How Legal Outsourcing Can Reduce Overhead Costs

2023-10-13

In any business, overhead is a big concern. The more you spend on the operational costs of your law firm, the less you’ll be able to add to your bottom line. Whether you’re a new practice owner or just trying to find a better way to do things, outsourcing should be on your list. Of course, before you can cut costs and improve your operations, you have to know what you’re spending in the first place. 

You have clients depending on you for reputable, effective legal representation. If you are too busy answering phones and scheduling appointments, you’re not going to have the time to give people the attention that they deserve. Read on to learn all about how you can reduce your overhead costs with outsourcing. 

What is overhead? 

Overhead expenses are the costs incurred as a result of running your law firm. This often includes ongoing costs for routine business operations, such as rent, accounting, insurance, salaries, and other expenses. These are expenses you pay regardless of whether you are producing business. 

Overhead is also not to be confused with operating expenses or direct costs. These are the costs incurred on a daily basis as a part of running the practice. This can include labor costs, marketing expenses, production-related expenses, and more. 

The average law firm spends around 45 to 50% of its fee rate on overhead, which includes both fixed and variable expenses. Fixed expenses are those that remain the same, no matter what the business is doing. Variable costs will increase and decrease with sales volume, such as marketing costs. 

Calculating overhead costs 

It’s fairly simple to calculate what you are spending on overhead in your law firm or legal practice. First, tally up all of your overhead costs in a month. This can include rent, utilities, office supplies, salaries, subscriptions, and so forth. Categorize expenses into three categories: fixed, variable, and semi-variable. 

Then, figure out what your monthly sales are for the same month in question and divide that by your overhead. For example:

$50,000 in sales / $10,000 in overhead = 0.02

0.02 x 100 = 20% overhead

This is an extremely low example of overhead costs. Many companies end up spending closer to 30 or 40% on overhead and operational costs. What you’re spending might be completely different. It does you no good to try to save money on overhead when you don’t even know what you’re spending in the first place. 

How to reduce overhead costs 

There are several different ways that you can reduce what you’re spending on overhead. Now that you have a better understanding of what “overhead” includes, you can focus on finding the best ways to cut costs without compromising the quality of services that you provide. If you want to reduce overhead, consider:

  • Streamlining administrative tasks and workflows 
  • Implementing legal technology and tools 
  • Negotiating contracts with service providers
  • Considering remote work to save on office space 
  • Outsourcing non-essential tasks and functions 
  • Reviewing expenses regularly to find opportunities for savings 

That second-to-last one can be a big part of your success: outsourcing. This allows you to create an entire answering service for your law firm without having to hire people or invest in a lot of overhead. In fact, outsourcing is often a great way to get everything that you need without creating additional overhead costs. 

What should I be outsourcing?

Of course, the next question that law firms and lawyers have is, “What should I be outsourcing in the first place?” 

This is a two-part question that requires a little bit of insight and investigation on your part. What should you be outsourcing? Start with things like inbound and outbound prospecting calls, lead intake and appointment scheduling, and support for live chat and other customer service needs. 

Consider any admin tasks or duties that are repetitive and don’t require your dedicated attention. Look at the things that you do in a day. How many of them actually require your dedicated focus? Are there things that you can outsource now to free up your time and resources? Perhaps there are steps later in the process you’ll want to outsource, too, so finding a good partner now is essential. 

The benefits of outsourcing legal admin work

When you want to reduce overhead costs without compromising on quality, you need to know where and what to outsource. Taking the time to do it effectively will provide maximum benefits:

  • Increased profits and revenues 
  • Reduced expenses and budgets 
  • Streamline routine processes and workflows 
  • Access to experts in the admin field 
  • Dedicated support for all kinds of legal services
  • More time to focus on your clients 

Think about all the time that you spend on routine tasks like phone calls, appointment scheduling, and lead screening. What could you outsource that would be most effective or beneficial for your law firm? This is where you want to think specifically about your unique needs. 

You can also look into outsourcing things like accounting, legal research, document review, and other services to add even more support for your law firm. However, starting with a dedicated partner for admin work is the best way to go. 

Partner with Smith.ai for legal administrative support and more

Smith.ai offers a dedicated legal answering service with a team of virtual receptionists who can handle everything you need. We can provide support for lead screening and intake, appointment scheduling, and even assist with your outreach campaigns to drive leads in the first place. Plus, we can act as your 24/7 legal answering service so you never miss another opportunity. 

Ask about our support for live chat and our AI voice assistant, as well as how we can deliver customized solutions that fit the unique needs of your law firm and scale with you as you grow. We take pride in taking the hassle out of running your practice so that you can deliver a better service to your clients. 

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

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Law Firm
Business Education
Elizabeth Lockwood is the content marketing associate at Smith.ai. She focuses specifically on writing and editing engaging articles, blog posts, and other forms of publication.

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