When to Hire and Who: A Data-Driven Approach for Law Firms

Guessing your way through hiring decisions is risky. It either leaves you scrambling or sweating payroll. In this episode, I'll show you how to replace guesswork with a practical, data-backed approach that gives you confidence in every hire you make.

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Welcome back to The Law Firm Owner Podcast. I'm your host, Melissa Shanahan. Today, we're diving into a topic that can feel like a moving target for every law firm owner: when to hire and who to hire. This is one of the trickiest things to get right. If you wait too long, you end up drowning, scrambling to keep your head above water, dropping balls for clients, burning out your team, training new hires in the middle of chaos. But if you hire too early, you create unnecessary stress. You're sweating payroll every month and second-guessing whether the work will be there to sustain this new hire.

Neither extreme feels good. This conversation is about using data, simple math, and clear signals from your firm to guide smart hiring decisions. There's no perfect formula, but there are practical frameworks you can use so that you are no longer guessing. And by the end of the episode, you will know the signals that tell you it's time to hire, the order in which to bring people on, and how to make sure that every hire creates real leverage, not just more overhead.

Hiring is buying back your time. So let's just start there. Hiring is not about filling roles; it's about buying back your time. That shift in perspective comes from Dan Martell's book, “Buy Back Your Time.” If you haven't read it, it's a must. I recommend the audiobook because Dan riffs at the end of each chapter, and it feels like you are hearing his behind-the-scenes thoughts of what was edited and scripted and put into the book.

The point is this: most law firm owners feel buried. They look around, and their first thought is, "I need to hire another attorney." But in reality, if you hire from the bottom up, starting with the lower level skill, repetitive work, you create margin for yourself and for your team. And that space lets you focus on higher value activities, whether that's legal work instead of delegable tasks, business development, leadership, marketing, strategy.

I have lost count of how many consult calls I've had where an owner says, "I need another lawyer." And after asking a few questions, it's clear that what they actually need is admin help. Jumping to hire a producer before you've cleared the low-level stuff off of your plate usually makes things worse, not better. Better maybe in the short term, not the long term.

So how do you start buying back your time? Step one is what I call a task brain dump. So, here's what to do. Grab a sheet of paper or open up a doc and write down everything you do on a weekly or monthly basis. Don't overthink; just get it out of your head.

Then here's what you're going to do. You're going to split those tasks into two categories. One is delegation tasks, and the other is replacement tasks. So, if you have a sheet of paper, you'll draw a line down the center. The delegation tasks are what would be considered the lower-level, repetitive administrative work. Think inbox triage, calendaring, scanning, filing, data entry, business compliance stuff. This is the stuff that can clog your day.

Now, if you're having a thought that email inbox is not delegable, I really want you to push yourself here because after working with certain people and after clients read “Buy Back Your Time,” it really helps them get over the hump and see where there is absolutely a huge portion of your inbox that can be delegated. Not all of it, but a lot of it.

Now, okay, that's one side of the paper. Let's talk about the other side, which is the replacement tasks. Replacement tasks are higher-level responsibilities. Some legal work, managing people, conducting consults, leading marketing efforts, and these tasks require skill, and they require training.

Next to each task, I want you to write down how much time it takes you per month. So even if you just say, okay, it takes me about, you know, 30 minutes a week to do this. All right, 2 hours a month. It doesn't have to be perfect; it needs to be just an estimate. This step is for you so that you see the total hours you could get back. It becomes much easier to let go when you can see that.

Don't skip this step. I say this to people when they do Monday Map, Friday Wrap, and they're getting everything out of their head to schedule into their calendar. It is eye-opening to see how those quick, 4-minute tasks add up. Four minutes here, 10 minutes there; suddenly you're losing hours every week, and those hours stack, and it creates weight.

Once you've brain-dumped your tasks, the next step is to figure out what you can afford to pay someone to take those things off of your plate. That is where the buy-back rate comes in. This is from, again, *Buy Back Your Time*, the book. So here's the formula. You're going to take your total compensation. That is your salary plus your distributions, so your total take-home. You're going to divide that number by 2,000 working hours in a year. Then, once you get that number, you're going to divide it by 4.

So, for example, if you take home $150,000 a year, that's $75 an hour when we divide it by the 2,000. Then you're going to divide it by 4, and that's your buy-back rate. So in this example, your buy-back rate would be $19 an hour. That means if you can hire someone at $19 an hour to do delegation tasks, it's profitable. You're not just trading dollars; you're creating margin in the business.

