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Episode 148: The Proper Balance Between Billable vs. Nonbillable Hours

by Heather Moulder | Life & Law Podcast

Ever struggle with how to properly balance between billable vs. nonbillable hours? You need to bill as much as possible so that you can meet your requirements and collect enough. But you can’t NOT do nonbillable work (for a variety of reasons).

  • How do you determine where to focus your nonbillable time?
  • When does it make most sense to prioritize nonbillable work over billable work (and does that ever make sense)?
  • What IS the best percentage balance between billable vs. nonbillable hours?

The answers to all of these questions (and more) are inside of today’s episode.

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Episode Transcript

[00:00:48] Hey there, everybody. This is Heather Moulder, host of the Life & Law podcast. Welcome to the show today. Today we have an interesting topic because this comes up a lot with clients, and that is the proper balance between billable vs. nonbillable hours.

How much time should you actually be spending on billable versus nonbillable hours?

And what are the various nonbillable categories?

What actually encompasses them, and how can you ensure you’re getting the right balance for you (i.e., diminish the non billable work that you don’t need to be doing or don’t want to be doing for whatever reason, so that you have more time for the billable)?

But also, how can you find ways to enjoy that non billable work, too?

Because, let’s be honest…Practicing law, being a lawyer, running a good practice or firm, involves more than just billable work. There is nonbillable work that needs to be done. So let’s just dive right in.

Let’s start with what I mean by billable vs. nonbillable hours.

Like what it is. Obviously, billable work is the work you bill to your clients, right? The work that actually gets paid for non billable work is all the other stuff you do that you cannot bill to clients.

[00:02:03] And there are five main categories. So let’s go through what that is really quickly so that we’re clear on what these are. Because as you progress throughout your career within private practice, the amount of time you’re going to spend on these categories is going to change. Okay?

Category 1: Professional development – your own individual professional development.

This would include CLE, working on skill and strength development of your own, and then also time spent to learn things that you need to learn in order to practice, in order to do the projects that you need to get done.

So I remember early in my career, there were times that I was told, okay, I need you to go research X, Y and Z, and I need a memo on it within a certain time period. And sometimes these were on very complicated issues. And not all of the research that I did, not all of the work that I did ended up billed, ended up billable, but all of this work that I did was helpful to me in learning issues that I needed to know in order to be good in the area that I had chosen. And also sometimes when I started drafting more documentation as I moved up, I had to really learn, okay, what are these provisions really here for? What does this mean? What all does this protect against? Sometimes I had to learn more about clients as I was drafting documentation around. I need to understand their business more so that I can appropriately document this. Now, much of that was billable, but sometimes it wasn’t. There was information I needed, knowledge I needed that was going to help me become a much better lawyer. That wasn’t billable, but I needed to do it for myself. I needed to do it not just for that client in that moment, but for me, my own professional knowledge and skill development, and knowledge development and learning. So that is what would go under the category of your own individual professional development.

And obviously, everybody needs some matter of time devoted to these things. First and foremost, we need CLE.

[00:04:27] And so there’s always that. But I think no matter what level you’re at, you have some level of professional development, learning and knowledge and skill development that you’re always working on. So that’s category number one.

Category 2 is the dreaded business development.

And I say dreaded because a lot of people, for whatever reason, seem to dread this because they think it’s going to be a huge time suck. And it can be, but it doesn’t have to be. Let me just tell you that right now. Okay?

And they also, most lawyers think, well, I’m not trained as a marketer. Well, I’m not a natural salesperson. Well, I’m more introverted. And so we dread this. And I will just say really quickly, none of those things have to be true. You can be an incredibly good networker and business developer as an introvert, and you can even enjoy it. And you don’t have to be trained as a marketer or salesman to actually be good at it. These are all skills that you can develop, and I highly recommend you develop, because if you are going to be a private practice attorney, you must learn to develop business over the long haul.

[00:05:35] Look, you could choose to be a service partner that still works in some places, but that works less and less and less. And I will tell you, if you want more control over your practice, over your career, over your day to day, the absolute best way to do it is to develop your own book of business with clients you actually enjoy working with. So that’s my spiel for business development. But obviously it is not billable. The work that we do for our business development. And that includes networking, that includes marketing activities such as writing an article, preparing and giving a speech, going to conferences. It includes posting on LinkedIn, if that’s what you do, or other social media avenues, depending on the type of law that you practice. I know some that actually post and get clients through Instagram, for instance. It very much depends on your practice, but all of those things are necessary to grow your book. All of those things are necessary to develop deeper relationships with people, and you got to do it.

