How to set fee-earner budgets properly and profit big time...

This is one of the most fraught areas of legal practice management for firms large and small...but it needn't be...

Well over twenty years ago we developed KMSWorkPlans™ as a tool to ensure better planning of the way fee-earner resources are used in firms...and they're used successfully in firms throughout Australasia...

What we recommend you do is treat each person as the individual they are, and start with an agreed level of average daily input for them...


As a simple example...assume a lawyer agrees to work a minimum of 8 hours a day...

Don't budget for 5.5 (or 6.5, or some other number) hours of billable time...that's the wrong starting point because it assumes that 2.5 hours a day are being spent on useful, important, other activities...

In reality most of the time they aren't...most of the 2.5 hours a day...577 hours a year...are just being wasted...and you've entrenched the "acceptability" of that by your planning "system"...

Look at the skill sets of each individual beyond their primary client work...and how they are able to be used to advance your firm's business plan...

Business development, mentoring. supervision, Knowledge Management etc...what does someone have that you are willing to buy off them instead of their time for client work...make no mistake you're paying for it big time no matter how it gets utilised!

Obviously it will vary a lot between individuals...

So we may decide that for this fee-earner a combination of unavoidable "General Administration," and planned elective FirmTime, will use up 1.5 hours a day on average throughout the planning period...usually a year, but no reason not to make shorter... and formally review more regularly...

8 hours less 1.5 happens to be 6.5 but it isn't arrived at by reference to formulas or averages in the Profession...

The process works just as well for someone who is 8 hours Monday and Thursday, 4 hours Tuesday, 6 hours from home Wednesday, and has Fridays off...doesn't everyone these days?

In fact the way the Profession is going...it's absolutely essential that application of fee-earning resources is better planned in this way...

The anticipated production of billable work at 6.5/average day is not aspirational...it's what is required of this individual..

Two key assumptions...

1. If FirmTime does not actually get done to the degree planned, the resulting time MUST fall back into the ClientTime bucket...and be used on Client work beyond budget...

2. The firm must arrange, in conjunction with the individual often...that there is always a healthy backlog of Client work...

Then if there isn't enough work, it's not because the fee budgets were merely "aspirational"...it's almost always because the firm did not do its Business development consistently and effectively enough.

Except in so far as the individual failed to engage and participate as required, that shortfall cannot be sheeted home to them...and the budgets were not incorrect, or too high per se...

Our experience over two and a half decades is that properly set budgets tend to lead to revenues that are many tens of thousands of dollars a year higher than the Profession's expectations...

If you do this consistently with most of your fee-earners, and get your leverage structure right, surprise, surprise, it can even mean that an average firm can make proper profits after principals' salaries!

There are many reasons for getting budgeting right...and for many principals this one is one of the more riveting!

KMS WorkPlans™ are used by firms under Licence...miniscule fixed investments per fee earner for massive improvements in outcome...

To initiate further discussion with me please email WorkPlansBlogPost@lawfirmprofit.com...or simply add a Comment with your contact details...