, this is something clients are increasingly demanding.”

Most firms haven’t embraced this model, but it’s a revenue model law firms can use to attract, earn, and win more high-quality clients consistently. Today I’m going to show you how this model can provide you with free advertising. 

Using products to attract more clients

The business model is simple, and it doesn’t require a whole lot of babysitting. It needs some upfront work to set things up, and a willingness to maintain the revenue model, so it continues to perform well for you. 

Here’s how this model works:

1. You advertise on a specific platform. I’m recommending pay per click advertising (e.g., Google ads or Bing ads) to start. 
2. You send customers to a specific landing page with an irresistible quid pro quo offer (i.e., trading education for an email address). 
3. You offer the subscribers an irresistible, low-cost product to gauge interest levels and segment prospective clients.
4. Clients subsidize your advertising; they pay you to promote your law firm. 

Here are the ingredients you’ll need.

• An irresistible offer
• A strong value proposition
• Money to advertise ($300 per mo. minimum)
• An email service provider
• A website or landing page (and all that comes with it)
• Strong educational content
• Social proof, credibility, and authority markers
• Product risk-reversals (you’ll need to verify the legalities)

You must invest the time needed to get these details right. Shoddy website design, an unreliable email service provider, or weak educational content, will sabotage the results you receive. 

As the saying goes, garbage in, garbage out.

The product you offer depends on your goals

You’ll need to determine what your goals and objectives will be ahead of time. Are you merely looking for a way to generate more leads? Would you prefer to transition fully to products? Maybe you’re interested in creating a hybrid firm — 70 percent of the revenue comes from billables, 30 percent from products.

It’s entirely up to you. You must identify these goals ahead of time, so you aren’t distracted by offers that take you away from your goals and objectives.

Which products should you sell? You can sell:

• Books
• Courses
• Workshops
• Seminars
• Events
• Initial consultations
• Productized services 
• Tools
• Apps
• Connections
• Access

There’s more here, but I think you get the point. Using these resources, you can generate a significant amount of revenue for your law firm and attract new clients simultaneously. 

Let’s take a look at our fictitious firm, Goldsmith, Price & Cooper, to see how this strategy would work. 

Goldsmith, Price & Cooper specializes in business law. They’re particularly interested in startups and small businesses. They’ve noticed that prospective clients have some common misconceptions about incorporating in Nevada.

Their clients are worried about asset protection. They want to provide their clients with the help and support they need, but they also want to make sure their firm is profitable. They gather their ingredients together.

• Two irresistible offers: (1.) An asset protection toolkit and (2.) They write a book on asset protection
• A strong value proposition: Their firm offers battle-tested asset protection
• Money to advertise: $2,500
• An email service provider: Mailchimp
• A website or landing page: (a.) A landing page for their asset protection toolkit and (b.) A sales page (with checkout via easy-to-use tools like Gumroad) to sell their book
• Strong educational content: Thorough, informative content that exposes their need for help. 
• Social proof, credibility, and authority markers: “As seen on” badges that highlight your firm’s expertise and recognition in the marketplace
• Product risk-reversals: A 30 day, no questions asked refund policy for the book 

Next, Goldsmith, Price & Cooper arranges these ingredients in the right order. They set things up so prospective clients: 

1. See their ad on Google or Bing
2. Click on their ads
3. Arrive on their landing page
4. Enter their email address to receive the asset protection toolkit
5. Views their irresistible offer and decides to purchase their asset protection book
6. Are invited to set up an initial consultation with a partner (not an associate) at their firm

Using this structure, you can produce a consistent stream of high-quality clients who are eager and willing to invest the amount needed to receive your expertise. You create products that deliver a substantial amount of revenue for your firm, subsidizes your advertising (so it’s free), and generates leads — all at the same time.

Selling legal products boosts law firm profitability

As we’ve seen, selling both products and services are great options to make your firm more profitable and attractive to prospective clients. By having a strong value proposition and creating ways to solve prospective clients’ problems, you’ll find they’re eager to invest in the products and services they need to protect their interests.

Time tracking for lawyers should be effortless. Many rely on Excel spreadsheets to track their time and are accustomed to this method. However, using spreadsheets to track time has hidden business and revenue implications.

Why law firms using excel lose money

The problem with using spreadsheets to track time is the increased opportunity for human error. Benjamin Lieber, Managing Partner at Potomac Law Firm talked about what time tracking for lawyers is like when spreadsheets are used:

“Lawyers would send me their time every month by email and would come in all different formats and all different conventions and levels of granularity. And even the units would vary somewhat. Some would use a tenth of an hour or some would use quarter hours, some would use a third of an hour; it was a mess…”

This can be a common scenario for law firms using spreadsheets as their form of time tracking. Here is why this can cause problems:

• Lawyers end up spending too much non-billable time on their timesheets
• Managing partners lose a tremendous amount of non-billable time deciphering attorney timesheets
• Law firm utilization and productivity rates plummet 
• Firm-wide standards aren’t enforced or clearly identified
• Managing partners are so busy wrangling spreadsheets that they don’t have the time needed to address the problem with their timekeepers

Research shows lawyers are paid for less than 30 percent of their day.

