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Did you know there is more to practicelaw than just forms?  practicelaw is designed to be a repository of resources intended to help your practice.  Similarly, the MSBA’s practiceblawg is a blog for the Association to share with you how the MSBA can help you improve your efficiency and grow your practice.  The MSBA offers members a number of products and services and is always looking for ways to better serve its members and provide greater value.

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What is your effective hourly rate?

by Joe Kaczrowski | Apr 22, 2015

Many attorneys offer some flat fee services.  For example, an attorney may offer a basic estate plan for a set price regardless of specifics.  If you are one of them, while you may know how much revenue you generate through such an offering, do you know what your effective hourly rate is?

Attorneys were encouraged to review their processes in an earlier post discussing the benefits of 'going lean.'  Perhaps through this evaluation you know exactly how long it takes you to complete a specific task, say creating a document.  Many attorneys do not track their non-billable time, and likely very few track the time required by their staff to complete a given task.

Document assembly tools like the MSBA's mndocs product have been shown to reduce the time spent creating and updating documents by 90%.  That number is impressive in its own right, but what does that mean to your bottom line?

Effective hourly rate is one way to measure process efficiency for non-billable tasks.  It also is a simple calculation; you take the total revenue from the task (the flat fee amount) and divide it by the total time spent on the task by all members of the team.

So how's it work?  Here's an example from one of the sessions at ABA TECHSHOW this year.  A law firm charged a flat fee of $2,000 to create a specific document but did not track how much time they spent creating that document.  The firm brought in a document assembly specialist to help automate their document generation processes.  The specialist helped the firm identify the actual time spent on document creation.  In this instance, the average time spent creating the document was 10 hours.  Simple arithmetic then puts the effective hourly rate for that process at $200 per hour.

The firm then automated the document generation process, which reduced the total time spent creating the document to 1.5 hours.  Using the same calculation, the firm's effective hourly rate is now $1,333.33.  Most firms would be hard-pressed to find clients willing to pay over $1300 an hour for their services, but through process efficiencies gained with document automation that's what the effective hourly rate becomes.

So how does this affect your bottom line?  Well, that depends. If you subscribe to the "work smarter, not harder" philosophy, then you can improve your work-life balance by maintaining the same revenue with fewer work hours. If you're in a "work smarter and harder" mode, then you now have more billable hours available to grow your business.  Whether you're looking for increased efficiencies or to expand revenue, document assembly tools like mndocs are a great place to start.

Have you registered for this year's Nine Days in June event yet?  If you're going to be in town for the Twin Cities Finale on June 26, be sure to check out Barron Henley's talk in the morning, which will cover the value of document assembly systems like mndocs as well as functionality built into other tools you already have (like Microsoft Word) and how to create a gold-standard set of form templates for your practice.