The third nonbillable category is pro bono work.

So this is going to somewhat depend on the firm you’re in and whether you’re solo or not, and what the requirements are versus what you also feel you want and need to do for the profession.

[00:06:53] Most law firms have some requirement for pro bono work per year. So if you are in a law firm, and especially if you are an associate, a lot of that goes away. The requirement goes away for a lot of us when we become partners. Not everywhere, though, but most of us, when we are associates, we have some level of pro bono work that we must do. You’re going to want to figure out what that is, because if it’s required, it’s required, or if it’s even recommended, I highly recommend it. Because what that means is they do place importance on it when it comes to how they evaluate you moving up.

Okay, so pro bono work is obviously going to be another category that isn’t billable because it’s pro bono. But I will say this. Sometimes it counts towards your hours, or up to a certain amount counts towards your hours. And that is the case primarily for associates in bigger law firms and even medium sized law firms. There is a requirement. You must do a certain number of hours and up to a certain number of hours, you actually get billable credit for it, even though it’s not collecting. So be aware of that, but also be aware of what that limitation is.

If there’s a limit, usually there is on, let’s say, up to 150 hours per year, a pro bono work is counted towards your billables. You need to know what that is, because if you are already in a pro bono, let’s say litigation that has 200 hours and 150 is your max. It’s not that you’re going to bail because you can’t, you’ve already taken it on, but maybe you don’t take on another pro bono piece. Right. But if you’ve done something and it’s settled and you only got 50 hours in, well, maybe that means you need to take something else on. So that’s the third category of non billable work.

The fourth category is leadership, mentoring.

I kind of lump these together. So, firm leadership. Maybe you are a practice group manager. Maybe you are a manager of an office. Maybe you are on a committee, some type of a committee within the firm. Maybe you are officially set as a mentor for one or more other attorneys. That is non billable work, but yet it is hours that you put forth towards the firm, towards the development of others in some way, shape or form.

And it is often a requirement, or maybe not a written requirement, but one of those unwritten rules that I’ve talked about before, that you do this type of a thing. If you want to move up the proverbial law firm career ladder (i.e., be promoted to partner, be promoted to equity partner). If there’s a several track system, you’re going to have to partake in some sort of firm leadership, mentoring type of capacity. And so that’s also important for you. If you are in a law firm and you are a mid level above associate and you’re wanting to be promoted, you want to make sure you understand what is expected of you in this realm because this can take quite a bit of your hours. Right. And you want to ensure you’re able to fit this in and still get your work done, but you want to do it. Okay.

So firm leadership and mentoring would be the fourth category.

And then finally administrative hours.

So administrative is all that other stuff like accounting, billing, intake, opening files, engagement letters, logging your time, entering your time, that kind of a thing. This is all the administrative stuff that you must do to keep your practice going. And it might also include some administrative tasks that would be related to maybe the pro bono, the firm leadership and mentoring, that type of a thing. That doesn’t really fall under the actual pro bono work, doesn’t really fall under the business development work, but it’s administrative in nature. It’s tracking, it’s expenses, it’s that kind of a thing.

I put all of that under the administrative, and the reason I take those out of those categories and put it under the administrative is for this reason, most of the administrative work can be done by somebody, not you. Okay? Now, obviously, that’s not the case if you’re a solo attorney and you don’t have any help whatsoever on your bookkeeping side, on your accounting side, maybe you don’t have a VA. But even solo attorneys, many of the solo attorneys I know hire VA’s to help them with this type of stuff. So that’s just FYI.

But if you are in a firm, there is usually some sort of support staff around you who can help with the administrative piece. All right? And if you’re really trying to reduce the number of non billable hours that you do because you need to up your billable game, this is the first area that I highly recommend you tackle for how to reduce it. And there are a couple of ways in which you can reduce the administrative work that you do, and we’re going to get into that in a couple of minutes. Okay?

So those are your five types of non billable work, your individual professional development, which you need to be doing. And it’s probably going to be a lot more upfront. And as you grow in your practice, you might have less and less, but there is a certain amount that you’re always going to need for CLE purposes. There’s going to be business development, which may not be a whole lot early on, but is going to grow as you grow. And I will note this, you’re going to want to do some business development from the get go as far as, like, networking goes. That’s always going to help you, and it will help develop your networking skills. So even if you are a first year associate in a really big law firm, I highly recommend you devote at least some time to your business development starting now. Okay.

