Knowing Your 6 Key Numbers®

Imagine you are vacationing at a beautiful island resort with no phones or internet, and the only contact with the outside world is by way of a supply boat that comes once a week. What three pieces of information from your law firm do you need to know to decide if you can stay another week?” Wow.

Somebody asked me this question in a meeting one day. I was overwhelmed. Surely, I needed more than three pieces of information? Did I want information about my cash? My people? What about the sales process? And within those categories, what actual one piece of information would I need? And which ones would give me an accurate enough idea of what was going on to allow me to make a decision about staying in paradise for another week?

Over the next few years, my team and I started answering these questions for ourselves and for our clients. We found that there are six areas that have critically important information—the type of info you need when you are sitting at a fabulous island resort. And while all firms are different, we know there is one Key Number in each section that applies to your firm. The Key Number is almost always forward-looking—meaning it tells you what is going to happen. And when it isn’t forward-looking, it tells you how to get back on track. Here’s a quick synopsis of the areas, components, and what we consider to be the 6 Key Numbers^®.

Cash

Cash is king, and no firm can survive without an ample amount. More than anything else, you need to know about the cash you have—and the cash you are about to need. Your Cash Flow Forecast (CFF) allows you to look forward, make decisions, and plan in a measured, reasoned, and proactive way, instead of reacting to a new crisis every week.

The question we are asked most often is, “How much should I be spending on … ” The good news is that we have the answer. We use a ratio to determine that called the Rule of Thirds – 1/3 goes to payroll, 1/3 goes to overhead and 1/3 goes to profit. Law firm owners work much too hard to be the last ones to be paid. You are taking the risk and should be reaping the financial reward. For this reason, we always monitor the owner benefit—and look for opportunities to increase it.

Production

At the end of the day, if your law firm is not producing legal services, it will close. The trick is to learn how to incentivize your people through goal setting and understand what the capacity of the firm is and how much of that capacity you are using. WIP (Work in Progress) is the key number for production. Today’s WIP is next month’s revenue.

Budget vs. Actual

The Budget vs. Actual report is a standard report in all accounting software and serves two purposes. First, it means you have a budget. The Budget vs. Actual report lets you know if you are straying off course and gives you the ability to course correct.

Marketing and Sales

Understanding how clients get to you is vital. Once you start tracking your conversion cycle, it highlights places in marketing where your message is not in alignment with your firm. Ultimately, the Key Number we track is the number of sales calls booked. With that one number, we can predict how many new matters will be signed in the next month.

Case Management

I realize no case is “normal,” but your matters do have certain similar characteristics. Your average case length and value paired with the Net New Cases key number gives us lots of insight. By knowing the number of Net New Cases (cases opened minus cases closed), we can predict how much work is in the firm, the pressure it will put on your team, and next month’s revenue.

I get it, attorneys don’t like numbers – that’s why you went to law school, right?  However, a little work will net you enormous gains.  And it doesn’t matter if you are sitting on an island or struggling to keep your firm going, the 6 Key Numbers^® that you need to know are the same. These numbers help you gain control, chart a path, and achieve your goals.

For more information on the 6 Key Numbers^® and how to implement them for your firm, read Brooke’s new internationally bestselling book, From Panic to Profit: How 6 Key Numbers can make a 6-figure difference in your law firm.  Now available on Amazon.  You can reach Brooke through her website at CathCap.com or by email at Brooke@CathCap.com.

A client recently shared his worry about taking on new marketing approaches, which included an effort to become credibly visible in a variety of marketing channels rather than centering all of his efforts on a single marketing avenue as he had in the past. Nothing especially shocking, but my client (risk-averse, like so many lawyers) was almost paralyzed.

A Seth Godin blog post casts light on that client’s situation by untangling risk and uncertainty:

Uncertainty is not the same as risk… Uncertainty implies a range of possible outcomes. But a range of results, all uncertain, does not mean you are exposing yourself to risk.(Emphasis added.)

“Pressure is what you feel when you don’t know what you are doing.” – Peyton Manning

This quote stopped me in my tracks. My first inclination was to disagree, because I sometimes feel pressure because of a deadline or because of the importance of some activity, even though I know what I’m doing. Digging a bit deeper, though, I think Manning has a point.

When it comes to business development, the lawyers most under pressure are those who don’t have a cohesive plan, who aren’t implementing their plan consistently, or who haven’t fully committed to one or more activities that are likely to help them secure work. Although they know what they’re doing on certain levels, there’s a disconnect between intellectual knowing and buckling down to do the work. If you know that you should request an on-site meeting with a client, for example, and you expect that you might well land more business or receive a referral or even deepen a valuable relationship, but you don’t ask for the meeting, you’re going to feel pressure.

