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Focus Areas Where Small Law Firms Benefit from Practice Management

01/06/14

Focus Areas Where Small Law Firms Benefit from Practice Management


Summary: A study into law firm practice management done by Blue Hill Research comes up with some significant findings. The research report published last month found that firms implementing practice management could do with 40% less staff than firms without practice management. The report also found practice management amounted to a four to eight hour per month reduction in non-billable activity and depending upon the conversion efficiency of saved time to billable hours the ROI of practice management ranges from 1000% to 4000% in case of law firms with 50 or fewer attorneys.

At a time when all law firms are struggling to streamline their operations and make their service delivery models more efficient, there are still firms that neglect practice management, and small law firms suffer the greatest, even though the techniques and resources are easily available. What seems unavailable to small law firms or solo practitioners is the time required to adopt and adapt to new methods of doing work. The costs of doing so endanger immediate profit in the short run, but in the long run they endanger survival.

Blue Hill conducted interviews with 45 law firms with approximately 50 or fewer attorneys regarding their evaluation and implementation of practice management solutions. The results show:

  • Reduction in non-billable activities between four and eight hours per month
  • Firms with less than five attorneys see close to 100% conversion of saved non-billable time into billable hours
  • Increased staff capacity helping to reduce headcount
  • Firms implementing practice management have close to a 3:1 attorney-support staff ratio on an average
  • Firms without practice management have 2:1 attorney to support staff ratio
  • Number of billable hours gained per year can range from 36 to 72 in small law firms with 100% conversion of saved time to billable hours
The study found that depending on the rate of conversion of saved non-billable hours to billable hours, the percentage ROI of investing in law firm practice management varied from 939% at 25% conversion (big firms) to 4055% at 100% conversion (small law firms).

The report by Blue Hill Research, titled "Building a Business Case for Law Practice Management" sums up the issue succinctly in the opening sentences: "Whatever their size, solo and small law firms often face matters and client relationships that are as sophisticated and complex as those faced by their large peers." And in engagement areas where small law firms had previously lagged behind due to lack of available resources, today there is an array of case management, billing and client management solutions that small law firms are using to level the playing field. However, a big number of firms continue to do things in the traditional manner still unconvinced of the benefits of adopting new methods of law firm management and due to the time required to invest to transition to new solutions.

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