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Summary
Billable hours are the lifeblood of a small law firm – and mastering the art and science of defining, navigating, and balancing them alongside the other functions of your role is crucial for your success. However, in between managing multiple clients, calculating hours to bill to those clients, and figuring what counts as “billable” in the first place, this is easier said than done.
In the following sections, you’ll be equipped with the information you need to properly bill your clients. Additionally, you’ll get essential strategies to maximize your billable hours, as well as insights into the evolving landscape of legal billing. To close, we’ll discuss tools you can use to maximize your efficiency and boost your ROI.
Billable hours refer to the time you spend working on client-related tasks that can be billed directly to your clients according to a previously agreed upon rate. Although what “counts” as billable hours may vary by firm, in general, these tasks can include:
On the other hand, administrative tasks and management tasks, such as email, marketing, and networking, are not billed to the client. For that reason, it’s important to understand the difference between billable and non-billable hours, as well as how proper management of billable hours can impact your professional growth and your firm’s profitability.
As a small law attorney, you are likely juggling many of the tasks mentioned above. With fewer paralegals, assistants, and outsourced marketing teams, you’re likely handling client meetings, legal research, administrative tasks, and more. If you’re just starting out, it may feel daunting to distinguish between billable versus nonbillable hours.
If you’re not sure how a task should be categorized, ask yourself these questions:
This isn’t an exhaustive list, but it’s a good place to start if you're unsure. Next, let’s calculate the hours that are deemed billable.
While different firms may have varying standards for what counts as billable and how many billable hours you should strive to obtain, the process for calculating these hours is usually the same across the board. In the legal industry, billable hours are often measured in tenths of an hour, also known as "6-minute increments." This system looks like this:
Minutes
Billed Time
So, to determine how much to bill you’ll use the following equation:
Time Spent x Hourly Rate = Billable Cost
For example, if you spend 30 minutes drafting a document on behalf of a specific client, and you charge that client $300/hour according to your agreement, your calculation looks like this:
Alternatively, if you spend 32 minutes on the same task, your calculation adjusts to:
Keep in mind that different firms charge different rates (average rates around the country range from $211 to $424/hour), and your client satisfaction will improve as your efficiency does – which brings us to the next section of our guide.
It's no surprise that effective time management is critical to a small law firm’s success. As we’ve already discussed, you likely juggle more tasks at a small law firm. And, of course, the importance of client satisfaction cannot be understated. Generally, the more efficient you are, the happier the client (and sometimes the judge) is. Here are essential time management strategies tailored for new attorneys:
Depending on your role within a firm, you may be given a required number of billable hours per year, or you might make the call for yourself and/or other associates. Small law firms arrange less traditional systems; for example, your compensation may be based on the number of hours you bill.
If you’re an associate, it’s important to know what’s expected, so that you can plan how you spend your time. If you’re a partner or solo attorney, understand your capacity and the amount of time you can reasonably devote to billable work each day or week. Break down larger projects into manageable tasks with specific deadlines, allowing you to track your progress effectively.
Accurate time tracking is crucial for billing clients transparently and ensuring you are appropriately compensated for your work. Use time tracking tools or software to log your billable hours diligently. Create a habit of recording time entries promptly to prevent underreporting or overestimating billable hours.
Identify and minimize activities that do not directly contribute to billable work. While non-billable tasks are still necessary for running a legal practice, managing them efficiently is essential. Schedule specific time blocks for administrative duties, client communication, and marketing efforts to prevent them from encroaching on your billable hours.
There’s no question about it: the average attorney is busy. But the advantage of working in the legal industry in 21st century is the influx of technology to help you manage that time.
A few examples of time-saving technology include:
Most notably, the rise of generative AI has disrupted the legal industry, changing the way we research and draft documents. While change can be unnerving, generative AI tools can dramatically increase speed and lead to more clients who express greater satisfaction levels.
We’ve covered almost everything there is to know about billable hours – but are they here to stay? Although we predict shifting away from billable hours would be a slow process, the legal industry is undergoing significant changes, and new small law attorneys must keep an eye on emerging trends to stay ahead. Two notable trends could reshape the landscape of legal billing and practice:
Increasingly, clients are seeking greater transparency and value for their legal expenses. As a result, there is a growing shift towards value-based billing models. Instead of solely focusing on billable hours, these models emphasize the results and outcomes delivered to clients. Attorneys are incentivized to achieve favorable resolutions efficiently, and clients appreciate the predictability and cost-effectiveness of this approach. Value-based billing promotes a collaborative attorney-client relationship centered on achieving common goals.
In response to mounting client demands and complex legal matters, legal project management is becoming more prevalent. This approach involves planning, organizing, and executing legal tasks with clear objectives, timelines, and budgets. Legal project management helps attorneys streamline workflows, allocate resources effectively, and anticipate potential roadblocks. By adopting this practice, new small law attorneys can enhance their efficiency, productivity, and ultimately, their billable hours. Moreover, it enables them to meet client expectations and deliver exceptional legal services in a cost-efficient manner.
Even after figuring out calculations, trends, and time management strategies, there’s a chance you still have one big question: How do I balance working faster with maximizing billable hours and profits? After all, if you’re working faster, it’s reasonable to assume you’ll bill clients for less time.
To get to the bottom of this question, LexisNexis commissioned a study by Forrester Consulting, which found that time-saving features and expertise-boosting features on Lexis+ contributed to a 246% risk-adjusted ROI on their initial investment into the tool.
As attorneys worked faster, they reported higher client satisfaction – and those satisfied clients referred more clients. Additionally, firms were able to retain work they’d otherwise contract out to a third party, leading to profit boosts as well.
Lexis+ is here to help you make the most of your billable hours with AI-enhanced features that help you navigate the industry’s largest collection of case law at client-delighting speed. Contact us to learn more or see it for yourself with a free trial.
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