Ryan Kimler | Money Matters: What Every Lawyer Should Know About Law Firm Profitability

Elise Holtzman: Hi, everyone. It's Elise Holtzman here, a former practicing lawyer and the host of The Lawyer's Edge Podcast. Welcome back for another episode. Most lawyers focus on billing hours and serving clients, but they don't always see how those efforts connect to the firm’s financial success or even to their own compensation.

It’s not just associates—even partners, equity or not—often lack a clear understanding of how law firm finance really works. In this episode, we’re going to pull back the curtain on law firm economics to help you think like an owner, not just an employee, even if you are already an owner, because you may not be thinking along those lines.

You’ll learn which financial metrics actually matter, how to build business acumen beyond just a balance sheet, and what high-performing lawyers do differently to increase both their value and their influence inside the firm. Before we dive in, today’s episode is brought to you by the Ignite Women’s Business Development Accelerator, a nine-month business development program created by women lawyers for women lawyers.

Ignite is a carefully designed business development program containing content, coaching, and a community of like-minded women who are committed to becoming rainmakers and supporting the retention and advancement of other women in the profession. To learn more about Ignite, visit thelawyersedge.com/ignite.

I’m delighted to welcome my guest today, Ryan Kimler, who is the founder of Net Profit CFO, host of the Net Profit Podcast, and an international best-selling author. At NetProfit CFO, Ryan and his team use accounting and finance to help law firm owners do one thing—have a growing and more profitable business.

Helping law firm owners have a growing and more profitable business produces two big results. One, your law firm has enough cash to grow and maintain strong financial health. Two, your law firm produces enough cash for you as the owner to fulfill your wants and needs. Ryan, welcome to The Lawyer’s Edge.

Ryan Kimler: Well, thank you for having me. I greatly appreciate you inviting me on to be a guest.

Elise Holtzman: I’m excited to talk to you about financial metrics. I’m laughing internally as I say that because financial metrics is not something that I tend to sit around and think about. I think most lawyers don’t tend to think about it until they’re suddenly thrust into leadership roles and they’re running a law firm.

But I do think that it is important for individual lawyers as well as law firm leaders to really understand how this works, because you can’t just sit in your office doing really good work and expect to earn the compensation you want to earn if you don’t really know how the law firm runs—the value you deliver and how that hits the bottom line.

So let’s talk a little bit about some of the financial benchmarks, metrics, key performance indicators—whatever we want to call them—that individual lawyers should be understanding about their firm, whether or not they’re in leadership roles. What are some of the key performance indicators that well-run law firms are looking at on a daily or weekly or monthly basis?

Ryan Kimler: If we’re going to start with individual attorney productivity, most law firms—if you’re a flat-rate firm—you might not have an hourly billings requirement. You might have a number of cases that have to be completed. It’s really working in the same way; you’re just not billing a client by the hour.

But most firms still have an annual hourly billing requirement. One of the first things they’re going to look at is, are you meeting that? Are you exceeding that as an individual lawyer? How much of your time are we writing off if we are writing off your time because maybe things were done inefficiently?

So that’s probably one of the first KPIs that they’re going to look at—is, are you meeting your hours? Are you being efficient with your hours during the day and really capturing your time? And I know for the firms that I work with and just firms in general, they’re going to look at that on a really regular basis—daily, weekly, monthly, as you said.

Elise Holtzman: What’s the terminology behind those? Because we hear terms like realization rate, utilization rate. What does that mean for lawyers who aren’t used to working with those terms?

Ryan Kimler: So let’s start with utilization rate. If you work a 40-hour work week, utilization rate is how many hours out of those 40 hours actually get into a billing system. If you have hours that’s downtime or admin time, or maybe you are doing some case generation, you go out to a networking event—obviously, those hours are not going to be in the system. Attend a CLE event—obviously, those hours are not going to be in the system.

Utilization, again, out of a 40-hour work week, how many of those hours are in the system accredited to clients? That’s utilization—how many hours are you utilizing out of your day? Then we have the realization metric. You might put, let’s just say, in a given day, you put six hours in the system for work that you’ve done on a handful—it could be one client, could be a handful of clients, doesn’t really matter—six hours in the system.

