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How to Use Financial Reports to Make Better Hiring Decisions
Hiring someone in your firm shouldn’t feel like a gamble.
But for many attorneys, it does.
You’re overwhelmed, client work is stacking up, and your calendar hasn’t had space for lunch in three weeks. So you start asking yourself, “Is it time to hire?”—but there’s no clear answer.
Hiring based on burnout is reactionary. Hiring based on numbers is strategic.
In this post, I’ll show you how to use your law firm’s financial reports to make smarter staffing decisions, time them correctly, and avoid the profit leaks that often follow poorly planned hires.
First: What the Right Reports Can Tell You
Before you decide who to hire or when to do it, your financials should answer:
- Can we afford this person now and in 6 months?
- How much revenue would they need to generate (or free up) to be worth it?
- Are we spending enough time on high-value tasks to justify expanding?
To answer those questions, we look at:
- Profit and Loss Statement (P&L)
- Cash Flow Forecast
- Revenue per Employee
- Utilization Rates (if you’re billing hourly)
- Owner Time vs. Admin Time Analysis
Let’s break those down.
Profit & Loss (P&L): Are You Actually Ready?
Open your P&L and look at the last six months. What’s your average monthly profit?
Hiring isn’t just about having enough revenue—it’s about having enough profit margin to sustain a new salary.
If your firm is running below 15% net profit (after paying yourself and taxes), hiring may stretch your cash flow thin—unless that hire will directly increase revenue (like an associate or intake specialist).
Also check: is your revenue growing consistently month over month? Or did you have one strong quarter?
Hiring based on a one-time revenue spike is risky. Hiring based on consistent growth is sustainable.
Cash Flow Forecast: Can You Cover the Cost?
Profit is long-term. Cash flow is real-time.
If your P&L says you’re profitable, but your cash flow is tight, you might struggle to meet payroll in slow months.
Project your monthly expenses + expected revenue for the next 3–6 months. Add in the full cost of the hire: salary, payroll taxes, potential benefits, onboarding time.
This gives you visibility into whether you’re making a confident investment—or creating a future cash shortfall.
Revenue per Employee: Are You Getting ROI from Your Team?
A quick calculation:
Firm revenue ÷ number of employees = revenue per employee
If your revenue per employee is under $120K–150K, you may be underutilizing your team—or overhiring.
This number varies based on your area of law and pricing model. But it’s a great way to gut-check whether your current team is already stretched or simply not structured properly.
What Are You (the Owner) Spending Time On?
This one isn’t found in QuickBooks—but it’s essential.
Make a list of what you’re personally doing each week:
- How many hours are on billable legal work?
- How many are admin, intake, tech troubleshooting, or calendar management?
- What tasks could be delegated for $25/hour or less?
If you’re spending more time doing work that can’t be billed—or doesn’t move the business forward—you’re already paying for help. Just with your time.
What Kind of Hire Will Protect (Not Drain) Your Profit?
Financials don’t just tell you if you can hire. They also help you determine who to hire next:
- If your revenue is growing, but fulfillment is behind: hire an associate.
- If leads are increasing but conversions are slow: hire or outsource intake.
- If you’re buried in scheduling, billing, or document prep: hire a virtual assistant or admin.
Each hire should either:
- Increase revenue (directly or by freeing your time to do so), or
- Improve efficiency so the firm can scale without burnout.
The Biggest Mistake Lawyers Make: Hiring Without a Financial Plan
Many lawyers make the mistake of:
- Hiring when they’re emotionally overwhelmed
- Guessing how much they can afford
- Hoping revenue will “catch up” later
- Not building hiring costs into their forecasts or tax estimates
This often leads to:
- Missed payroll
- Burnout anyway (because you’re still doing everything)
- Lower net profit
- Hiring regret—and turnover
The truth? Most firms don’t need more staff. They need clear systems, better financial visibility, and help identifying operational gaps before adding headcount.
Want to Hire Smarter—With a CFO-Level Strategy?
At Prestige Accounting and Consulting, we help lawyers go beyond gut-feeling hires.
We’ll help you:
- Identify exactly when to hire (and for what role)
- Model how it will affect profit, taxes, and growth
- Avoid financial stress by setting up a smart salary plan
Hiring is a big decision. Make it a smart one—with numbers to back it up.