Now, I know probably what you're thinking. "Melissa, no one good works for $19 an hour." And yes, depending on your market, that may be true locally. But this is where creativity matters. Many of my clients use overseas virtual assistants or agencies that specialize in law firm support. The key isn't the exact number; it's that you're thinking through the math and making sure the hire adds leverage and margin instead of just breaking even.

One more note here. When delegation hires don't work out, 9 times out of 10, the issue isn't the person. It's that the firm didn't properly train or onboard them. Sometimes it's the person, but you really need to look in the mirror when something's not working out. If you want leverage, you have to invest the time up front to teach them how to set you up for success.

I can't emphasize this enough. Start with delegation hires before you hire producers. Too many owners leap to hire attorneys while they're still doing some data entry, or they're doing, you know, managing their own calendar, managing their own inbox. They're scanning documents. They are, they're doing admin tasks.

That is a backward approach. It feels easiest just to hire a lawyer who's been trained to lawyer, but it keeps you in the weeds, and it prevents you from operating at the level that your firm needs from you. When you free yourself from admin work, you gain the space to think, to plan, and to lead. You're not just more productive; you're calmer. And when you eventually do bring on a new lawyer or paralegal, they're stepping into an environment that's organized instead of chaotic.

Okay, now let's talk about producers and producer multiple. There are people whose work directly generates revenue: attorneys, paralegals, sometimes legal assistants. And the key metric here is the producer multiple. The producer multiple, you calculate that by taking the revenue generated by the producer, and you divide that by the all-in cost of the producer. What do I mean by all-in? All-in means salary, benefits, bonuses, employer taxes, everything the firm pays to employ that person or to have that person in your firm. It's the money that's poured into the person.

A healthy multiple, when you do the equation I just shared, is anywhere between 3x and 5x. Now, 3x is the floor. It's the bare minimum. I often tell people 4x really should be the target because not everything's always going to go perfectly. You may find yourself for whatever reason being in a little bit of a slower spot, and if that's true and you have some months that dip, then maybe it falls to a 3x. Okay, and then you can get it back up to 4x. If you're already at the floor, when something happens that you weren't planning for, it makes it very difficult to create a sense of normal. Everything feels squeezed and tight and stressful. 5x is excellent if your market supports it. It really depends on where you are, what your rates are, et cetera. 5x isn't bad. It can be great, but it depends on your set of circumstances if that's something that is reasonable for for your firm.

Now, here's why this matters and producer multiple matters. Producer revenue does not just cover their salary; it needs to cover the entire business. It contributes to covering the entire business. So, imagine you have a business, forget a law firm for a second. You have a business where money comes through the door. Okay, that money coming through the door, that's the only money coming in, it pays for everything in the business. And that's healthy. That's the way that that should go. So, when your producers do work and your firm gets paid for that work, it can't just cover them. It has to cover and make sure that it's covering well enough that the business is healthy.

So it covers overhead for the entire firm. The only money coming into your firm is what the producers generate, and if that money is not at least three times the cost of the people who are pushing out that work, you will constantly feel squeezed. If you pay an attorney $150,000 all-in cost and they generate $450,000 for the firm through the work that they're doing, that's a 3x. Fine, but it's also the floor. It's not necessarily what you want to shoot for, so you might want to consider looking at that and seeing if you're happy with that.

Now, if you don't track revenue per individual producer, a lot of flat fee firms, for example, they don't. They have an attorney and a paralegal and maybe a legal assistant, and, you know, together they push out the work. Okay. If you don't track per individual, it's not a problem. Then just calculate it as a group. Total firm revenue, the money that's coming in, divided by the all-in cost for the producers that pushed out that work. It's not as precise per individual. You can't see that level, but it gives you a clear picture if your producer multiple for the firm is actually healthy.

Now, we've been talking about attorneys, but this goes for paralegals and legal assistants as well. If they are doing what you would consider billable work, they are a producer, whether it's your flat fee or hourly or contingency. It doesn't matter. If they are doing billable work, they are considered a producer in your firm.

Let's say you have a producer that is a paralegal, for example, and half of their job is to work on the legal matters and files, and then half of their job is to do admin or intake-related tasks. Okay, so then in that case, when you are looking at the all-in cost for the producers, you only want to use 50% of that person's all-in cost because only half of her job is really supposed to be producing.

So, I'm hoping this provides a guide. I don't want to give you guys advice that's going to blow out some numbers and make you think it's unhealthy. You really want to do a good job with this. Now, if you have someone in your firm that is, you know, 90% of their job is a producer, meaning they work 8 hours a day and 6 hours are billable, that is a, that's a straight-up producer. So you don't want to break anything up. It's not dividing the hours up and deciding what percentage. It's really just looking at the role and what they're hired for and what their set of responsibilities are for. And if half their job is not supposed to be on billable stuff, then it shouldn't count towards the producer all-in cost.

