Revenue Per Employee with Tyson Mutrux

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Are you a firm owner who is looking for a way to calculate the success of your firm? In this insightful episode, host Tyson Mutrux delves into the crucial metric of revenue per employee within law firms.

Revenue per employee can be measured in a few different ways. Some include dividing the revenue of a business by the profit generating employees. It can also be calculated by dividing revenue by all employees. Either way you decide to do it will determine if your firm is understaffed or overstaffed. Tyson shares the importance of having a balanced revenue because if not, it means the success of your firm relies on a select few great employees.

As firm owners, it is crucial to consider factors that can increase or decrease revenue. For example, if you spend a lot of money on marketing for the firm, you may see an increase in revenue because of that prioritization. This will eventually decrease after a few months, so be prepared to see a fluctuation of revenue.

Take a listen to learn more!

Episode Highlights:

• 00:23 The importance of revenue per employee for law firms
• 01:07 Different ways to calculate revenue per employee 
• 04:10 How various factors, such as marketing campaigns and other projects, can affect revenue per employee

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Transcripts: Revenue Per Employee with Tyson Mutrux

Tyson (00:03.662)
Hey, it's Tyson with another Bite Size Saturday episode. And this one should be quick, but it's a pretty valuable one. And I'm going to talk about revenue per employee. And you can go pretty deep with this one. I'm going to keep this one pretty basic for you. I'll give you some other ways you could use it as well. But before I get into that today, though, I do want to remind you, we are taking video submissions of your questions about…

starting and running a law firm. So whether you're starting the firm or in the trenches and you need a lifeline, go to MaximumLawyer .com forward slash ask and submit your questions. And what we'll do is we'll play those on the air and we'll answer your questions. We'll get those answered for you. But today I want to talk about a metric, its revenue per employee. We've not talked a lot about it on the podcast a ton, but it is a very…

metric that I think people should look at. And it's pretty simple. And you can look at this a few different ways. Some people look at this as revenue divided by all employees. You can also do it revenue divided by profit generating employees. And how you define profit generating, that's where it gets a little subjective. You could do it, what a lot of people do is the legal production.

side would be the profit generating. I think that's a little unfair if you don't include the marketing department because that's a big part of it as well is the profit generating. But the most basic way of doing it is revenue divided by all employees. And that's going to give you your revenue per employee. And what this allows you to do, it allows you to determine whether you are understaffed or you are overstaffed. Now I'm going to give you some sort of some targets.

for personal injury firms. This will somewhat apply to other firms, but you do need to figure out what's right for your particular firm. But I'd say on the bottom end, if it's 150, I think that's the very bottom you should be. You should be shooting more towards that 200. Some people say 150 to 175.

Tyson (02:27.662)
I would say you should be shooting for 200 or more. The reasoning why you might see some people say, well, you don't want it to be over 175, because that usually means that you're relying too much on one or two rock star employees, which if they leave, that can be pretty detrimental to you. And so I do understand the reasoning for that. But if you have great systems and you're using a lot of automation,

Nowadays, if you're incorporating artificial intelligence, you can definitely get to that 200 point or more. I wouldn't say fairly easily, but you definitely could. So play with that a little bit. I would say the very bottom should be 150. So the way that would work is if there's 200 or two of you and you're making 300 ,000 per employee, you are, you know, 300 ,000 divided by two. So you're making 150 per employee. You're at the bottom end. So you need to pick it up a little bit.

and maybe streamline some things. So that's a rough guide that you can use for yourself. Let me give you some more examples. You can do it by department, okay? You can do it by team. So revenue by team. So whatever revenue that team generates divided by the number of employees within that team, you can do it. So let's say revenue, let's say you have three, you're an injury firm, you've got three teams.

You can do total revenue divided by the three teams, okay? You could do it that way. You could do it by attorney. So revenue divided by attorney. You can do it a lot of different ways, like I said. So whatever metrics are most valuable to you, but at its most basic level, revenue divided by all your employees, it's gonna give you that revenue per employee, and that's gonna help you. And make sure I'm clear on revenue per attorney.

So you would go revenue divided by total number of attorneys in your firm. Okay. That's what you would do. And that's how you would come up with your revenue per attorney. But I want to make sure I'm clear about that. I'm not sure I was clear about that whenever I first said it. So I want to make sure I'm very, very clear about that. But it's a very good metric. It's going to allow you to determine, look at things. Okay. Where are we when it comes to revenue per employee? How are we doing on things? Are we overstaffed or are we understaffed? And so it's pretty helpful. Now,

Tyson (04:54.35)
you're also going to remember it might, let's say you're launching a big marketing campaign and you're going to spend a bunch of money and you expect to get great results or you're spending a bunch of money on some sort of building or another project and it's taking away a lot of time from your employees or whatever, you're in the process of a move and so your revenues might dip and…

When it comes to the marketing, I'm gonna get to that in a second, what I was meaning by that, but there's things that could affect this, okay? So you have to take that into consideration as well. But when it comes to marketing, let's say you spend a bunch of money on marketing and then you get this massive boost, right? You get this massive boost in revenue for a certain period, okay? That may be a short amount of time. So your revenue per employee might be fantastic for a short amount of time, but then it might dip after that. So you have to take into consideration all these different things. And…

Once you get a little bit more advanced, you can get to profit per employee. So that's another metric that you can dig a little bit deeper into. But again, things change with your firm. The numbers can depend on a variety of different things. So be very, very careful about that. But that's all I have for you today. Like I said, it's going be a short one, but it's a really valuable metric that I think everyone should be looking at. And if you want me to cover anything else on the podcast, I would love to hear from you. Shoot me a text 314 -501.

We get lots of great suggestions. I would love to hear some more from you, so shoot me a text. Until next week, remember that consistent action is the blueprint that turns your goals into reality. Take care, everybody.