[00:12:43] And then there’s going to be some level of pro bono work. And then as you grow in your practice, this is usually not there your first couple of years. But by the time you’re a mid level associate and as you get further along into partnership, you’re going to have firm leadership, you’re going to have mentoring, you’re going to have committees, you’re going to have that kind of a thing. And then there’s the administrative. So those are your five main categories.

Now the question becomes,..

How much time should you actually be spending with your billable vs. nonbillable hours?

Here is what I would tell you.

[00:13:18] You want to probably have somewhere between 10% – 25% of your time doing non billable work. Now, that’s a pretty big range, and some of you may never get to the 25%. It’s going to very much depend on who you are, what your role is, where you are.

So a senior partner who is a practice group head, a member of a committee, the executive committee, and does a lot of pro bono work, is probably going to have closer to that 25%, maybe even more. Now, this is dependent, by the way, on your firm. Some firms want their senior leadership to be billing attorneys. Some don’t want them to bill hardly anything at all. And so some of this is going to depend on, again, the firm you’re in, the role that you play.

But for most people who are in those type of positions, somewhere between 10% to 20%, up to 25%, of your time can be devoted to nonbillable work. And you really need at least 10% – 15% of your time devoted to nonbillable hours. Because, again, there are categories that you need to be doing that are nonbillable. Like the pro bono, like the business development, like your own professional development, like some type of mentoring and firm leadership as you move up the ladder. Okay?

The Right Balance of Billable vs. Nonbillable Hours for Junior Associates

[00:14:42] Now, what I would say is junior attorneys, very junior, like your first couple of years, probably about 10% of your time would be spent on non billable work. And it would primarily be in that individual professional development category with a little bit of networking and business development and a little bit of pro bono if that’s what’s required.

And then obviously, there’s always going to be administrative work for all of us. But we’re going to talk again later about how to really reduce that so that the majority of your nonbillable work is on the stuff that is actually good for you, good for your own professional development, good for your own business development over time. Okay?

Billable vs. Nonbillable Hours Balancing For Mid-Level and Senior-Level Associates

For mid level to senior associates, you want to get up above that 15%. 15% is a general rule of thumb. You might even get up to 20% depending on what it is and depending on what the factors are within your firm for making partner. Some places place more of a preeminence on these types of things. Some do not.

So again, I said earlier, what are the unwritten rules and what are the written rules? Every firm has written rules that they expect you to meet in order to be considered for partnership. Okay? Everybody does. Everybody also has unwritten rules. And it’s up to you to figure out what those unwritten rules are. And so you don’t want to go way over. If about 15% is a right number for you and your firm, you don’t want to be at 25%. It’s not going to help you, and it may actually hurt you. Okay?

So you’re going to want to understand that. And I talked about this in another podcast around the written rules versus the unwritten rules and what to expect and how to make partner and all that type of thing. So I will find that particular podcast and put it in the show notes for you so that you can go listen to it. If you are somebody who’s starting to really think about, okay, what do I need to be doing? I need to get my ducks in a row, that kind of a thing. And by the way, it is never too early. Maybe your first year, maybe even your second year, you don’t need to worry too much. But by your third year, you really do. You need to be paying attention to these things and doing more. You are kind of out of that early phase of I have no idea what I’m doing. You’re starting to get a little more confident and comfortable in practicing law. That’s when you need to start paying attention to more of these things.

And so go back and listen to that episode if you haven’t. All right.

The Proper Balance of Billable vs. Nonbillable Hours As You Progress Towards and Make Partner

And then if you are – the more senior you are, like senior associate to junior partner on up – just note that you’re going to have to start adding in more business development as you go. And potentially more internal firm mentoring, more leadership type stuff, committees, that type of a thing. So those percentages go up as that comes into play.

How To Maximize Your Billable vs. Nonbillable Hours

[00:17:34] Now, how do you figure out how to maximize the effectiveness of your nonbillable time and where you might be able to decrease the amount of time you’re spending on things that maybe you don’t need to be doing, like all that administrative stuff that’s probably taking up more time than you realize and probably crowding out some time for billable work and then also spending more time on the non billable that you would prefer to be doing? How do you figure that out?

So here’s what I’d like you to do.

