Re: Toronto: Growing a Great Startup Ecosystem

Jack Newton — Mon, 26 Sep 2016 15:02:07 -0000

Agreed!

Re: Toronto: Growing a Great Startup Ecosystem

Jack Newton — Fri, 23 Sep 2016 13:49:15 -0000

Clio has a 40-person office in Toronto, and we've been super-impressed by the talent there (and by the way, we're hiring: https://www.goclio.com/abou...

Re: Study Finds That Solo Lawyers Bill Only Two Hours A Day…But What Does That Mean?

Jack Newton — Fri, 23 Sep 2016 09:24:35 -0000

Adam, rest assured that hourly and flat-fee billings have been segregated in the Legal Trends Report.

Re: Study Finds That Solo Lawyers Bill Only Two Hours A Day…But What Does That Mean?

Jack Newton — Fri, 23 Sep 2016 09:21:19 -0000

Carolyn, thank you for writing this post. I appreciate you helping spread the news and generating discussion about the Legal Trends Report.

That being said, you’ve made a straw man out of comments or conclusions you believe either I or the Legal Trends Report have made without having viewed my keynote discussing the findings or having read the report itself (which is currently being prepared for publication). I’d like to take the opportunity to lay out the report’s findings in more detail and address some of the conclusions/assumptions you erroneously assign to both myself and the report.

Before I start, I feel it’s important to take the opportunity to clarify some details about the provenance of the data utilized for the Legal Trends Report. Data for the Legal Trends Report was gathered from anonymized and aggregated billing data that has flowed through Clio’s billing system. This type of data aggregation is necessary to help inform Clio about application usage and trends that allow us to understand customer behaviour, anticipate loads, and ensure Clio is appropriately resourced to provide an exceptional customer experience. This information does not contain any Personally Identifiable Information (PII) or client data.

This type of functional data can directly benefit Clio’s customers as well as the broader legal profession. An anonymized and aggregated data pool allows us to generate valuable legal insights that allow lawyers to anticipate market trends, and remain both relevant and informed. This type of legal insight is a first for solo- and mid-sized firms, but BigLaw firms have participated in this type of anonymized data aggregation and sharing for years via Thompson Reuters and Lexis Nexis products like TR Peer Monitor and LexisNexis Counsel Benchmarking. It’s about time we had some real data into this vacuum.

Additionally, we treat security and privacy with the utmost concern, and go to painstaking lengths to ensure that any data insights are obtained in accordance with our Terms of Service (Section 2.12), which affords any Clio customer the opportunity to opt out at any time.

With that out of the way, let me address each section of your blog post:

Fact 1: Solos Underreport Their Hours
The disparity between the self-reported utilization rate (i.e. number of hours billed in a day / number of work hours available in day) isn’t surprising to me. There are well-understood biases that exist in self-reported data, such as the the social desirability bias which skew survey answers towards what people feel will seem “good” to their peers.

Fact 2: Low Billables May Reflect Lifestyle Choices
You comment that: "without more information on the assumptions underlying these findings, most significantly, whether it was reasonable to assume that solos work an 8-hour day/40-hour workweek?"

Working with data allows us to avoid assumptions and sources of bias. The data in the Legal trends report provides factual evidence that lawyers are, on average, utilizing 1.76 hours of their day. Regardless of the assumed length of workday, the take-home learning is that anyone would be hard-pressed to make a living with 1.4 hours of billable work coming out of their workday, whether it’s a 4, 8 or 16 hour workday. With ~260 workdays per year and an average rate of $232, this means the average solo is making 1.4 * 232 * 260 = 84,448/year. Before overhead + expenses (!).

Fact 3: Inefficiencies are the Least Likely Explanation for the Low Number of Billable Hours

What’s worse than lack of context for Report’s factual findings, is the preliminary conclusion that the reason for solos’ low billable hours is that they simply are inefficient.

This conclusion wasn’t made by the Legal Trends Report, primarily because it remains unpublished. We feel it’s only fair to withhold conclusions until reasonable context is available via the published report.

In my opening keynote at the 2016 Clio Cloud Conference, I presented only a “sneak peek” of the Legal Trends Report. When presenting the KPI (Key Performance Indicator) data around utilization, realization and collection rates, I made the following data observations:

1. Lawyers utilize, on average, 28% of their potential billable day. (this is the Utilization Rate: of your available hours, how many are chargeable after netting out all non-client facing activities?)

2. Lawyers realize, on average, 81% of their billable time (this is the Realization Rate: how many of your utilized hours end up on the bills you send to your clients?)

3. Lawyers collect, on average, 86% of their billed time (this is the Collection Rate: how much of what you billed to your clients was collected?)

Based on these data insights, I made the following conclusions:

Lawyers should be focusing on increasing their Utilization Rate, which, according to our data, is devastatingly low at 22%.

The average Realization Rate and Collection Rate are actually respectable, at least in comparison to Utilization Rate. Our belief is that focusing on these KPIs will offer diminishing returns in comparison to Utilization Rate.

Why is Utilization Rate only 22%? There can be two answers:
1. Lawyers don’t have enough clients/work to keep them busy and fill up the remaining 78% of their day; or,
2. Lawyers aren’t efficient enough, and although they have the volume of work to potentially increase their Utilization Rate, they aren’t able to efficiently and effectively complete their work (or, alternately, have made lifestyle choices to shorten their day).

The Clio data contains another bias in this regard. My guess is that most Clio users (as well as lawyers using other cloud-based LPM platforms) tend to be younger attorneys and/or newer solos.

Our data suggests this assertion is incorrect. Clio’s latest demographic survey showed the average Clio lawyer had been practicing for 13 years, pegging them at ~40 years old. Approximately 40% of our lawyers have been practicing less than 13 years, and 60% have been practicing more than 13 years.