Realization is how many of those six hours are realized onto the bill. Some firms are going to look at your time and look at what got done. They’re like, "Well, we can’t really bill four hours for that work," so they’ll write it down. Or maybe all the hours get on the bill as a realization metric, but then the client comes back and has a complaint or something like that, and then you end up giving them a discount. That would also cut back on your realization—how many hours are realized on the bill.

Elise Holtzman: What are some of the other metrics that firms are looking at? I mean, they must be looking at expenses as well as individuals. So, for example, one associate or partner might be much more profitable than another one. One may have higher expenses for a variety of reasons. So what do some of those metrics look like?

Ryan Kimler: Let’s first start with the other KPI or word you guys probably throw around, which is collection rate. Obviously, if you’re collecting well on your clients and maybe you have another attorney at the office that’s not, the difference between those two, collected is actual cash in the door.

So while we’re talking about individual lawyers here and how you can do better, one of the things that you can do is be aware of what you have in trust. Be aware of what is there and available to bill. If you need more money on a case, then talk to the appropriate person that is responsible for getting with the clients. That might not be you—it might be you, but it might not be you—sending out the notice, collecting the additional trust money.

But being aware of that and not just way, way overbilling—if you have $2,000 in trust and you need to do $10,000 worth of work, you just opened the law firm up to $8,000 that might not be collected. I think that’s a good starting place—being aware of the trust money and what’s there. That’s going to help you be better on your collection rate.

Then I think the other thing is, just to hit on time tracking one more time here briefly, really have a consistent schedule of tracking your time every day. Because if you have to go back and remember what you did yesterday, the first thing you’re going to do is underestimate the time you actually spent. That’s lost dollars for the law firm.

Also, don’t underestimate your time thinking, "Well, the law firm would never approve this." That really isn’t your choice. If you’re not partner level or you’re not an owner, you’re not the one reviewing the bills, they get to decide what goes out to the client, not you. So don’t make a bunch of assumptions and not give the firm the opportunity to bill your hours.

All of those things that I just listed could put one attorney in a position where maybe two attorneys are being paid the same, and one of them is more expensive than the other because they’re giving discounts before the partner ever has a chance to review it. Maybe they’re not tracking all their time and they’re losing time every day. Maybe they’re not helping the firm on the collection side. All three of those things could really attribute to one attorney that’s not producing as high of a return as another.

Elise Holtzman: Right. If you’re saying something along the lines of, "Well, I bill the same number of hours as Ryan. Why is he getting paid more than I am?" that might be a place to look. Because if Ryan is more efficient, he’s billing more of his time, more of his time is being collected on the bills, the bills are going out in a timely fashion, he’s not losing hours.

I recently interviewed Molly Kramer on my podcast, who goes by The Billing Coach. We talked about this idea of people losing time. Sometimes it’s a mindset thing. As you point out, Ryan, it could be as simple as waiting until the next day to bill your time and you lose something because you just think, "I’m tired, I want to go home, I’ll just capture it tomorrow." You lose something.

If you think about it, if you’re working five days a week—and many lawyers are working more like six or seven days a week—but if you’re working five days a week and you lose just an hour a day and you multiply that by your billing rate, imagine how much money that is a loss for you and the firm over a period of time.

So you and I could be putting the same number of hours down—or let’s put it this way, working the same number of hours—but we may not be putting the same number of hours down. I may not be as efficient with my time. I may not be sending the bills out in a timely fashion, which means that I’m not collecting them in a timely fashion. By the way, the longer the bills sit and the bigger the bill is when it gets to the client, my understanding is the less likely they are to pay.

As somebody else once said to me, bill early and often. If you can bill smaller bills, they’re more likely to get paid than if you send them one huge bill. I do think that this is important for individual lawyers to understand. It’s not just going in. I mean, listen, I knew nothing about this when I was practicing law. I just went in and I billed the time I thought I was supposed to bill. I had absolutely no idea that any of this stuff was going on in the background.

But if you want to make more compensation, if you want to be valued by the firm, if you want to make partner, or if you’re already a partner and you want to make equity partner, it’s very important for you to understand that these are the numbers that the practice group leaders and the executive committee members and whatever financial people that the firm has employed with them are looking at.

