Breaking Down Your Law Firm’s Revenue Goal: A Clear Path to Success

Some law firm owners can tell you their revenue goal for the year, but if you ask them how they'll get there, if you want to have a conversation about that and geek out a bit, exactly how many cases, in what case types, things get fuzzy fast. And in this episode, we're clearing that up.

I am going to show you how to take that one big number and break it down into simple, actionable sub-goals that will make your revenue goal inevitable. This is a numbers-heavy episode, but stay with me. It's going to be a good one. Let's dive in.

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Hey everyone, I'm Melissa Shanahan. This is The Law Firm Owner Podcast. Thank you for being here. Today, we are talking about how to break down your revenue goal. What I call with my clients, the mother goal. We'll break it down into sub-goals so that making that revenue is inevitable.

Now, your revenue goal, your mother goal, isn't the most important number in the business. That's not why I call it that, the mother goal, but everything else trickles down from it. So, yes, it matters. But the way you get there matters even more. You can't just crank harder. That's not the path to it, and that's not a strategic path to it.

So, what you can do is to look through a smart, data-driven lens, and that's what we're going to do today. By the end of this episode, you'll understand a simple 3-step process to reverse engineer your goal, revenue goal, into clear, controllable pieces. Or more controllable pieces.

Okay, so step 1, start with the top-line number that you're shooting for. That's your destination. That's your mother goal. Let's use an example. Even though we work with clients with all different practice areas, let's use the example of an estate planning firm. So, if you run an estate planning firm and your top-line revenue goal for the year is $2 million, that's the number we're going to work from. Okay.

Now, the next step is to find your average revenue per matter in each of your main services. So, for example, though we work with firms with all different practice areas, let's just use estate planning. For most estate planning firms, there's estate planning, probate, and trust administration. Those are 3 main services or revenue streams that we see.

You want to know the average revenue for each. If you already track that, great. Pull those numbers. If you don't, make a note to begin tracking this because this episode, it's not about how to calculate it; it's about how to use it. I do have an episode on how to calculate average revenues. We'll put that in the show notes. It was done a while ago, but we'll put it in the show notes so you have it there.

Once you have your average revenue for that revenue stream, then everything else will start to become really clear. For the sake of example, we'll use healthy, realistic numbers, not entry-level pricing, not high net worth work.

So, for estate planning, for every matter that comes through estate planning, the average revenue we're going to use is $3,200. Now, for probate, we're going to use $5,500. And for trust administration, we're going to use about $8,000 per matter. Now, these are the numbers we'll use to walk through the rest of the exercise, but you have to know your average revenue per matter within each revenue stream. Okay.

Now, in the next step, you're going to figure out where you're sitting right now in terms of your percentage of total revenue that came from each of those categories in the last year, from each of those revenue streams last year, from each of those practice areas last year.

So maybe when you look, you find that estate planning made up about 65% of total firm revenue. And probate was about 20% of total firm revenue. And then trust administration was about 15% of your firm's total revenue. So that's your current mix, your baseline.

And just as an aside, so you don't have to, hopefully this will help tee you up if you're going to think through this for yourself. You take the revenue from the practice area or from that revenue stream divided by the total firm revenue, and that will give you, you know, 0.15, and you know that's 15%. That's how you calculate that. So, that's your current mix. That's your baseline.

Now, if you want to shift that, let's say you want to grow the probate side of the business because… because, right? You're going to set a target percentage. So right now, it's 20% of your total firm revenue, but you'd like to grow it. So what would you like it to be? So then let's say that when you're setting target percentages for all 3 of your practice areas, estate planning, you want the target to be 55%. So it's a little less since you're spreading out and you want probate to do more. So for probate, it would be 30%. It was 20%. So this is your growth area. And then for trust administration, 15% holding steady.

Knowing both your current mix and your target mix tells you exactly what kind of change you are working toward. So then the next step, we're going to use those target percentages that you set to reverse engineer your plan.

So with a $2 million top-line revenue goal, your targets will become $1.1 million for estate planning, $600,000 a year for probate, and the $300,000 in the year for trust admin. And that is because I'm taking $2 million times 55%. That's what a target percentage was for estate planning, and that tells me the revenue that needs to come from estate planning. And then I do the same thing for probate. I want it to be 30%. It used to be 20%. So 30% of $2 million is $600,000. And then trust admin will hold at 15%.

