The Revenue Flow

I was working with a firm owner recently on whether they could afford to hire another lawyer. It's a question I get a lot, and I wrote about how to work through it a few weeks back.

What struck me this time was what they could and couldn't see. They could tell me what the firm had billed every month for the past two years. What they couldn't tell me was what was coming in over the next three months, or where it would come from.

And that's the number the hiring decision actually depends on.

Upstream

Think of a river. Whatever happens upstream reaches you downstream eventually. It just takes time to arrive, and the further upstream it starts, the longer the wait.

Your billings are downstream. They tell you exactly what has already arrived. Your business development is upstream, and what you did there months ago is only now reaching your invoices. If all you watch is downstream, you only notice the flow has dropped once it already has.

To see what's coming, you have to look upstream.

The Revenue Flow

In a specialist law firm, work reaches your billings through four phases, and it only runs in one direction.

Phase one, BD activity. The events, the content, the coffees, the relationships with accountants, brokers, banks and other firms.

Phase two, referrals. Some of that activity turns into people who send you work.

Phase three, enquiries. Referrals arrive as enquiries, and some of those become engaged clients.

Phase four, billable time. The work gets done, recorded and billed.

Each phase filters the one before it. BD produces referrals, which produce enquiries, which produce engaged matters. Each handoff also has a lag. The revenue you bill this month often started as a conversation six months ago.

So a soft month is never really about this month. Somewhere upstream, one of those handoffs slowed down, and if you can see all four phases, you can see which one.

What we built

This client already had phases one and four covered. Their BD initiatives were tracked in Notion, which is a flexible online workspace the whole team can open, and their time recording and accounting software covered the end. The gap was the middle two, which is where most firms have nothing at all.

So we built two simple boards in Notion.

The first is a referral partner board. One card per referral relationship, each showing the BD we've done with them, how many leads we expect from them over the next three months, what a typical matter from them is worth, and how confident we are the work will arrive, rated low, medium or high.

The second is a sales pipeline. Each enquiry sits in a column: enquiry, phone screening, meeting, engaged. Each one carries its expected value, the month we expect the revenue to land, and the referral partner it came from.

That last link matters most. Because every enquiry is tied back to a referral partner, you can see over time which relationships produce paying work, and which ones only produce meetings.

The rules that make it work

The boards are simple. What makes them useful is a handful of rules.

One. Put expected next to actual. A relationship you've spent a year on that has sent nothing should be obvious at a glance, without anyone running a report.

Two. Confidence is earned. A partner moves from low to high when a referral actually lands, not when a meeting goes well.

Three. Keep the ones you lose. Mark an enquiry as closed when it doesn't go ahead, with a short reason, rather than deleting it. That record is the only way you'll ever know your real conversion rate.

Four. Hand over at the right moment. Once time is being recorded against a matter, it leaves the pipeline. Your work in progress is already counting it, and leaving it in counts the same revenue twice.

Five. Update it as you go, not when you remember. A tracker that depends on someone having a spare thought goes stale within a month.

Where to start

You don't need Notion for any of this. A spreadsheet is fine to begin with.

Start with phase three on its own. List every live enquiry, what it's worth, and the month you expect it to become revenue. That alone will tell you more about next quarter than your bank balance does. Add the referral partners once the habit sticks.

Then when the hiring question comes up, you're not answering it on how busy you felt last week. You're answering it on what you can see coming from upstream.

If you want to think through what your own revenue flow looks like, or where it is slowing down, grab fifteen minutes with me on Zoom. Click here to book a 15min chat.

More next Tuesday,

Gordon