Ryan Kimler: I want to point out one more thing here. You gave the example of what does it look like if you miss an hour a day or even if it’s a half hour a day, right? The time doesn’t really matter. Either way, we all understand that when you're losing dollars, one thing I want to point out is that when you lose that time, that comes directly off of profits because your firm is going to have a baseline number, of these are what our expenses are when we talk about paying our people, marketing, and overhead. This is what the number is.

Well, your first billings are going to contribute to paying those bills and keeping cash in the bank for the law firm to keep going. Then some of your last billings are going to contribute towards profits. So if you’re taking an hour a day off the top, you’re taking directly away from firm profitability. That one hour is a huge deal.

Elise Holtzman: That’s a good point. I think a lot of lawyers also know that the firm has expenses. They know, oh yeah, we have a marketing department. We’ve got the billing people. We’ve got the records people. We’ve got the cybersecurity team. We’ve got all of these different folks who are really important to the running of the firm.

But I hear people say all the time, "Well, I billed this many hours. I should be making more money." It’s not that simple. So I think that recognizing this and not just going, "Oh, that’s interesting," but really understanding how it works will make a big difference, not only as you step into leadership as a lawyer.

Because I think what happens a lot of times, and I’m sure you see this, Ryan, you can tell me what you think about this, but I often say that they don’t teach us how to run law firms in law school. Then you get to a certain age and stage in your life, people like you—you’ve got some good clients—and suddenly they say, “Hey, we’d like you to help us run the law firm. We want you to be practice group leader. We want you to be managing partner, sit on the executive committee, be in charge of something,” and you don’t necessarily know how to do it.

The other thing is that I think when law firms are looking for leaders, if they have the ability to do this, if they’re not kind of flying by the seat of their pants, they are looking around for people who understand the business side of things. So if you want to be involved in firm ownership, you want to be involved in leadership, it’s critical that you understand the financials because this is a for-profit business.

Yes, it’s a service-oriented firm, but we can’t just be in a service mentality like, “I do really good work for these people.” It’s also got to be a profit-oriented mentality. What are some of the ways for lawyers to learn this stuff?

Ryan Kimler: That’s a challenging one. Obviously, law school doesn’t teach you accounting because, I mean, that’s really what we’re talking about here. We’re talking about accounting and really how money flows through a business. Obviously, there’s a ton of learning sources available, as far as YouTube and things like that. That’s probably where I would start, is really learn how money flows through a business.

Because if you can really get a grasp on that, it’s not an easy equation. It’s not simple and straightforward. Unfortunately, those reports—accounting reports and how cash flows—are really made for compliance, unfortunately, and the IRS. But I do believe if you can get a handle on those things and really understand a little bit about the economics of a law firm, you’re going to put yourself head and shoulders above everyone else.

Elise Holtzman: It occurs to me that there might even be continuing legal education courses that talk about firm profitability. For folks who are in jurisdictions where you have mandatory CLE, my view is you’ve got to take the CLE anyway. You might as well take something that is going to benefit you, rather than waiting until the end of your reporting period and taking whatever you can find at three o’clock in the morning that’s available online.

First of all, I think that anybody who’s interested in improving and increasing their own compensation, as I said, needs to understand this stuff. So those are a couple of options. Then maybe just sitting down with a mentor at the firm and saying, “Hey, I’m curious how this works.” I mean, I’m not necessarily asking for you to open up the books and show me all the details, but what are some of the things that you sit around and worry about? What are some of the numbers that you see come across your desk on a monthly basis?

So I think just even talking to the people internally that are on the leadership team and letting them know that you’re interested in this stuff. Believe me, they’re going to be happy when they find out that you care, because a lot of lawyers don’t even know to ask the questions. Then they say, “Well, that’s not really my thing. I don’t really need to pay attention to that.”

Ryan Kimler: I completely agree. I think, again, just knowing your numbers. If you’ve got staff you’re responsible for, maybe a paralegal or something like that, knowing their numbers a little bit too. Really evaluating, is the firm billing me out at the right rate? Even asking that question, or is it time that I’ve built enough skills we can raise my hourly rate?