Next, you're going to plug in those averages that we discussed a little bit ago, the average revenue per matter in each revenue stream. You're going to use those.

So you're going to take the practice area's revenue goal. Estate planning, the revenue goal because we want it to be 55% of $2 million, is $1.1 million. You're going to divide that by the average revenue per matter, which we said was $3,200 is the average revenue per matter within estate planning. So what that means is that you would need 344 matters within estate planning in the year in order to be on track for $1.1 million, which will be its part in the $2 million goal.

Now, for probate, we have $600,000 is the goal for probate. We're going to divide that by $5,500, which is the average revenue per matter. That means you would need 110 matters in the year within probate, within that practice area.

Now, the next, trust administration is $300,000 is what we want trust administration to do. That's 15% of $2 million. You're going to divide that by its average revenue per matter, which is $8,000. And that means over the course of the year, you need 38 trust administrations.

Also, I do realize, for those of you thinking this, the timeline isn't perfect. Right? Just because you open a matter doesn't mean it's going to be done within the calendar year that you're trying to work on this for. Okay, but you have other ones that are closing out. So it's okay to plan this way. You'd be amazed how close these plans can get when you when you reverse engineer in this way, even though the timing isn't perfect.

So, for the year, you are aiming for 344 matters within estate planning, 110 matters within probate, and 38 matters within trust administration. So the total number of matters for the firm really isn't the point. It doesn't matter. What matters is how this breaks down into something that you can really sink your teeth into, something that you can actually manage and plan around.

And even if these divide evenly across 4 quarters, you know, there's we have the yearly goal in terms of number of matters, for example, and in terms of revenue per practice area, and you can decide to distribute the load evenly across 4 quarters, but you don't have to. You know, you may decide to give more weight to one quarter than another, but just for simplicity, we're going to divide it evenly here.

So, estate planning, we have 344 estate plans per year. You divide that by 4, that means 86 estate plan matters within estate planning per quarter. For probate, you need 110 in the year, so divide that by 4, you need 28 per quarter. And then for trust admin, you need 38 for the year, which, when you divide it across all 4 quarters, that's 9 or 10 matters within probate within trust administration per quarter.

So when you break it down to the quarter in front of you, say you're planning for Q1, you can actually take each of those quarterly numbers, and you divide by 3 to figure out what you need to do per month.

So, estate planning, we need 86 in a quarter. And let's say you're making plans for 2026 and you're looking ahead, and Q1, you know you need 86 new estate planning matters. Okay. If you divide that by 3, that means you need about 29 matters within estate planning per month to come on board. And that's more helpful than saying 344 for the year. You need that. You need to do that in order to see this is what's in front of me.

And then when you break it down to the quarter in front of you, so let's say, let's say you're planning for Q1, you could take each of those quarterly numbers and divide by 3 to see what that means that you need to do per month. And again, this is assuming that it feels right to break it down evenly per month.

So, estate planning, we wanted 86 matters per quarter. Okay, divide that by 3 months, and that means around 29 estate plans or matters within estate planning per month. So 29 per month. Now that is much more useful to look at than 344 for the year. You need to figure out the year so that you so you need to figure that out. That's why we went through that, so that you can reverse engineer to see that means 29 per month.

For probate, you actually need 29 for a quarter if you're breaking it down evenly. So when you divide that by 3 months, that's around 9 matters within probate per month. And then trust administration, you need 9 per quarter, so divide by 3, that's 3 matters within trust admin a month.

So you don't need to map by month for the entire year. That is just a waste of time. You need to start big, plan for the year, figure out what that means per quarter, and then, only for the quarter in front of you, figure out what that means by month. Because a lot is going to change, it's not going to go perfectly to plan, and so then you're going to redo when you finish Q1, for example, you're going to review the quarter you just had, and you're going to look ahead and adjust your goals based on what happened in Q1.

