No Sweat: How to Pay for That New Law Firm Hire

New Hire


Life is like a combination lock; your job is to find the right numbers, in the right order, so you can have anything you want.

Brian Tracy

Fear steps in and your future seizes.  The only way to be more than you are now is to hire; but, how can you make that happen? Your mind says, “What if I can’t meet payroll? What if I fail?” If you’ve experienced these fears, you are not alone.

A law firm is a business which provides legal services. Moving toward being the CEO who owns a true business (not just a job), cherry-picking work you love, creating enough revenue to live the life you love (and not just dabble) are the keys to building a financially successful law firm and a good life.

What Does NOT Growing Cost You?

If you want anything more than you have now, not growing is not an option. If an attorney, who bills just $300/hour, does 15 hours of $20/hour administration work a week, she is losing out on $218,400 per year.

Let’s look at the math.

From my experience, solo attorneys often do work that could be delegated to an assistant 15 hours a week, so the math is $280/hour x 15 hours = $4,200 every week. In a year, that’s $218,400. Add a zero for what that looks like in 10 years. Shocking, right?!

No messaging me that you don’t have billable work to bill out during those hours. B.S. You would, if you weren’t playing secretary. During the time you’re doing assistant level work, you’re not evolving your mindset, billing, strategizing, developing relationships, or taking time to just be.

You’re holding yourself back; what does holding yourself back do to your happiness level, family life, marriage, kids’ college fund, your retirement fund, or your day-to-day well-being and contributions to the community?

What Does Law Firm Growth Cost? 

Law firm growth doesn’t cost as much as you think. I just went through this analysis with a client who shared your fear. His time is tapped out; he’ll never create more revenue, do more of the work he loves, or spend more time with his family if he keeps doing administrative tasks.

NOTE: We’re discussing hiring for a legal assistant position; however, the analysis is the same (with appropriate numbers substituted) for hiring a case manager, paralegal, or associate.

The main investments in a new employee are:

  1. Salary
  2. Benefits/Taxes
  3. Office Space

For our example, we’ll use:

$16/hour salary + 25% benefits/taxes (which is $4/hour) and $300/month for additional office space. (Use the hourly rate, number of hours, and rent that’s appropriate for your geographic region, keeping in mind that if you pay bottom of the barrel, you’ll get bottom of the barrel.)

  • So, let’s walk it through together.
  • First, $16/hour + $4/hour = $20/hour
  • Then, $20/hour x 40 hours = $800/week
  • Next, $800 x 52 weeks = $41,600/year
  • And, rent at $300/month x 12 months = $3,600/year

Total Investment for Employee per Year: $41,600 + $3,600 = $45,200 total per year

Total Investment for Employee per Week and Month: $869/week or $3,767 month

For many firms, $3,767 is less than their average case value; so, at the investment level of less than one case per month, you have a full time legal assistant. How cool is that?!

What Value Will My New Hire Provide?

The national metrics commonly used to evaluate employee production is 4x to 5x compensation package. You may have heard of the 3x metric, which works well for the convenience of contract workers, but not employees. When your firm is structured properly, 4x to 5x is achievable while maintaining an enjoyable work environment, even for associates.

Using the 4x metric in our example, your employee must produce value of at least $166,400 per year because her compensation package is $41,600 year and 4 x $41,600 is $166,400. The rent is allocated to non-salary overhead expenses.

Can your legal assistant meet this metric?

Recognize that I’m talking value, not always dollars, but, for now, let’s talk dollars and assume that 75% of your assistant’s time is billable (and when I say billable, I always mean collected) and she bills at $135/hour for example purposes.

So, 30 hours a week at $135 is $4,050 per week

And, 30 hours a week for 50 weeks is $202,500 which exceeds the 4x benchmark (and almost hits 5x) plus she has an additional 10 hours every work to do other work to propel you forward and make your life easier.

NOTE: For an associate, whose compensation package is $100k (for easy math), she would need to produce $400,000 to meet the 4x metric. I would always prefer flat fees which makes leverage so beautiful, promotes healthy client relationships, and results in much happier lawyers, but today we’ll look to the billable hour for an easy peasy example. At 1700 hours per year, your associate would only need to bill $235/hour, a low fee. At $300/hour, she’d hit $400,000 at 1,333 hours.

You Don’t Need an Influx of Capital to Grow Your Law Firm

Sure, you may be able to use your credit cards, get an SBA loan, participate in a business incubator support, borrow from your parents, or take on an attorney investor to grow your firm, but you don’t need to. You can do this yourself.

If you had a legal assistant (or associate) working in your office full time making things happen and taking 15+ hours of work off your week every week, could you produce one additional client a month to cover that investment?

Of course, you can.

Get out from behind your desk, build relationships, lead educational panels, do a TEDxTalk, serve as an expert for the media, throw yourself into a cause you care about, or do one of the other 1,578 things you could do to bring in just one more client a month.

The entire point of hiring is that employees pay for themselves and so much more. Stop making excuses. You don’t need an influx of cash to grow, you just need the first month’s salary and rent (in our example, $3,767, likely less than your average case value), the right mindset, and action.

When your legal assistant is onboard rockin’ and rollin’ and your numbers indicate adding another employee would propel your firm forward, you’ll have this analysis to make it happen.

All opinions, advice, and experiences of guest bloggers/columnists are those of the author and do not necessarily reflect the opinions, practices or experiences of Solo Practice University®.

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