Okay, so far, we have covered delegation and getting the lowest-level tasks, hiring from the bottom up instead of hiring expensive hires to take on some more higher-skill work first. So when you do that, things are healthier automatically. You're building in the right way. You are hiring to buy back your time, not hiring to fill a role in the firm. The second thing we covered was producer multiples. Hopefully, you got some clarity there on how you can look at your own situation and see if your set of circumstances is actually healthy right now.

And then the thing we're heading into now is net cases. This is another signal to watch for: net cases. So here's how it works. Pick a time frame, say, 6 months. You want to subtract the cases that closed or files that are complete from the cases that were opened in that same time period. That's your net case growth.

If you consistently see positive net cases month over month or stretch over stretch, that's a strong indicator of and can be a strong indicator to tell you when it may be time to hire. So what net cases is telling you is the pool of cases that your firm is handling, is it growing, is it plateauing, or is it shrinking? Now, this is why it's an indicator for growth because you may feel really busy, but when you look at your net cases, if you haven't grown in terms of your case load that the firm is handling, your active cases, then there's not a reason to hire. You may need to address some things. It may not feel good inside of the firm.

So you have to look at, "Where do we need to create efficiencies? Why are we feeling busier even though we're not handling more cases?" There can be different reasons for that. If you're family law, it could be because you're getting higher conflict cases in, and the percentage of those is increasing. It depends. You have to look at what is going on in your firm.

But this number can cause or spark really good discussion around strategy for yourself. And once you see that this is growing by a certain amount, and you get to decide what that is, then it will allow you to say, "Okay, at that point, we will have enough new cases in the firm that we can bring someone in, they'll have some things to handle, and they'll have more to get them up to speed." Now, that threshold for that criminal firm, it looked different for him than it would for an estate planning firm. But the principle is the same. You watch the trend, not the spike. And of course, negative net cases are equally telling. So if your caseload is shrinking month over month, that's not a time to hire. Again, it's a time to investigate what is going on. So this is just another indicator you can use when you're trying to decide when to hire.

Okay, we have talked about hiring from the bottom up. We've talked about producer multiples. We've talked about net cases. Now, we're going to talk about production models. This is the last tool I want to give you, and this concept of production models. Think of your firm in units. One attorney supported by paralegals and legal assistants to get the work out. Now, the ratio matters because it ensures that everyone is working at their highest level.

I often see something like 1 attorney to 1.5 paralegals to 0.5 legal assistants. And that is the right ratio so that work is distributed properly. So that ratio supports a sustainable case load without attorneys doing paralegal work or paralegals doing admin work or legal assistant work. And that's critical because it's expensive to pay attorney rates for paralegal tasks. I see this happening all the time.

You don't have to get it perfect, but get really honest. Where in your firm are the attorneys or you spending time on things a paralegal could do? Where are the paralegals spending time on things that legal assistants could do or an administrative assistant could do? The goal is maximum leverage. Everyone in their lane, performing at the level that makes the most sense for their role. And once you've mapped your production model, you get that ratio right, you can check it against your producer multiple and your net case trends. And suddenly, the decision to hire becomes much clearer.

All right, so let's do a recap. You're going to do a task brain dump and sort into delegation tasks versus replacement tasks. You're going to calculate your buy-back rate, and you're going to hire for the delegation tasks first. Do not skip this step. Don't jump and hire for something higher level. Do this the right way.

Then you're going to use the producer multiple, 3 to 5x, to ensure that revenue from the producers is healthy and that the firm is healthy because of what's being brought in against what is being paid out to them. You're going to track net cases and notice trends that indicate when it's safe to hire. And lastly, you're going to build production models so that everyone works at their highest level, to their highest capacity, to fulfill their own potential in the role that they're in.

When you let the data guide you instead of your gut or your brain comes up, thinks it's a really good idea and doesn't check it against some of these things, you end up creating clarity and confidence in your hiring decisions. You reduce stress. You protect your profitability, which is protecting the health of your business. And you set your team up for total success.

If you want to run the producer multiple for your own firm, we've built a calculator that you can use. The link is in the show notes. You can plug in your firm's revenue and approximate tax rate, employer tax rate, and producer costs. It'll let you do that. And it's going to spit out your multiple instantly for your whole firm, not by producer, but it'll do it for your firm as a whole.

If you'd like to talk about where your firm is and whether support from Velocity Work could help, you can book a call through my site. It's no pressure. The conversation, it's just a chance to look at what's happening to see what could make the biggest difference for you and for your firm. Thanks for being here. I'll see you here next week.

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.