I frequently tell attorneys running law firms they are incredibly privileged to operate in the fourth most lucrative industry in the United States. However, that doesn’t come cheap, as you also have the third-highest payroll costs compared with overall revenue.
This is a double-edged sword since it means lawyers can get away running a poorly managed legal practice while still turning a profit (and there are hundreds of examples available). The unpleasant truth is that you, reading this right now, almost certainly know at least one attorney who runs such an unprofessional firm.
I want to address something I see happening over and over. The issue is hiring additional employees to address a problem or during times of expansion prematurely. I’d like to suggest an alternative to the typical practice of hiring more people (note that there’s nothing wrong with hiring more people in and of itself – but how I often see it transpire. Instead of throwing resources at a problem, concentrate on the issue you need to overcome.
Question: What do most firms do when they start growing?
Answer: Throw people at the challenge, right?
I’m here to challenge that mindset. When a company is growing, its first impulse is to promote the available position and add a body. The belief is that “another person will allow us to offer X, Y, or Z and resolve the problem.”
However, this instinct may severely limit the efficiency of most law firms because adding an employee without a clearly defined role makes it impossible to get maximum ROI from them.
One alternative to employing people when expanding is to outsource.
The significant advantage of outsourcing is to utilize the specialized knowledge and established procedures another company has created. Let me give you a few examples of how we’ve achieved this at GlobalMac IT.
In 2014, we became aware of an issue we learned that many people despised and wanted to remedy: the phone auto-attendant. The appeal is providing a system that allows the caller to be directed to the exact person or department needed; it would reduce the distraction experienced by everyone in the office with every call coming in.
However, everyone despises automated systems.
Has this ever happened to you: wanting to talk with a human but being forced into hearing “Sorry, 0 is not an option; please try again”?
Arghhh! That. Drives. Me. Nuts!
When we looked at the auto attendant solution a bit closer, it may have cost our business thousands of dollars in lost business.
Have you ever given up when trying to call a business and then called the next one down the list because you could not reach a human?
We quickly decided we needed to answer our calls live.
Option 1 – Use an Existing Body
The first choice was to have a single person in our office handle all calls.
But, because everyone in our office had a lot on their plates, we quickly rejected the notion.
Option 2 – Hire internally
The second option was to hire a receptionist to answer calls. Bringing on an additional employee would bear the total cost of wages, plus the fully burdened cost and overhead of having an additional employee.
Tip: Rough numbers are 30% above their actual salary is the total cost.
This adds up quickly, with additional items required such as a computer, desk, chair, phone, taxes, benefits, such as increased insurance costs, etc. Added monthly expenses for all the accounts and services they need (phone service, email account, software licensing, etc.) and more. Setting up new procedures for the new position and the training required for the job is another expense often not considered.
The fact that we did not have a high volume of calls, not nearly enough for a full-time employee, made us realize that this was not a viable option either.
Option 3 – Outsource Externally
Outsourcing this task was the final option we considered.
Smith.ai was the clear choice for us after researching and delving into the firms we were considering. They had been around for a while and had established processes that almost ensured quality. They also leverage technology more than other competitors, and in addition to the old-fashioned messages, they can tie in with Slack as well as our support ticketing system, saving us further time and making our team even more efficient in the process. We now spend about $500 a month, and we get great feedback from everyone who calls us.
A live human answers all our calls during business hours. We love it, and our clients and prospective clients love the personalized experience.
Another example occurred in 2019 when we looked at the cost of the traditional CPA firm we used to do our taxes and then added up the total time that our COO was spending doing the books, plus our payroll cost. We were not thrilled with our CPA firm, and they did not add much value or take proactive measures to help us. They were old-school; we get your books done and help with taxes once a year. There was no additional value beyond that, and it was reflected in the amount we spent.
We determined that Chris, our COO, was spending 20-30 hours a month dealing with tasks related to bookkeeping and taxes. Most importantly, just because Chris could technically do the books, it did not mean that he should. This was not his specialty, and he did not enjoy doing it. We are too small to warrant a full-time bookkeeper, so we started looking at outsourcing options.
We found a virtual CFO that takes care of the financial basics of bookkeeping and taxes. But, even more importantly, she is an advisor that helps Chris and me make better financial decisions for the company. She has provided solutions to reduce the cost of payroll and health insurance and many other typical costs all companies incur.
The most significant benefit we are receiving is leveraging their expertise and developing streamlined processes. When our vCFO took these responsibilities over, it felt SOOOO good, knowing that it was now done better than ever before. It was a weight off our shoulders, freeing us up from focusing on being a bookkeeper and allowing us to do what we do best. She comes to us proactively with things we would never have the foresight to consider.
By leveraging her expertise, we benefit in ways we would never have realized if we continued to complete these tasks in-house. Chris now has freed up 20-30 hours a month to focus on the many other hats he wears at GlobalMac IT.
For example, she handled all the complexity of the PPP loans in 2020 and brought an idea many small businesses did not take advantage of in 2021, the Employee Retention Credits. She dealt with everything from start to finish, a total benefit for our company of more than $120k. This more than paid for her services.
These are just two examples in which we have been able to outsource necessary tasks.
Our most significant benefits are freeing up time for our internal team members to do what they do best which generates higher ROI and keeps the costs down that would have been necessary if hiring additional employees.
Side-note: It just dawned on me that the term outsourcing, for many, will make them think of outsourcing jobs overseas. The times-are-a-changin’ and while there are many ways to do that, tons of US-based businesses have evolved their business models to work with such a model. I wanted to point this out to ensure readers don’t close off this idea due to a negative association with the term’ outsourcing.’
What We Do for Mac-based Law Firms:
We handle the complete scope of technology management for our customers, from minor day-to-day problem solving to comprehensive project work to help them be more productive and secure.
We take on the role of our clients’ outsourced IT department, helping them with password management, new user setups, network, security, and LOTs more.
Each encounter with a client leverages our enthusiasm for Apple computers, our company’s fundamental goal of redefining the connection between people and technology, and our dedication to our core values; Grow, Be the Hero, Work Smart, and Embrace Change!
All our clients are taken through our Proven Process, a repeatable, detailed, play-by-play procedure we follow, which allows them to immediately tap into the 16+ years of expertise we have supporting Mac-based legal practices.
What are the benefits of outsourcing vs. hiring?
When you decide to outsource, you’re not just buying a “service plan.” You’re paying for the values and procedures that the company has developed over time. When considering outsourcing any part of your business, keep those elements in mind.
The main takeaway is to ask yourself where your company’s time goes. What is the actual cost of completing a task for your organization?
Do you have someone spending 20 hours per month doing the bookkeeping for your company? What is the overall cost to your firm if this continues for another year? And don’t just multiply their hourly rate; include their fully burdened rate, which is typically another 30% more.
However, dig a little deeper. What is the impact on that employee’s productivity as a result of this number? Are their abilities to do this task part of their unique abilities? Is this something they enjoy or despise doing? If you took away the time they spend, what would be the overall impact of freeing them up for other tasks? Finally, include the upfront and continuing expenses of adding a new employee.
So, put down your highlighter and grab a pen, a legal pad, and a calculator. Re-read the passage above and do the math again. I’d love to hear about your findings as well as any AHA! Moments that occur.
If you’ve gotten this far and actually done something (after all, if you’re not going to do anything about it, the time you spent reading this entire article is wasted), please email me at [email protected] and let me know what you discovered as well as what you’re planning to do about it!