5 Ways to Run a More Profitable Solo Law Firm

You became a lawyer to help people facing difficult situations to navigate the complex labyrinth that is the US legal system. Of course, turning a profit is a nice side benefit. The challenge is that it’s harder than ever. According to Clio:

• 2023 marked a significant drop in profitability for law firms of all sizes.

• Solo attorneys saw only about 50% of the revenue growth larger firms did in the last few years.

• Most solo attorneys work more hours than they would like.

The good news is that you don’t have to struggle to run a successful solo law firm. While you might not generate revenue of the same scale as a larger firm, you can boost your profitability and add flexibility into your day-to-day. 

Revenue is not profit

First, let’s talk about one thing that often trips up solo attorneys (and partners in larger firms, to be fair). Too often, attorneys mistake “revenue” for “profit”. The thinking is that if you’re billing correctly and have a steady stream of revenue coming into the practice, you’re doing something right. It means you’re profitable, right? 

Sadly, that’s not the case. Profit and revenue are related but not the same. While revenue is a measure of the incoming cash flow to your practice, profit is a measure of how much revenue is left over after paying all your bills. It’s possible to increase your revenue without seeing a corresponding increase in profitability. 

Let’s say you increase your client load, but you’re spending more on administrative costs, or you have a bump in overhead. Your operating costs rise to match the increase in revenue, which means you’re not truly generating more profit. You’re just doing more work.

That’s obviously not a place you want to be. However, you don’t want to be that solo who’s working from the living room couch on a 13-inch laptop and all your files spread out over the coffee table as you try to prevent your three-year-old and the family dog from destroying your tentative filing system. You need to find a balance between austerity and too much work. 

Tips and tricks to boost solo law firm profitability

Building profitability is less about finding more ways to make money than it is about discovering what you’re doing to hold yourself back. In many instances, these tips and tricks are just common sense, but some might surprise you.

Delegate and if you can’t delegate, hire someone

How many hats are you wearing? Do you handle marketing, lead intake, and client case development all on your own? If so, you’re doing it wrong. As an attorney, you should be focused on tasks where your energy and expertise are most needed. Delegate other tasks to someone else. If there is no one else, hire someone (or outsource). A great example here is lead intake. You can’t focus on mission-critical tasks if you’re working to vet leads and populate their information in your CRM. That’s an example of a task better handled by someone else (like Smith.ai!). 

Speaking of a CRM…

The true definition of success for a law firm is the strength of relationships with its clients. A CRM (customer relationship management) platform helps you build those relationships easily. If you don’t have a CRM already, it’s long past time to implement one. You’ll find a ton of options out there, from free platforms like HubSpot to paid CRMs like Clio, and everything in between. 

Automate, automate, automate

Automation is everywhere today and for good reason. It helps businesses do more while focusing their human talent where they make the greatest impact. Document creation is a great example within the legal industry. How much time do you spend searching for a previous legal document, removing names, dates, and other specific information, and then repopulating with new data? Chances are good that it’s a lot. Legal document automation turns those docs into templates and then populates them accurately within seconds. Even complex contracts like real estate closing docs can be completed in hours instead of days.

Know your outflows and adjust to meet your profitability goals

Profit is what’s left of your revenue after you’ve paid all your bills. So, it makes sense that knowing your cash outflows is critical to boosting profitability. Track your expenses and then cut things that aren’t really necessary. We’re not arguing that you shouldn’t stop at the coffee shop every morning. We’re talking about more significant outflows, like paying too much in rent for your office or leasing equipment when it might make more financial sense to buy it outright. 

Create a payment system

According to the American Bar Association (ABA), law firms that implement a payment system can increase their profitability by 10%. A payment system ensures that your clients have flexibility when it comes to how, when, and where they pay their bills. For instance, you can accept credit cards, eChecks, and more. And you don’t have to handle payment processing yourself, either. That’s another example of a task that can be delegated to someone else, like our virtual receptionists, who are happy to provide payment collection services, whether that’s handling new consultation deposits, past-due collections, or something else. 

Building a profitable, successful solo practice

Ultimately, you can work yourself to the bone and never actually create a profitable legal practice. Revenue generation is only part of the equation. Smart decisions that control your costs, reduce your overhead, and allow you to focus on the most important tasks while delegating or automating lower-value but still important responsibilities are crucial. 

At Smith.ai, we’re more than just the leading legal answering service. Our virtual receptionists become part of your team, helping you build a solo practice without actually having to go it alone. From appointment booking to email and SMS follow-up, instant outbound calls to call intelligence and metadata, we help you build a profitable, successful solo practice. 

To learn more, schedule a consultation or reach out to hello@smith.ai.

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