In contrast, if you have a plan that you’re implementing consistently, though you may feel tension until you see results from your plan, that tension is different in nature. When you know what you’re doing, both in terms of the specific activities and the timing, you also know that you can shift your plan as needed to tweak your results.

You know that you have something that’s fundamentally workable. You’ve done your homework and you’ve prepared yourself and your plan.

Do you feel pressure about business development? If you do, take a few minutes today to get to the source of that pressure. You’ll probably find that it’s one of these issues:

• You don’t know what you’re doing (you don’t have a plan or you don’t know how to implement some aspect of your plan)
• You don’t know how to make time to implement your plan consistently (so you never have an opportunity to reach momentum)
• You don’t know how to perform one or more activities incorporated in your plan (and so you haven’t even started)
• You’re terribly uncomfortable about some aspect of your plan (you aren’t confident that you can engage in business development activity without harming relationships… or your ego)
• You need to bring in new business now and you don’t yet know that your plan will work (you haven’t implemented your plan and you’re focusing on the need for business rather than on your ability to meet that need)

Which of these issues underlies the pressure you’re feeling? Once you’ve identified the problem, you’re that much closer to solving it. If you aren’t sure where to start, please schedule a complimentary consultation so we can get acquainted and mutually decide whether I can help.

Being busy has become a national obsession, and it certainly affects lawyers. We seem to have two speeds: frantic and fearful. We need to have a discussion about what might lie between these extremes, but an even more pressing question might be how to keep marketing going even when frantic.

You’ve no doubt heard that content is king for marketing, and there’s a simple reason: good content builds trust. Great content is easy to generate when you have plenty of spare time, but how do you keep up the flow of content when you’re frantic?

Re-purpose everything. When you do something, look for other ways to use that same content. Here are a few of my favorites:

• An article can become multiple blog posts
• Blog posts can be broken down into blurbs suitable for use on LinkedIn or Twitter
• Any writing you do may yield a question suitable for opening a discussion in a LinkedIn group
• Any presentation you make may be uploaded via SlideShare (being attentive to potential copyright questions) and you can reuse the presentation points as blog posts
• Record a blog post, and you have a podcast (and podcasts are hot, hot, hot today—if they’re a good fit for your market)
• Client questions can spur an article
• Your reaction to a blog post or news story can yield a comment, which you might then expand into a blog post (as a guest, if you don’t have your own blog), an article, or a podcast

When it comes to re-purposing, the sky is the limit. Make it your habit to ask, how else can I use this?

Even more importantly, ask where you can distribute it. Content won’t help you grow your practice unless it’s consumed by the right audience. Where it’s a fit for your practice, look for ways to appear in the relevant industry and popular media. And look for how you can use what you’ve done to build relationships as well.

What resources do you have that you can re-purpose now to extend your reach?

Have you ever found yourself wondering whether to pursue one or another course of action for business development purposes? Absent a crystal ball, unfortunately, it’s often difficult to know in advance what will get you the maximum reward. But if you track your results, you’ll be able to use the simplest system ever. Here’s how.

1. Keep a record of your activities. You can make this simple or quite complex, but you’ll probably find simple to be more actionable. The simplest way to do this is to create a spreadsheet with spaces for date, activity, results, next step, and decision. Every time you complete an activity, note it.
2. As you begin to see results (or the lack thereof), update your spreadsheet. Many activities will get immediate results of one form or another (inviting a contact to lunch, for instance), but some may have a longer gap between action and result (actually having lunch with that contact and waiting to see whether you get work, introductions, or some other next step as a result). Schedule a monthly review to keep track of those longer-term results.
3. Note your next steps. Assuming you’re going to continue this activity, what would your next step be? Ideally, you’d complete this entry after you see results, but if your activity is more prone to long-term results, you may need to project a next step based on the results you anticipate. If that’s the case, be sure that you go back to confirm whether those results actually came to pass. (If not, all the more reason for you to track your activity carefully and improve your predictions!)
4. Once a quarter, review your activities and results, and decide whether you should stop or continue the activity based solely on the results you’ve attained. You might choose to overrule that decision (if, for instance, your results represent a promising midpoint toward a meaningful outcome), but this decision should be based purely on the evidence you see.
5. For each “stop” you note, ask yourself what activity you might start to replace it. Use the evidence you’ve gathered to hone your ideas. If every indication is that attending bar association meetings is not beneficial for you, don’t add another bar group and hope for a different result. Instead, investigate an industry organization or a business group.

Want to get even better results? Ask a mentor or trusted colleague to help you determine what to start, stop, and continue. The benefit of this process (adapted from the performance review context) is that you’ll quit making decisions based on emotions like hope (“but if I keep doing this, I might land an amazing piece of business”) or fear (“I’m really comfortable doing this, and if I start doing that instead, it’s going to be hard and I might fail”). And when you remove emotion, you’ll see clearly what to do.

What should you start, stop, or continue?