What people don’t realize is, a $10 an hour difference in an hourly rate on a 1,500-hour year is $15,000. Again, assuming the law firm is set up and we’re at a place where the bills are covered with what you’re billing now, $15,000 just went to profits or went to investment into growing the firm or into that next hire.

I’ll share real quick—one of the things, if I have a client that has a lawyer come to them and is asking for a raise, one of the first things we’re going to look at is, well, what have they done? What have their hours been? What are their processes like? What’s their quality of work? Of course, quality of work and who they are as a person is really, really important, but we’re also looking at the numbers.

What has their profitability really been at the firm? What has the profitability of their team really been? All of those things are going to be evaluated. If there’s not room to move you because of what you’ve done, then there’s not room to move you. You can get to a place where you’re stuck because if you’re not working on yourself to become more efficient, to have a better product, you will hit a point and get stuck.

Elise Holtzman: Lawyers definitely fall into that trap sometimes where they say, “Well, I’ve been at the firm for a long time. I’ve been here for several years. I work on important matters. I care about the firm. I work hard, so I should be getting a raise.” The challenge is that if the numbers don’t support it, and they do give you the raise because they’re afraid you’re going to leave, now that is taking away from the firm’s growth and that is taking away from the firm’s stability.

So it’s unlikely that people are going to want to do that. Sometimes they get guilted into it or they are afraid you’re going to leave, but we don’t want that to be the basis on which you are getting increased compensation.

So what are some of the behaviors and decisions you think an attorney can adopt in their own practice that’s going to contribute meaningfully to firm profitability? What are some of the things that you think they can be doing? What are some of the things that you think they can be keeping track of? What have you seen the smartest lawyers do in that regard?

Ryan Kimler: Cover time tracking—super, super important there. Also, again, just understanding the business more. Look at if you’re in multiple practice areas, if you are, let’s just say, you do family law and you’re doing divorce cases, what’s an average divorce case worth? How can we make sure that the client is getting good value for what they’re paying? And also, how can we drive that value up?

Those are all really, really good things to look at and have a good handle on. Again, what’s your average case value? How can you do more case volume? And then I would look at your processes as well. If you know the tasks or know the steps in the case—again, if you’re managing a paralegal—are there things that you’re doing that a paralegal could do? You’ve got to look at efficiency that way as well, because that’s going to help you work on more cases as well.

I would talk with whoever your supervisor is. Just asking them those questions—“Hey, I’ve been doing this step in the case. I think a paralegal can do it. Should we make that shift?” Asking them those questions, I think, is going to really show up well for you as an individual lawyer because you’re looking for efficiencies. You’re looking to make the business better.

Obviously, if you can increase your capacity of how many cases the firm can take on, you’re increasing the revenue dollars that could come in the door or sales dollars. Revenue, sales, same thing. I think those are a couple of important things to look at as well.

Elise Holtzman: I just want to highlight a couple of thoughts there. When it comes to business development, if you’re someone that is driving business development, you’re more likely to be more highly compensated than the person who isn’t. Anyone who listens to this podcast regularly knows that that’s a lot of the work I do—helping lawyers learn how to develop business in a way that makes sense for them and for the firm.

So I’m absolutely an evangelist for this. That’s one of the ways to do it. To your point, looking at the kinds of work that you’re able to drive to the firm, whether you’re bringing in new clients or you’re doing additional work for existing clients—whether they’re yours or somebody else’s—it’s really important to understand which work is most valuable.

Now, there’s an argument to be made that you want to do work that’s valuable to your clients, regardless of what it is. But when we’re talking about profitability and we’re talking about growth and driving your own compensation higher, it’s important to know that there may be two kinds of work that you really like to do and that you have the opportunity to bring into the firm, but one of them is significantly more profitable than the other.

Not being blind to that, I think, is critical. So really understanding, as you point out, your own practice and what is going to go to bottom-line growth. Then when it comes to—you mentioned paralegals and pushing that work down—we talk about the highest and best use of your time. What’s the highest and best use of your time?

It’s not doing administrative work, because every hour of administrative work that you do that you can’t bill for is another hour of billable time that you’ve lost. There’s that opportunity cost there. You know as well as I do, Ryan, that lawyers are notoriously bad at delegating and also notoriously bad at hiring the right people to do this administrative work because they look at it as a cost.

