When you hear me say that Samantha has a million-dollar law firm or Jack has a $300,000 law firm, I’m referring to their run rates.
What’s a Law Firm Run Rate?
A law firm’s run rate is the revenue anticipated for the year (as in the next 12 months). Using our above example, Samantha expects to bring in a million dollars in revenue over the next year and Jack is on track to bring in $300k in revenue over the next year.
How to Determine Your Law Firm’s Run Rate
There are two methods for determining your run rate. I prefer the first because of the presence of consistency which better predicts future results.
1. Run rate is based on the last 3 months’ revenue; if consistent, it is the revenue your law firm would have for the next 12 months if revenue stayed the course. For example, Samantha’s law firm has brought in $80k, $83k, and $84k for the last 3 months. This is relatively consistent for that level. Samantha has a run rate of a million dollars. The math is about $83k x 12 months equals $1 mil.
2. Over the past 3 months’, Jack had revenue of $10k, $25k, $40k. You can see there’s no consistency, but we go with what we have and when we average the three, we (kinda) could say he’s on a $300k run rate because the average is $25k and $25k x 12 = $300k. If you don’t have consistency, you have a run rate number, but take it with a big ol’ grain of salt.
To Your Success!
P.S. If you’re nodding yes, if you’re ready to go from pain to gain, if you have the vision of building a million-dollar+ law firm but don’t know how to get there, let’s chat about where you are and where you want to go. Set up your Breakthrough Strategy Session here.