One of the major determinants for how an associate’s year-end review is going to go is how much money she made the firm. There are other things too, like how an associate is developing client and case management skills and whether the associate is developing her own book of business. But when everything is boiled down to its rawest form, partners at most firms want to know how profitable the associate is. Since an associate’s profitability is the most important thing to her employer, she should make it a priority to know this information herself. But I recommend that she not only know the information for a year-end meeting, but monitor it throughout the year.
Keeping track of your billable hours
Most of us have a pretty good idea of what our billable requirements are. But do you know how much that translates to in actual dollars? Do you know your hourly rates? Do you know what your share of the overhead is so that you can determine how profitable you are? Does your firm allow you access to this information? Since I started practicing in 2012, I have always kept thorough track of my billable time entries on a daily, monthly, and annual basis. I’m a sucker for spreadsheets, so I created a spreadsheet that would help me keep up with my time on an ongoing basis. Only recently did I realize I was missing an important column. The money column. I was not keeping track of how much money those billable hours translated to. This is important because time entries don’t always tell the whole picture.
Monitoring the value of your billable hours
Some firms allow you to write down time for attending CLEs or marketing events. If you go to an all-day CLE, you may get to write down 7.0 hours for this day. Or if you travel to Chicago to pitch a new client or building your relationship with an existing client, you write down 18.0 hours for your travel/meeting time. Your monthly hours total will still look great. But while those are essential tasks, the hours you spend doing those tasks did not earn the firm any revenue.
If you are only keeping up with your time entries, like I was, you are going to miss a vital piece of information. You don’t know how much money your cumulative time is worth. In a meeting with one of the partners at my firm, we were talking about larger goals for the futures of the firm and myself, and how billables affected those things. He recommended that rather than shooting for an hourly goal each day, I have a goal to bill a particular amount of money each day. Doing so would put me in a better position to reach my goals.
Because I already had a spreadsheet for my time entries, all I had to do was add a column to my spreadsheet and plug in an easy formula that would allow me every day as I entered my time to see how much money my time entries amounted to each day. [Note: Time entries and billable rate are for illustrative purposes only and do not reflect actual events].
As you can see, this is a straightforward spreadsheet. There are only five columns. The first two identify the file number and name. The third indicates the work I performed. Column D enumerates the increments of time each task took. Column E is the new column — it shows the monetary value of each task. If you’re not proficient with Microsoft Excel, here’s what the formula looks like to derive that value: =sum([insert cell value here]*[insert hourly rate here]). Here’s the sample: =sum(d4*200).
The importance of knowing your revenue generation
Your value to your firm is directly tied to how much revenue you generate. I assure you that your firm knows how much money you’re making them. If you want to be on equal footing at your year-end meeting or if you want to advocate for a raise, you need documentation to substantiate your position.
You may be like me and be at a firm that treats you well and have people around you who are interested in your well-being, but that comfort level is not a good reason to be unknowledgeable about the business side of things. If your firm has goals for you or you have goals for yourself, the best way to make sure you are moving toward accomplishing those goals is to regularly monitor your progress. Keeping track of the monetary value of your billable hours is one of the most effective ways to monitor your profitability and position yourself for success within your firm.
Photo by Andy Simmons.