First off, start paying more attention.

Start taking an inventory of your non billable time. You track your time already. Pay attention to your non billable and ensure you’re thinking through what category does this go into? And start tracking it yourself.

[00:18:26] Track the pro bono work that you do. Track the networking activities that you do. Track the marketing activities that you do. If you help, even if you’re an associate and you’re asked to help with an article, right, that’s written and somebody else’s name is put on it, you need to be tracking that.

[00:18:43] Track the time you’re spending in each category. And that includes, and this is the hardest one of all, track the administrative. Pay attention and write down, like, how many hours do I spend every week or month to bill my time?

[00:18:59] How much time am I spending reviewing bills? How much time am I spending on intake matters?

[00:19:06] Where am I spending my time on non billable work? And how many hours is it on average, per week, per month, per quarter? You can’t do this unless you’re jotting it down. So start there, and after you do it for a couple of months, you’re going to be able to look back and really analyze, okay, this is where my time is going on, non billable.

Next, compare the time you’re actually spending on nonbillable work to your goals + vision.

And that’s when you can start tackling. Okay, what do I want to do about this? Where can I reduce some of this that maybe I don’t need to be spending so much time on? Okay, now when you do that, I want you to take a look at each kind of category and ask, and actually not even just each category, so you look at each category, but you start thinking through, okay, what are the activities? What actually was going on here?

Maybe you attended a network event, a networking event. Okay, so what was the goal that I was furthering through this activity? There should be a goal for practically every activity that you do that’s non billable, even the administrative stuff. Right. What’s the point of it? What am I furthering here? How does it advance my larger goals and vision for, I want my practice, my career to be in the long term.

[00:20:21] Right. So, for example, let’s say pro bono work, if it’s required that you do 150 hours of pro bono work per year, but you’ve got 350, perhaps you realize, okay, I need to stop taking on so much unless it’s something that you feel really strongly about and it’s more values based and it’s not taking away from other areas that are just as important to you. You’ve got to be able to balance that, right? Perhaps you took on extra pro bono work because you’re a litigator who’s trying to make partner, and there’s a specific type of experience that you need.

[00:21:02] And that case that’s pro bono actually gave you that experience that is actually furthering your professional goals in other ways, not just through doing the pro bono work. Right. So you want to look at it from a bigger picture and say, okay, for each of these things, what goal is it furthering? How is it advancing me? How is it advancing my overall professional development? How is it advancing me? Being able to attain the goals I’ve set for myself, short and long term.

[00:21:33] Now, some of these things are not really going to be helping you a whole lot with your goals.

Pay attention to the ROI on any nonbillable activity.

[00:21:38] Some of these things might surprise you. So let’s go back to that example of that networking event. Perhaps you went to a networking event because another colleague asked you to and they just needed bodies there. But it made zero sense for you to be there because none of your potential clients are going to be there. Perhaps you could cut back on going to those types of things. That might be an area where you need to set a boundary and say no.

Maybe you took on a speaking engagement and you spent an inordinate amount of time to prepare the right speech. You went back and forth, it took a lot of your time, and it ended up giving you nothing. Well, that’s something to pay attention to, because speaking, just to speak, isn’t necessarily a good use of your time. So look at the payoff. What is the payoff of these activities? They’re not always monetary and they’re not always immediate. So you look at the short term and the long term. How does this further my goals? How does this further my own professional knowledge, skills development? How does this further me in some way, shape or form? How does this further the firm? And is that a good enough reason? Sometimes it is.

[00:22:49] Be honest about what that real payoff is so that you can truly identify where you need to cut back and where you might need to add in. This is also the case, by the way, for when we are asked to serve on committees. So we are asked to do certain things that might look good, but may not actually further us.

[00:23:14] Right. Something that the firm wants. Now, sometimes we say yes because the firm wants us to do it, but there can be a limit on that.

[00:23:24] And I will note that a lot of women get this and a lot of people of color get this. And there are particular people who firms tend to reach out to more. And you do not need to feel obligated to always say yes. Make sure the things you are saying yes to make some sense for you as well. Be a little picky about these things. You want an actual ROI in the time that you invest in these things. What’s your ROI?

Identify where to invoke higher standards and boundaries.

All right, so once you’ve done that, you’re going to notice that there are things that you can say no to. More often, there are things that you’re going to want to say no. This is where you get to set boundaries and standards for yourself. And I went into the difference between a standard and a boundary in a recent podcast.