So tell me a little bit about that. What do you advise law firms to do when they’re saying, “No, Ryan, you don’t understand. We can’t hire another assistant. We can’t hire another person in office services because that’s just going to be too expensive”?

Ryan Kimler: Before I go there, I want to point out one thing really quickly. Delegating and handing down work, you have to be very, very careful with because, let’s just say you have a task—again, I’m just going to go back—let’s say you’re doing divorces. A task in a divorce case, let’s say you, Mr. Attorney or Mrs. Attorney, has been doing it and you’ve been billing the client $450 an hour, and you want to hand that to a paralegal that’s now $150 an hour.

This is why I’m saying definitely talk with your supervisors about it. Because if you make that trade, while it is an hour off of your plate and opens you up to do something else, you’ve just traded down in rates and lost $300 an hour—$450 down to $150. So if your firm doesn’t have the volume coming in to replace that time for you, or if you’re not generating it, then you’ve just lost in profitability.

That might not seem like a lot, but you multiply that times 10 hours a week, times four weeks in a month, we’re talking about $12,000, which could be a significant difference, especially if several attorneys start doing that inside of the firm.

Elise Holtzman: There’s a real chicken-and-egg problem there, right?

Ryan Kimler: It is.

Elise Holtzman: You and I could probably talk about this all day. One hundred percent. If you don’t have the work to do, then in order to have the money coming into your firm, that’s why when people start their own practices, so often they don’t start with an assistant because every hour that gets billed to the client really needs to be billed at their rate. They don’t necessarily have the capital to hire the person. They don’t have the business coming in.

But over time, if you continue holding on to that work when you could be doing other things to generate more work—and the paralegal can’t generate more work, and your assistant isn’t generating more work—it’s typically the lawyers in the firm, or if they’re fortunate to have business development and marketing professionals that can help them do that, those are the people that are generating the work.

So I do think that there’s a push-pull there, and it may be hard to know when to make that shift. But I think that for most lawyers who are in established firms already, they’re more likely to hold, I believe—and you can disagree with me because reasonable people can certainly differ on this—but I’m curious as to your thoughts on this, I think most lawyers are more likely to hold on to work that they should be giving to somebody else and losing the opportunity to free up their time to do more of that work or to bring in another client or to bring in additional work from an existing client.

I think largely because—and there’s a whole other podcast episode about why lawyers don’t like to delegate—it starts with the adage, “If I want something done right, I have to do it myself.” So I think that there’s a huge mindset shift around that.

Ryan Kimler: Now, I will say, if we’re—let’s shift for a minute—let’s talk about flat rate work. Now, all of a sudden, shifting from an attorney hour to a paralegal hour is a big deal and moving in the right direction. If you’re not doing that, like you said, I think there’s an opportunity cost.

I want to go back to your question now about hiring. What if a firm says, “Well, we can’t hire another assistant, and we can’t hire another paralegal”? Then I would say if you have the work, you probably have a delegating problem. Because if you have the work and you bring someone in that’s got some experience, maybe not somebody that’s brand new at being a paralegal, obviously, they would have training and ramp-up time, but if you’ve got someone that’s got some experience in the practice area that you’re in and they’re ready to just take off running, you should have hours and work to hand them, which means they should start producing a profit for the firm or at least break even. So the idea that you can’t make that next hire really means you’re not giving them the work to start with for whatever reason, or you’re not structuring it in the right way.

The other thing I’ll say about hiring is, when I work with lawyers and they think about hiring, they always want to look at the full-year picture. “Oh my gosh, in order to bring in that lawyer, I’ve got to have $100,000 plus $40,000 in bonuses two weeks at a time." Two weeks at a time.

I’m not saying, okay, you just have to have two weeks of payroll. It probably makes sense to have a few more than that—have a couple of pay periods for this person stacked up in the bank to make you feel comfortable—but two weeks at a time.

Elise Holtzman: Is there a rule of thumb? Because I do get asked this sometimes when I’m working with small to midsize law firm owners or leaders where they say, “You know what, we think we’re going to want to hire an associate. We think we need to hire more, but we don’t really know when to do it. We don’t necessarily know what the numbers need to look like in order for us to be able to do it. Sometimes we feel like we’re doing it a little bit by feel, and that’s nerve-wracking. We don’t feel comfortable doing that.”