Finally, there’s a darker explanation for the low billables for solos that Clio completely ignores: the fact that for many solos, the work just isn’t there.

I 100% agree with this, and underscored this theory aggressively in my keynote.

I also framed Clio’s mission as being two-fold: help lawyers find clients, and help them operate efficiently. If we tackle those two problems, we’ll see Utilization Rate increase.

Fact 5: Even if Inefficiencies Account for Low Billables, That’s Partly the Nature of Legal Practice

If ‘inefficiency’ in the context of law practice is defined as time spent not billing, is that necessarily a negative — as the Clio report seems to suggest? What I mean, is that in many higher paying fields, there’s a lot of work that’s done ‘off the clock’ that nevertheless, is a key component of one’s ability to command the big bucks.

We’re not placing any value judgements on how ‘off the clock’ time is utilized — and there’s no doubt that the 6 hours of non-billable time in a day is helping drive the workload and hourly rate of the 2 hours of billable time in a day.

The real shocker was this: the Legal Trends Report demonstrate that Utilization Rate is less than half of what most self-reported surveys indicate. This stands to challenge the existing narrative surrounding law firm economics, and calls into question the validity of self-reported data with small sample sizes (e.g. the 2012 Lexis Nexis report you cited).

I’ll add my own editorial here though: at John Suh’s keynote at last year’s ClioCon, he asked “what is the ideal law firm size?,” and cited a variety of surveys that indicated mid-size (10-20 person) firms enjoyed significantly better unit economics than solo firms. The Legal Trends Report support’s John’s claim, as we showed 4-8 lawyer have a 50% increased average utilization rate than solos, and 12+ person firms have a 100% increased average utilization rate than solos.

If we let the data speak and take opinions off the table, it’s clear that the unit economics of a solo practice are far different to those of boutique firm. Yes, all the activities you named as non-billable activities are valuable and important, but they could really hurt the solo in terms of utilization rate. The data makes no judgements about the value of the unbilled time.

Fact 6: Data on Hours Billed Is Meaningless Without Knowing Corresponding Rates

The Clio Report overlooks other important piece of data: the relationship between the 1.76 hours billed and the rates charged. Without knowing more, it’s tough to assess whether the 1.76-hour a day lawyer is struggling.

An unpublished report cannot overlook anything.

The Clio Report overlooks other important piece of data: the relationship between the 1.76 hours billed and the rates charged. Without knowing more, it’s tough to assess whether the 1.76-hour a day lawyer is struggling.

I agree this would be interesting to look at — I’m thinking a scatterplot showing utilization rate against average billable rate.

Moreover, I’m just using the averages here, which as I theorized earlier, are skewed by Clio’s large proportion of younger lawyers and new solos and do not fully reflect the experience of a solo ten or more years out.

As above, our customer demographics would suggest that an age-related skew is unlikely. We plan to explore all of this in the to-be-published report.

The Clio Report Shows the Danger of Facts Out of Context

The Clio Report (aka Legal Trends Report) does not show the danger of facts out of context. The report is unpublished, and if you had viewed my opening keynote I think you would have seen that all the data insights were couched in what I think was a pretty thoughtful analysis. If anything, I’d argue this blog post doesn’t benefit from the context of either the report or a first-hand viewing of the keynote in which it is introduced.

Here’s my final comment: I’d argue the real danger is the status quo; a multi-billion dollar industry operating in a vacuum of aging insights, self-reported data. I was very careful to report facts and logical interpretations in my keynote, with the hope of providing the entire legal community with a series of data-driven insights never before available.

I’m looking forward to some healthy additional debate once you’ve had the opportunity to view the keynote and we’ve had the opportunity to publish the Legal Trends Report. You and your readers are welcome to sign up to be the first alerted when it’s available:

It’s obvious we both share a passion for helping to develop an informed legal community. Keep the questions coming!

Re: Clio Releases its iPhone App

Jack Newton — Mon, 23 Sep 2013 14:33:44 -0000

Jean, we're working on it. Would love to hear what you'd like to see - jack at goclio.com

Re: GoClio – Online SaaS for Law Firms and Practices

Jack Newton — Mon, 08 Mar 2010 19:06:52 -0000

Thanks for the post on Clio, Craig. We appreciate the kind comments on the UI - definitely the kind of experience we've been aiming to deliver.

Best regards,
Jack

Re: Is there a PERFECT law practice management solution out there?

Jack Newton — Thu, 23 Jul 2009 16:53:54 -0000

Hi Long,

Right now comments/communications are centered around documents, but we're working on rolling out a more direct communication system to supplement this.

Re: Is there a PERFECT law practice management solution out there?

Jack Newton — Thu, 23 Jul 2009 11:00:43 -0000

Hi Long,

Nice post. We've been working hard to make Clio the perfect system for firms like yours, and you should definitely give Clio another look.

We offer a free trial, and we think the pricing model we've got is the right fit for the solo/small firm market.

In terms of your needs and wants, we're a really good fit:

> Here’s what I need:

> 1. Client/Contact Management
Check.

> 2. Daily income/expense tracking
Check.

> 3. Attractive, user friendly note taking system
Check.

> 4. Integrated back office accounting OR export system to Quickbooks, etc)
Check. We export to QuickBooks now.

> 5. Trust accounting solution
Check.

> Here’s what I want:

> 6. Basecamp like communication with clients
Check. ClientConnect (rolled out at LTNY this year) is exactly what you're looking for.

> 7. Web based document assembly (a pipe dream)
We can export to CSV for assembly with Outlook/Word etc.

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