So there's no reason to put in the work to figure out, this is what I need to do for every month for the year. Just focus on the quarter in front of you. But in order to focus on the quarter in front of you, you have to reverse engineer from the bigger numbers that you're trying to shoot for. So, look at the quarter in front of you.

When you can see these numbers and what it takes per quarter and what it's going to take per month for the quarter in front of you, and you can compare to what you're currently doing, the path forward becomes much more clear. And here's why this exercise really matters, because it provides clarity.

When you can see this breakdown, when it's not just one big annual number that you're just going to go at, but it's a clear picture of what it actually takes, it becomes obvious where your focus needs to be in terms of what you're going to do in order to allow for that capacity. That clarity shows you what your strategic priorities should be and what kind of effort you're going to need to put forth in these coming months to make these numbers real, to bring these numbers to life.

Do you see how this works? You're not just setting a revenue goal, you're engineering it. And you've connected the dots from where you are right now to where you want to go. So you've got the real current state in terms of how the mix of what is contributing to the overall revenue goal from your practice areas. You've got the target mix and the math that shows what it's going to take to get there. And from there, you can make smart decisions.

It may mean that you invest in marketing for the practice area that you want to grow. It may mean that you adjust pricing in one or more areas in your firm. It may mean that you streamline some systems or the workflows within one or more key areas of your firm to allow for efficiency and to hopefully increase capacity. Now, that's leverage. That's clarity. And that's the kind of thing that comes out of doing this work of reverse engineering.

If you want to do this for your own firm, here's what you need to write down: your top-line revenue goal. So you need to make a decision on that, and there have been so many great episodes to help you choose that, the future you're building, think bigger. So revisit past episodes for inspiration and for help on how to think about what your top-line revenue goal should be.

The second thing you're going to write down are your main categories of work, the revenue streams, that's a way to think about it, your practice areas. If you really only have one practice area, maybe it's major case types that you're working on. But what are the main categories of work? What are the main revenue streams in your business?

The next thing you're going to write down is the average revenue per matter for each of those categories or practice areas, or streams of revenue. The next thing is your current percentage of total revenue for each of those revenue streams or for each of those categories.

Okay, so you've just written down your top-line revenue. You have thought through what are the categories of the revenue streams that you're going to look at. You've determined your average revenue for each of those. You've also determined the current percentage of total revenue that each of those contributes.

Then you are going to set a target for what you want those percentages to be. Do you want to grow one? Do you want less of another? Make some decisions there. Then you're going to do some math. Then you're going to multiply and divide, and you're going to find out exactly how many matters you need in each category in order to hit these revenue goals. You're going to break those numbers down by quarter and by month, starting with the quarter in front of you.

It's almost like a goal pyramid, a reverse goal pyramid. And it turns your goal from abstract to actionable. This is what I was talking about before. You'll ask people what their revenue goals are, and they'll tell you what the revenue goal is for their firm, and they have zero strategy and no clear path to that. They're just going to hustle. They're going to work harder. They're going to hit some big revenue goal because they're just going to bring in a new arm of business with no thought about what their current business is doing.

So this again, this episode is what turns your bigger goal, the mother goal, from it takes it from abstract to actionable. You now have a framework to move from a goal you want to see happen to knowing exactly what it's going to take in order to create that path there.

If you are ready to start applying this kind of clarity to your own firm, head over to velocitywork.com. There you'll find free resources to help you get started, and if you think you'd like to work with us on your firm, you can schedule a call for us to determine if it's a right fit because the work we do here at Velocity Work is the work that creates velocity.

All right, everyone. I'll see you here next Tuesday.

Hey, want to watch the video of this episode? Head over to Velocity Work’s YouTube channel. You’ll find the link in the show notes.

You may not know this, but there's a free guide for a process I teach called Monday Map Friday Wrap. If you go to velocitywork.com, it's all yours. It's about how to plan your time and honor your plans so that week over week, more work that moves the needle is getting done in less time. Go to velocitywork.com to get your free copy.

Thank you for listening to The Law Firm Owner Podcast. If you're ready to get clearer on your vision, data, and mindset, then head over to VelocityWork.com where you can plug in to quarterly Strategic Planning, with accountability and coaching in between. This is the work that creates Velocity.