Law firm profits for the 2014/15 financial year – What are you planning on earning?
In Australia we have just commenced a new financial year.
Accordingly it is a great time to take stock of how you did last year and decide if that matched your expectations.
It is also the time to set your goals for next year (if you haven’t done so already).
One of the key steps in ensuring that you earn the profit you want from your law firm is to set a goal to earn it in the first place.
You no doubt have heard the saying” If you don’t know where you are going , any road will get you there!!”
It is exactly true with law firm profits.
If you don’t set a goal to earn the profit you want, then you will simply drift along and earn whatever you end up with, but not necessarily what you want to.
So what level of profit are you happy with?
The funny thing with profits, is that making more doesn’t necessarily correlate to working any harder.
I have sole practitioner law firm clients planning on earning a profit of $600,000 this year and there are ones that are happy earning only $300,000.
That is their personal decision and personal choice.
One thing I can tell you is that the principal of the $600,000 profit firm is not working twice as hard as the other. Far from it.
In fact the principal of that firm is actually working less hours than when they were making considerably less.
The hours that you are prepared to work is simply one factor in profits and of course there is a finite limit to that as you only have 24 hours in each day, even if you are prepared to work more.
We have been lucky in Australia, as the economy has been conducive to small law firms being able to achieve great financial returns.
Talking with my clients (who are all small law firms) and they are generally telling me about how revenue has grown significantly over last year and their plan for next year is to grow further.
Even in that economy though, there will be plenty of firms who are dissatisfied with their firm’s financial performance.
In many cases I suggest, when you drill down to find out why, there was no plan to earn a great profit in the first place.
The starting point to any great performance, be it running a law firm, running a 100 metres, or losing weight, is to know what you want to achieve in the first place.
No doubt in any management training you have done, you have heard of setting SMART goals. You know what I mean, Specific, Measurable, Achievable, Relevant and with a Time frame.
If you set a goal, you are already well on the way to achieving it.
What is your goal for your law firms profit for this year?
Colin Ritchie passionately believes in the future of the legal profession and knows that helping firms to dramatically improve profits and practice valuation is his way of ensuring that the legal profession has a bright future.
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