So is there some rule of thumb that law firm leaders can use to help them determine whether it’s the right time to hire someone?

Ryan Kimler: Start looking at your own plate. If you have 20 to 25 hours of work that you can hand an associate, that should get them to a place where they’re just above break-even and then frees you up to go generate more work.

Then if you bring that person in—let’s just say you have 20 hours of work that you’re handing them—you’ve got 20 hours to fill before you take on anything else. So I think if you’re at a place where you have 20 to 25 hours of work sitting on your plate, it’s time to start looking.

The other thing too that I’ll say is, especially in the conditions where we’re at right now—very low unemployment—finding a lawyer, finding legal talent, will take you a while. It’s not going to happen quickly. I don’t know when this is going to come out. Right now we’re talking middle of October. Because of year-end bonuses, you’re probably going to have a hard time pulling anybody away from a firm right now.

Elise Holtzman: Right. They’re all waiting.

Ryan Kimler: Yep. Again, if you have 20 to 25 hours of work a week to hand now, you should start looking, because by the time you find somebody, if you keep generating and keep that wheel going, it’s going to be more than that 20 to 25.

Elise Holtzman: I really like that as a benchmark. And it’s also not about having somebody who’s coming on and immediately being super profitable. We’re talking about breaking even because even the breaking even is dramatic for you—whether you’re a law firm leader or whether you’re just somebody who doesn’t have enough people on your team, for example.

It doesn’t necessarily have to be like, “Oh my God, we need to have 40 hours a week of work for this person.” We do know that one of the biggest challenges for law firms right now is talent acquisition and talent retention.

I just came back recently from co-chairing the Managing Partner Forum's Fall Symposium, which was for women in law firm leadership—managing partners who are women. We talked about this stuff at the larger Managing Partner Forum conference in Atlanta, where that’s one of the number one things that law firm leaders are worried about.

So also a great point. Start doing it before that “dig your well before you’re thirsty” thing, right? Going back to one of those old expressions, I think it sounds like, based on what you’re saying, it could be a really good idea.

Ryan Kimler: Just for a minute, because I know what’s going to be scary, right? “All of a sudden I have 20 hours a week. What am I doing?” There’s a major, major opportunity cost.

Go look at your case value. Again, I don’t know why I picked on divorces today. I’m going to pick on something else now. Let’s say estate plans, right? Let’s say you’re signing estate plans at $6,000 a piece. Let’s say your realized rate is $500 an hour, right? You’re trading 20 hours that you’re getting paid $500 for, for the opportunity to generate six grand an hour.

That’s what you’re trading—not to mention the work should still be getting done and you’re not losing money because that associate is at least breakeven. There’s an opportunity cost with you billing, again, I’ll say, realized rate of $500 an hour on an estate case. That is, you can’t go sign another case for $6,000 for your firm.

Elise Holtzman: Some of the polling we did recently at this Managing Partner Forum conference that I mentioned was around raising rates. What are you seeing in terms of trends of law firms raising their rates on a regular basis? Are you seeing them do it? If they’re running their firm truly as a business, if they’re paying attention to these metrics, are you seeing them raise their rates on a regular basis? And then what percentage points are you seeing across the board typically?

Ryan Kimler: So my first answer is not raising rates enough. It’s not even close, especially the last—you think about 2021 or that 2023 timeframe, right? Inflation was everywhere. That’s the other thing as an individual lawyer—you’re at a firm, your value and what you’re bringing in has to outpace inflation and the expenses of the firm. So that’s another battle when you’re trying to increase your compensation. You’ve got to outpace inflation.

Never enough, number one. Number two, usually not moved in large percentages. You know, now it does add up because we’re talking about a lot of volume of time, right? But like $25, $50, $100 an hour—again, I gave the example earlier, just $10 an hour doesn’t sound like a lot, but on a 1,500-hour year, it’s $15,000, right? And not large enough either in some cases.

I think a good evaluator of this too—I’ll just say real quick—how many people are turning you down for price, right? When you’re doing consultations, I think a good healthy rate there on that is probably 20% to 25%.

