Many of my coaching clients who are confident in their hourly rates are concerned about ways of determining profitability for their fixed price, or flat fee, services. They want to know how to reach a profit margin that will make them the kind of money they need to be successful.
Profitability is a term that is thrown around in business settings, but people often use the word without knowing what it really means. In order to define it, let’s first talk about what profitability is not.
When I talk about profitability, I’m not talking about what you or anyone else thinks is a fair price. “Fair” is a relative term, and everyone has his or her own idea of what that means. Whose idea of “fair” are we talking about? Fair to you? To the client? Is there some sliding scale of “fair” out there? Of course not.
Profitability also has nothing to do with what the client would wish to pay. Most people are looking for ways to save money. But you are not in the business of providing the cheapest, bargain priced, clearance rack service. You are in the business of providing excellent service. And excellence costs money. If the client doesn’t want to pay the rate you need in order to be profitable, then they are not the right client for you.
I’m also not talking about market expectations. Just because your competition charges a certain rate, that doesn’t mean that the service they are providing their clients is on par with yours. Their overhead may be different or their staff may be larger or smaller. They may cut corners or provide extras you aren’t aware of. You can’t base your rates on what your competition charges.
The Acid Test for Determining Profitability
All that you need to be concerned about here is figuring out what you need to charge your clients in order to ensure that your business is profitable, that it’s making you money.
Many people have complex ways of figuring profitability. But determining what you need to charge your clients in order to be profitable does not have to involve long drawn out calculations.
There is a straightforward, simple way to determine profitability. It’s what I call the “Acid Test.”
- Calculate the amount of time it will take to provide the service. This includes your time and your staff’s time.
- Figure up the cost per hour for that time. Include the amount your work is worth per hour and the cost of your staff’s work.
- Then multiply those two figures to arrive at the amount it costs you to provide the service your client needs.
But that number does not make you a profit. That number only covers your costs. Note my emphasis: Your costs. Not the client’s cost. That is the minimum amount you need to make just to break even. You can’t run a profitable business that way.
To make a profit, you need to build in a 50 percent gross profit margin on top of your total cost for the service. So basically, take what it costs you to cover your expenses, and then double that number. That is the amount you need to charge the client in order to make a profit. It’s that simple.
If you apply this simple acid test to your fees for service, you will become profitable.
We’re five weeks away from the return of the Double Your Revenue™ workshop. Registration has opened and the seats are filling. As a subscriber to my newsletter and blog, I would hate for you to miss out on getting into this exclusive workshop to a stranger I’ve never met – or worse, to one of your regional competitors.
As I mentioned in August, my partners and Atticus and I are hosting two separate one-day classes for this workshop in Dallas, Texas. We’re capping enrollment at 15 attorneys per class. The first session is set for Thursday Nov. 13. The second is set for Friday Nov. 14.
I’ll be teaching the program alongside Atticus co-founder Mark Powers. If you consider having both of us as instructors better than just one of us, then you should know that these two dates will be the only Double Your Revenue™ workshops that we will teach together, side-by-side. At the end of your session, you will have a written, step-by-step plan to implement the best and most effective ideas that you generated at the program.
Don’t just take my words for it. Read these testimonials from past graduates:
I attended the spring 2006 Double Your Revenue workshop, and started working smarter. My practice in 2006 grew 60%, both billings and revenues, and without any net increase in staff. Of course some expenses increased, but I was able to pay the largest staff Christmas bonuses ever. We started having fun again. You guys ROCK!
Carl Dore’ Jr.
Dore & Associates, Attorneys, P.C.
When I first entered the room at the Double Your Revenue workshop … I was concerned about how this process would work. How was the coach, Steve, going to get us all on the same “plane,” take us on the same journey and land us each on an airport where we could disembark with an action plan to begin the process of doubling the revenue of our respective law firms? I didn’t believe it was possible. Steve exhibited a masterful way of encouraging us, guiding us and inspiring us. When we returned to our office, we did get the results of doubling our revenue over the next two years. I am enthusiastic about recommending Steve’s coaching services.
Rick L. Law
Law ElderLaw, LLP
The DYR program gave us a new perspective on our practice. It also gave us the opportunity to think through where we were, where we wanted to go and, most importantly, how we were going to get there. DYR was time well spent.
Jay C. Kaufman
Kaufman Law Group, LLC
I decided to work with Atticus in the Double Your Revenue workshop. We implemented better systems and began thinking in innovative ways, including Atticus concepts like exclusivity, client selection and the dash board. It is exciting to look at marketing in a new way. For me, it is not about making more money as much as it is providing better service and enjoying my life’s work. Atticus is worth every penny!
Balbi & Co.
My practice was controlling me vs. me controlling the practice. Because of Atticus, I can see my goals. Atticus gives you the tools. It is delightful to have my life again, while making more money without additional time.
Harris & Hunt, P.A.
Since starting the Double Your Revenue program, my net income has increased dramatically, and I see more growth potential ahead. I have gained control over my practice, and I have seen the benefits of applying DYR principles at home. It’s been a life changing experience.