Just as a quick recap, standards are your own internal rules for what you will or will not do for how you will behave. Boundaries are the rules you set for other people and how they are to behave around you and the rules they must follow. Otherwise there are consequences for them. Okay? So doing this is going to show you some areas where you might want to raise your own standards and where you need to set some boundaries.

So go back and listen to that episode as well if you need a little bit of help in how to do it and what to do, but pay attention, because that’s what this whole inventorying is for. I don’t want you to go through this process of logging your time paying attention and then go, okay, that’s interesting, and do nothing with it, because what was the point then, right? You’ve done nothing. And the whole purpose for taking this time to log, to pay attention, to really review, is to figure out where do I want to make changes and what changes can I make to increase the right kind of non billable work and decrease the wrong kind of non billable work.

Identify Your Resources

[00:25:22] And then finally, and this is where the administrative stuff comes into play, you’ve got to ask, okay, what can help me do less of this? What are my resources?

[00:25:34] And resources can be technology.

[00:25:37] It can be better processes and systems that you put into place that helps save you time, energy, and it can also be people, right? How can you delegate more to other people? So how could your assistant help? How could a paralegal help? How could other associates help people that you manage? If you’re a solo attorney, is it time to hire a bookkeeper, an accountant, a part time VA or paralegal that will free up your time so that you can do more of your billable work and the non billable that actually will bring in work.

Create Systems + Processes

[00:26:13] Also, as you’re looking at this, I mentioned systems, processes. How can I systematize things? There’s all kinds of areas where a system or a process will save you time if you’re the one doing it, but also makes it easier to delegate to other people and you still get the result you want out of their work, out of what they do. So where do I need better systems and processes? This is going to tell you.

[00:26:41] So, for example, I had a client who was spending an inordinate amount of time on putting together engagement letters and the emails that went out with them. And it was just a waste of his time that he was a solo attorney, and he felt like he had no other way. Well, we realized it would be cheaper for him in the long term to get a part time paralegal.

[00:27:05] And she ended up taking over, opening all new files, getting the engagement letters out and the emails out, getting people set up in the system. It was much more cost effective for him and it freed up more of his time to bring in more clients. So where can you utilize other people, put systems into place and also utilize technology that is available to you. Another area that can be delegated that oftentimes I find a lot of lawyers don’t do enough of is marketing activities. Now, yes, you need to be the one to determine the content. If you’re speaking, you need to be the one to prep a lot of it. But if you have a marketing department, they can do some research for you. They might be able to identify the best conferences for you to apply to and come up with some good topics. Figure out what topics have and have not been addressed over the last couple of years to give you some good ideas to get started with. They can do some basic research for you.

[00:28:10] They can help make things prettier. If you put together your speech, they can put it into slides and make it look good. If you need slides, there’s a lot of things they can do for you. So do not forget about the people resources that you have available to you. If you are in a mid to large firm, how can you delegate, get as much of the administrative off of your plate and even some of that business development, marketing. Another tip just that comes to mind.

[00:28:46] Let’s say you’re a great networker and you’re really good at collecting business cards from people. And if you do it right, and hopefully you do, you note things about people after you’ve met them on their card so you can remember who they are, right? Well, you don’t have to be the one that inserts all of that into your contact list. You can give that to an assistant, you can give that to somebody else to get all that information in there for you. You might have set up some sort of spreadsheet where you want to reach out and maybe you star the people that you know you want to reach out to and put up on your follow up list. Well, somebody else can get all that information in there.

[00:29:27] You do not have to be the one to do everything. Figure out the resources and people and tech that you have that can help you put together the right process or system to help support that to happen in the way that you want so that others will know what to do and how to do it and how to deliver the right information back to you and it’s going to help you a lot because here’s the deal, y’all. Yes, you got to do billable work. That’s obvious, right? But there’s a certain amount of non billable you also need to be doing. But you want to ensure that the non billable time you are spending is the most effective non billable time for you, your practice, your career. You do not want to be wasting your time.

[00:30:13] You do not want to be spending a ton of time on things that really aren’t giving you an ROI and are preventing you from doing the things that will okay, so that is it for today’s conversation. Hopefully it helped you really think through some of the non billable activities you are doing, how to save a little time on some of them, which areas you might need to focus on a little bit more.

[00:30:37] We will be back next week with another guest. Bye for now.