Laywers today are running themselves into the ground, doing everything they can to meet the crushing standards set by firms, who are also struggling to contend with competitors. 

Here’s the problem with spreadsheets. Your spreadsheets, whether it’s Microsoft Excel, Google Sheets or Open Office Calc come with a specific set of problems. 

1. Skill set. Do your employees have the necessary skills needed to use the spreadsheets properly? It’s important for your law firms time tracking practices easy and intuitive.
2. Human Error. If you don’t track your time minute-by-minute, it can be easy to forget how long it actually took you to complete your work. Additionally, spreadsheets are easy to manipulate and built-in equations can be distorted.
3. Inconsistent standards. The way one attorney tracks time, may vary from another. This can cause inconsistency in time tracking and hurt billing.
4. Billable leakage due to delayed time entries, creating a case of over-billing, lost revenue and an increase in non-billable work. Research shows spreadsheets, when combined with non-billable work, produces an average loss of $86,294 to $106,294 per person, per year. 

Your firm has multiple clients. This means multiple spreadsheets for each client or one master spreadsheet. To complicate things even further, each associate has their own copy of the time tracking spreadsheet. One or more of your timekeepers continue to make new copies of this spreadsheet. 

Who has the most up-to-date copy? Did the other timekeepers working on a client matter download your most recent spreadsheet? If they didn’t, and they added their time to an old spreadsheet your most recent work is missing. The 40 hours of work you spent on your client’s matter is now gone. 

Advantages of Time Tracking Software

The solution to eliminating spreadsheets is time tracking software. Software like Bill4Time, takes the guess work out of tracking, managing and deciphering lawyers timesheets. This results in more time for attorneys to focus on their work and decreases the changes of hidden revenue leakage at your law firm.

In some situations, your law firm may need to adjust a clients invoice. It could be due to lack of communication of your billing process, dissatisfaction with service or simply trying to bargain your rate. No matter the reason, rate reductions add up over time and can hurt you bottomline. Having the proper legal billing software can help reduce law firm write-downs and boost your revenue.

The case of Manigault v. Daly & Sorenson, LLC, is a notable example of expectations gone awry. Manigault felt her law firm used 15-minute increments to charge her unfairly when the “specified work took far less time to accomplish.“

Did her law firm take advantage of her in this situation? We’ll never know. The Wyoming Supreme Court disagreed with her assertions, stating that her law firm was not unreasonable. 

The secret cause of write-downs and write-offs

The hidden driver of law firm write-downs and write-offs typically isn’t due to a misunderstanding. It’s also not usually the result of overwhelming mistakes on the firm’s part. It’s an expectations mismatch. 

Pam Woldow, attorney and legal consultant, confirmed this in several posts. Here are a few of the scenarios that create write-downs and write-offs. 

1. Create realistic expectations. It’s important to have an idea of the services you can provide and scope the work accordingly. This starts with an accurate process to measure performance. Inaccurate measures of performance and cost estimates can lead to miscommunication resulting in a client being dissatisfied and requesting a write-down.
2. No concrete budget set. No budget was set during initial negotiations. The firm simply billed clients as usual, doing as much work as they can justify. When clients receive their bill they’re upset. The large amount listed was nowhere close to their expectations and could ask for a discount.
3. Scope creep or changes to the scope. Scope creep occurs in one of two ways – clients request changes but assume their requests are part of the existing budget/price. Or, the firm makes changes to the agreed-upon scope (justified or unjustified). It’s important to communicate all changes and the impact they could make on the scope of work.
4. Inefficient time tracking. Refer to timekeepers who (a.) spend far too much time on legal work and (b.) use traditional form of timekeeping such as an Excel sheet or pen and paper. Utilizing an automated, “set it and forget it” style time tracking software can reduce inaccuracies and allow you to measure your performance.

The issue in each of these very common scenarios is miscommunication on expectations.

Reduce law firm write-downs with proper communication

First, we need to clarify our terms. We need to understand the difference between a write-down and a write-off? It’s an important distinction that helps us better understand the benefits of legal billing software. 

• A write-down reduces the value of an asset (invoices in this case) for tax and accounting purposes, but the asset still retains some value.
• A write-off negates all present and future value of an asset. It reduces its value to zero.

