If I told you that I was a running a business that sold sunglasses—like the pair worn by Tali—but that I had no idea how much it cost to manufacture those sunglasses, what would you think? Probably that I am crazy, and there is no way that my business would be successful. How could I possibly make any profit if I don’t understand how much it costs to manufacture what I’m selling?
Now imagine a different scenario: I’m running a law firm that provides legal services on a flat-fee basis, but I don’t track my time, so I have no idea how much it costs to actually deliver those legal services. Would you still think I am crazy? Probably not, because this a very common scenario—people associate the need to track time with the billable hour. They’ll tell themselves “I don’t bill by the hour, so I don’t have to track my time.” Let me be blunt here: this is wrong, wholly incorrect, and there’s no way around it.
If you’re a lawyer, accountant, consultant or anyone delivering professional services, your time is money. You need to track where you spend it.
Here are three reasons why.
Reason #1 – To understand your margins
In order to run a successful business, you need to understand your unit economics, or the revenue, cost of goods sold, and related margin for one “unit” of whatever you’re selling. If you’re selling sunglasses, this would mean you understand the revenue generated on each pair, the cost of goods sold (raw materials, shipping cost, etc.) and the margin. If you’re selling legal or professional services, this means you understand how much revenue you generate per case and how much time it takes for you to deliver legal services on each case. (Need help understanding law firm profitability? Download our guide for a more detailed walkthrough.)
The only way to truly understand how much time it takes for you to deliver your professional services is to contemporaneously track your time, meaning that you record the time entry as you’re completing the task.
Tali leverages voice technology like Amazon Alexa to make this incredibly easy and frictionless. You may be saying “I don’t need to track my time, I’ll just look back and estimate how much time each case takes me. That’ll be accurate, right?” WRONG, WRONG, WRONG.
As time goes by, remembering how much time it took to complete a task becomes more and more of a guess, and it’s something that you will always underestimate. Why? Because you always think you’re better or more efficient at something that you actually are. In fact, attorneys can lose up to 50% of their billable time by not entering it on a regular basis as they go!
Reason #2 – To drive revenue
Once you actually have a sense for what your existing margins look like, you can use that data to adjust your pricing and revenue model to drive additional revenue. Again, the only way you’ll be able to do this is if you track your time as you go.
Here’s an example:
Let’s say you’re charging a flat fee of $3,000 on certain cases, but spend 50 hours or $2,500 (e.g., 50 hours x $50) on each case, you’re only generating a 17% gross margin on each case. That doesn’t leave a lot of profit to pay for other fixed costs associated with running a law firm, like rent, technology, etc. So what should you do? You have two options: (1) increase your price, or (2) lower your cost. If you believe that 50 hours is a reasonable amount of time to spend on these types of cases, then the only option left is to increase your flat fee to, say, $4,000 or $5,000. (For more info, check out our post on pricing your legal services.)
Reason #3 – To better manage your team
Whether you’re a team of 1 or 100, time is a precious resource, so you should understand where that time is being spent. If you’re managing yourself, tracking your time is critical to delivering your professional services on time and on budget. If you’re managing a team, having team members track their time contemporaneously can provide you with the real-time insights you need to manage your team more effectively.
Here’s another example:
Let’s say you have a new associate attorney on your team that is working on several flat-fee immigration cases. If you know that you can spend 50 hours on each case to achieve your target profit margin, then tracking time contemporaneously will allow you to manage the project budget in real time. If you see this new associate attorney has spent 20 hours on the file but hasn’t delivered anything substantive yet, you can intervene appropriately to keep things on track. Without this insight, your projects could run over budget and your profit margins might suffer.
So there you have it: the painful reality that every lawyer, consultant, accountant, and freelancer should be tracking their time contemporaneously in order to maximize the financial performance of their business. This reality doesn’t need to be painful though. At Tali, we’re eliminating the friction from the timekeeping process, making time tracking easy, seamless, and, dare I say, fun?
And the proof is in the pudding: with Tali, users have reported as much as a 40% increase in revenue and saved 150 hours per year.
We believe that every timekeeper should have access to a virtual timekeeping assistant who will log and track their time. We’re on a mission to make the time-entry form a thing of the past, so that you can capture more of what you do and do more of what you love.