Karen Brady, Attorney
I started the Double Your Revenue program, like most other participants, with the run-of-the-mill goals of more money, less time, more satisfaction. I reached these goals and many, many more. The unique paradigms and practice tools we learn in each session have given me such focus and clarity about what I want to achieve and how to achieve it that I can easily assess where to apply my time and money. The confidence this clarity produces is incredible; the support and inspiration the group gives one another is priceless, and it continues to help me grow and enrich my life.
Candace M. Pollock
Hahn & Pollock, LLC
I have had vision and drive since I started by practice. What the Double Your Revenue program has given me is the tools to turn my vision and drive into effective, as opposed to erratic, action. Tools to communicate with my team, to focus my energy, to pull me out of a slump! Interestingly, as a by-product, my vision is sharper than ever. Now my energy about my business and my future is more focused and excited than before.
Kevin D. Quinn
Steve Riley’s program has accelerated my practice and improved the quality of my life. The program provides specific and measurable tools to assist in thinking strategically. The group format also acts as an indispensable catalyst and motivating force to help implement the strategies that will work best for a particular practice. The Double Your Revenue program is not about “tips and techniques” (although you will get some good ones), it is really a system for analyzing your current reality and helping you create the one you really want.
Law Office of William A. Deitch, P.C.
What I wanted out of Double Your Revenue was the confidence to fully transition to estate planning. What I got out of the program was a devoted, visionary practice partner; a committed, energetic team; a multi-state estate planning practice; and a career that is fun, satisfying, and making a real difference in people’s lives.
Teresa Byrd Morgan
Bennett & Morgan, LLP
Lake City, FL
The Double Your Revenue program has been the key to the tremendous growth in my business and increased effectiveness in my life. I have tripled my revenue in the 3-1/2 years since joining Steve’s program while increasing my free time exponentially. A program I enrolled in to grow my business has transformed my life, my future, and my relationship with my family and business team members.
Vincent E. Bonazzoli, P.C.
What I wanted out of the workshop were tools to rebuild a law practice by design; what I got were tools to rebuild, transform, and live my life by design.
D. Bowen Loeffler
Loeffler & Wargo
Port Clinton, OH
Your investment: $995 for yourself; $795 for each additional attorney or staff member from your firm.
If you want to Double Your Revenue™ and gain a competitive advantage in your market, act NOW and register. If you are unhappy with the program, after attending the session and implementing our strategies, we offer a complete money back guarantee.
How are you approaching the end of the year? Yes, we haven’t even reached Halloween, but it’s not too early to decide how you will maximize your time and efforts during the last few months of 2014.
If you’ve been following me for very long, you’ve likely heard me talk about a strategy I call the End of the Year Sprint™. I addressed it last year in my blog, and I’m revisiting the topic because it’s a yearly habit you should be doing to grow your practice. You’ll have to forgive me if some of this advice seems like a rehash; frankly, it is. But I believe this is an important annual process lawyers should complete, and so I am hoping you’ll forgive the repetition.
There is an actual worksheet I’ve created using that title, but this exercise— once you understand it — can actually be done quite easily on a large sheet of blank paper that you’ve divided into four quadrants.
Before I explain the exercise, let’s dig a little deeper into how lawyers typically approach the end of the year. In my experience, there are the two ways they handle it:
The Worst Way
- The end of year sneaks up on you like a mugger and clobbers you.
- You are and your team are distracted by the holidays.
- Cash flow is inconsistent.
- Suddenly January is here, and you are surprised to see it.
The Best Way
- You see the end of the year like a finish line and sprint to it with intensity.
- You sprint with focus and clarity to drive great results.
- You create a contest or game with your team.
- You maximize your cash flow.
- You start setting up 2015 to be the best year ever.
If the “best” way makes sense to you, then here is how I suggest you approach the sprint:
Budget one full hour on this week’s calendar for you to do this exercise. At that time, take out a large sheet of blank paper. (An 11×17 sheet works best, but you can improvise by taping together two standard letter-sized sheets.) Position it horizontally and draw a large cross dividing the sheet into four quadrants.
Label your four quadrants with these headings and follow the instructions:
- Cash Flow – To maximize your cash flow, list your best financial opportunities for the rest of the year and put together a quick written plan on how to get them accomplished. Rank your highest dollar cases first.
- Marketing – Identify your top five marketing opportunities that will happen before the end of the year and draft a plan on how to get the most out of your marketing efforts.
- Projects – Identify your three most important projects you want to complete before year end. If possible, assign a project manager to help you complete them by year end.
- Next Year – Answer these questions to set up strategic planning for 2015.
- What would it take for 2015 to be the best year ever?
- What would you have to do now to start the ground work for 2015?
- What support would you need for 2015 to be the best ever? (Do you need to plan a firm retreat? Hire a coach? Join a quarterly group program?)
Filling out these four steps, while not replacing the power of a live workshop, can at least give you the sense of how to set up and do an End of Year Sprint in your own practice.