A write-off is typically a one-time event, entered immediately when an asset has lost all usefulness or value, but write-downs can be entered incrementally over time.

When it comes to billing, your clients have fuzzy, implicit and unrealistic expectations. A study by Jukka Ojasalo outlined the differences between these client expectations.

• Fuzzy expectation. Your clients expect your invoice to be within an approximate range, though they couldn’t tell you what that specific number is.
• Implicit expectations. Your client believes it’s “obvious” or “self-evident” that your bill would fall within a specific dollar amount or range (only it’s not obvious).
• Unrealistic expectations. These are expectations you’re either unable or unwilling to meet; for example, your client expects you to produce $500,000 of legal work for $25,000.

To truly reduce law firm write-downs and write-offs, these expectations must be flushed out during the negotiation process. 

How legal billing software can help boost revenue

1. Automated workflows. Good legal billing software enables you to create automated workflows. These workflows are a series of steps and procedures your team follows at the beginning, middle and end of a project. Does a particular client want you to pick up the phone and talk to them when an invoice is over budget? Are clients, contacted when they request something that’s considered to be scope creep? 
2. Pre-bills. A draft version of your invoice gives you the time to go over billing guidelines and client expectations ahead of time. A pre-bill gives you time to run things past partners in charge of a specific matter or project before it reaches the client. 
3. Project management. Good project management enables you to create and assign tasks for specific projects or matters. That’s important if you need to flush out client expectations during the beginning stages of a project or simply hold clients accountable to the standard they’ve set. 
4. Automated time tracking. Using automated time tracking tools, you can convert completed tasks and to-dos into time entries and invoices. That’s beneficial for several reasons. First, you have a visual reminder that you’re working on the tasks and action items your clients have specifically requested. Second, you’re able to gain explicit approvals on each of the pertinent tasks in your client’s project or matter. 
5. Detailed reporting. Reporting can help determine which practice areas have the most write-downs or write-offs, manage budget and identify where problems could arise. Your software should help you identify the important trends and details shaping your firm’s financials. 

Good legal billing software enables you to send invoices and receive payment. Great legal billing software provides you with a framework and the full suite of tools your firm needs to boost revenue, reduce write-downs and eliminate write-offs. Platforms like, Bill4Time, offer an all-in-one solution from built-in payments processing through Bill4Time Payments to invoicing, automated time-tracking and more to manage your firm.

Write-downs and write-offs aren’t mandatory

Sometimes they’re necessary, but they should be the exception rather than the rule. 

Managing your client expectations is easier when you have the right set of tools. With good communication, the right legal billing software and a full suite of supporting tools, your firm will have the tools to reduce unnecessary revenue loss.

A senior associate at a large law firm shared an anonymous snapshot of her day on Quora, outlining the stark reality of life in a busy law firm and lack of time management for attorneys.

“Documents begin to come back and a junior associate dumps work on me from outside of my practice group. I try to tell him to shove it, but I can’t because he has CC’d a powerful partner. I ignore the deals that I’m trying to close and deal with the junior associate’s query.” 

A brief scan of her day shows work is dumped on her by those above and below her.  This is the reason why time management is such a struggle for attorneys.

How poor time management costs law firms money

Time management is a problem for small law firms as well. The 2019 State of U.S. Small Law Firms states that small law firms often have to choose between the practice of law and the essential tasks required to keep their law firm running. 

“Nearly 40 percent of their day goes into activities other than the actual practice of law. Much of this is time for which the lawyer will never be paid.”

Forty percent doesn’t sound too bad until you realize that an attorney working 12-hours per day spends approximately five hours on non-billable work. This means they have seven hours to work with. Here’s the problem. These billable hours are battered by billable leakage, poor realization rates, discounts, and write-downs.   

Other sources state the loss is much higher. According to the Legal Trends Report, the majority of attorneys collect pay for only 2.3 hours of the work in their day. 

Why time management is a juggling act for most attorneys

Attorneys experience significant demand for their time. Whether it’s a client or new associates on the team, there are a variety of people, circumstances, and tasks competing for your time and attention: 

• Partners and associates who want to unburden themselves by giving you extra work 
• Non-billable work that requires a consistent investment of time (e.g., business development, accounting, rainmaking) 
• Crises to deal with —  external crises like client emergencies and complaints, internal crises like covering for a particular practice group, or peripheral crises like advertising fraud 
• A sudden change — an increase or decrease in client demand for a practice group or a loss of several key associates in your firm 

Adopt new processes and boundaries

Taking control of your time boils down to creating best practices and setting boundaries within your work. Adopting legal practice management software, setting calendar restrictions for when you’re available or simply saying, ‘no,’ when you don’t have the bandwidth.