Elise Holtzman: Well, I think that’s going to make a lot of people have a heart attack, Ryan. I mean, yeah, we don’t want to get turned down because we’re too expensive. “How dare we do that? We’re going to price ourselves out of the market. No one’s going to ever hire us again.”

Ryan Kimler: Yep. All things I’ve heard. All things I’ve heard before and have yet to see it happen. The other thing I’ll say too, real quick, while we’re here on pricing—all firms do this. I don’t get it, but I understand it’s the way of the legal space. Partner, let’s just say, is like $700 an hour, and your brand-new associates are like $300.

At the end of the day, if there is a problem in the case, whose desk does it end up on? It ends up on the partner’s. So your gaps between—I’m just going to say it—your gaps between your partner rate and your associate rate is just stupid. Rather, if you take your car into a mechanic shop, whether the guy is brand new working on cars two weeks ago or two weeks from retirement, rate is all the same.

So all of your gaps between associate and partner need to close. You’re leaving money on the table because, at the end of the day, again, if something goes wrong, it ends up on your desk for you to handle.

Elise Holtzman: Wow, Ryan, that’s heresy right there.

Ryan Kimler: It is, to a lot of firms.

Elise Holtzman: That’s pretty crazy. What I saw in the polling—and again, this is all self-reported, so no one was showing us their financial statements—but we saw that a lot of firms were saying that on an annual basis, they’re raising their rates between five and six percent. Maybe 10% of them said they were raising them about 10%.

So just to give some benchmarking to people, you’re saying it’s not enough. So it’s something for people to think about because certainly that’s the first place to go when you’re trying to improve profitability is top line. A lot of people are scrambling to try to reduce their expenses, which presumably is a good idea, but it’s not going to get you there as quickly.

Ryan Kimler: You can only reduce so much. Eventually, think about what you’re cutting too, right? And anything that you’re cutting—I mean, obviously, if there’s waste and you’re not using it to run the business, cut it. But beyond that, you’re cutting what is driving your business, right? And you can only cut so far. You can’t cut to zero. Raising revenue and growing is the answer for sure.

Elise Holtzman: All right. Well, yeah, I mean, that’s it right there. Raising revenue is the obvious thing. I think that for many lawyers, it feels very challenging. So, Ryan, as we wrap up our time here together today, I want to ask you a question that I ask all of my guests at the end of the show.

There’s a phenomenon called the curse of knowledge, where experts sometimes forget that what is so obvious and natural to them is not at all obvious to others. When it comes to understanding law firm economics and using it to drive both law firm results and individual lawyer results, what’s a principle or piece of advice that may seem obvious to you but you think is important for people to hear?

Ryan Kimler: Yeah, very, very simple. Think about how money flows through the law firm—where it comes in, the places that it goes out. Again, a lot of times if you can find one place to make more efficient, to make better, it has a firm-wide impact that can be a much larger impact than you could have imagined. So think about how the money flows through the firm.

Elise Holtzman: I’m going to piggyback on that and remind people that whether you are a first-year associate or whether you are a senior partner who has put his or her head in the sand for a while about this thing, this is an opportunity for you at any level. I think that the junior folks should not make the assumption that all the senior folks understand how this works. I think the senior folks should remember that they’re not too old to learn this stuff and that it does contribute meaningfully to the bottom line and helps them with their own compensation.

It’s hard to advocate for more compensation when you’re not helping drive firm growth. I love that idea of just understanding how money flows through the firm, what I like about that is, again, as somebody who’s not a numbers woman, I like the idea that I can understand it conceptually and that I don’t have to look at financial statements until my eyes bleed, right? It’s just important to understand how the money comes in, how the money goes out, where the gaps are, where the holes are, how I can contribute to plugging some of those holes and making sure that they don’t happen.

So this is really valuable stuff, Ryan. Thank you so much for being here today. I appreciate having you. I want to thank our listeners for tuning in as well. If you’ve enjoyed today’s show, please subscribe, rate, and review us at Apple Podcasts, Spotify, or your favorite podcast app. In the meantime, be bold, take action, and make things happen. We’ll see you next time.