Why Lightbulb Works - a case study in business blogging

Photo: Noric Dilanchian.

Ndarala member practice, Dilanchian Lawyers & Consultants of Sydney, has used it general web site and especially its blog to great effect. Noric Dilanchian supplied Des Walsh with a brief statement on the role of the Dilanchian blog. I am repeating it here because it is an interesting case study.

The Post

The Lightbulb blog on our http://www.dilanchian.com.au/ website is 12 months old. That makes it a new born. Our website is five years old, which makes it ready for primary school. As for some of the writing in the Library section of our blog, it's about 18 years old, which means it is now adult content.

Making the baby blog a success among its siblings has required passionate stories, research notes, investigative reports and other types of writing. In shorthand, we call them posts, like everyone else. The rare post which works to generate client enquiries is heart-felt, has a logical structure, has an edge or smarts or even humour, provides practical advice and keeps it real for the specific audience we have in mind when we select the post's topic, title, style and positioning.

Being topical, controversial and prolific are not necessarily virtues when it comes to generating client enquiries from our Lightbulb blog. The effect of the rare post that works is to both capture and communicate our insights and capability as lawyers and consultants with decades of experience. Those posts engage prospects to explore our blog further. They make them go beyond one page. They make them check out the blog's siblings and read or scan between say 5 to 30 pages of our extensive website.

At a certain point, typically after browsing between 5 to 30 pages, some of our visitors turn into prospective clients when they are moved to call or email us with an enquiry. How we then respond to serve some as new clients, or refer them to others, is an important part of how we benefit from our blog.

Our broader web site content clearly helps our blog greatly. There are many lessons here.

Also essential is our consistent use of all the usual search engine optimisation habits and our regular monthly enewsletter. While digital media has made publishing and communication faster, easier and cheaper, to get to the best form of communication (which I believe to be theatre and conversation, that's particularly because both are interactive) you have to have something worth saying and a voice, ie an ability to communicate in an engaging way.

You have to add to all this your dedicated time, commitment, devotion to maintaining first rate publishing standards, energy and good karma. It's not something you can do on your own. Like all authors, it helps to have colleagues and friends who can help you in research, check your assumptions, and give you regular leads, feedback, technology ideas and editing suggestions.

Despite the huge effort it involves, I have found having a blog a very special experience. As intellectual property and business law specialists, we consider it a vital service to our clients to regularly scan or go over the horizon and report back to our clients to give them advanced guidance, all in language they can understand and media that engages them. A blog has added to the ways we achieve this.

The Economics of Professional Services 5 - normal time based charging

Most professional services businesses derive the majority of their revenue from time based charging. Revenue therefore depends upon the combination of billable hours times the charge out rate achieved per billable hour.

CALCULATING MAXIMUM BILLABLE HOURS

In theory, there are 365 days in a year. In practice, time needs to be taken out for weekends, holidays and illness. This holds, or should hold, even for the sole practitioner.

Deducting this down time, there are around 220 available working days in an ordinary year. With eight working hours per day, this gives a maximum of 1760 working hours in a full year.

Note that the eight hours per day should hold even for the sole practitioner. We work to live, not live to work.

I know that the reality is that many of the big shops work on more hours than this. Yet the real core economics of the practice do revolve around this lower figure.

Not all the 1760 hours is available for charge. Time has to be spent on business development, marketing and administration. The next step, therefore, is to calculate the charge target, the real time available for client specific work.

There is no absolutely correct figure here. However, as a guide:

• within the constraints set by an eight hour day, the sole practitioner is unlikely to be able to achieve more than sixty per cent charge time
• charge targets for junior staff members are generally higher, round eighty per cent
• with partners or team leaders, charge time will be lower because of greater marketing, business development and administrative responsibilities.

Once charge targets have been set for each staff member, total available charge time can be calculated by simply adding the staff totals together.

CALCULATING TARGET AVERAGE CHARGE RATES

Available charge time can now be used to calculate target charge rates.

Each business has to cover its costs plus the desired profit. Proprietor’s income can be counted as either a cost or included in profits.

Both approaches are followed in practice. However, it is generally desirable to make a distinction between:

• the target return for the proprietor’s labour which should be counted as a cost
• the target return on capital which should be profit.

Once costs and target profits have been calculated, target average charge rates can be calculated by dividing available charge hours into target revenue.This gives the average billings per hour that must be achieved if the practice is to achieve its financial targets.

Note that this calculation provides a basic reality check. If the average charge target cannot be achieved, then the whole business plan must be revisited.

CALCULATING INDIVIDUAL CHARGE RATES AND CHARGE TARGETS

Once the average charge target rate has been calculated, it should be broken up by staff member or staff category.

There are no absolute rules governing charge rates. Charge rates vary for different professional categories, for different types of work and by industry and market position.

Once the average charge rate target has been broken up into charge rates for individuals or staff categories, individual billings targets can be calculated by multiplying charge rates by target billable hours.

Once this task is done, we will have calculated:

• available billable hours in total and by staff member and staff category
• revenue targets covering both costs and desired profits
• the average charge rate necessary to achieve target revenues
• the average individual/staff category charge rate necessary to achieve the average
• individual charge targets required to achieve total revenues.

Introductory post. Previous post. Next post.

Note on copyright

This material is copyright Jim Belshaw. It may be reproduced or quoted with due acknowledgement.

The Economics of Professional Services 4 - sources of income

This next series of posts reviews the normal sources of income open to a consulting practice.and discusses the variables likely to affect those sources of income. It aims to improve business performance by improving understanding of and therefore the capacity to manage the various variables involved.

Our discussion begins with an analysis of normal time based charging since this is the way most practices earn their income.

The chapter then reviews a number of ways of increasing returns on particular jobs:

• multiple charging
• the role of cost recovery in ensuring proper returns
• the use of special levies
• and the way in which structured approaches to intellectual property and productisation can be used to improve returns

Introductory post. Previous post. Next post.

Note on copyright

This material is copyright Jim Belshaw. It may be reproduced or quoted with due acknowledgement.

The Economics of Professional Services 3 - structure of the guide

This guide provides a basic introduction to the economics of professional services with the aim of providing information for use in business planning and practice development.

The guide draws from a big consulting background. However, the core lessons are just as relevant if not more so for a single person operation since single operators are generally much closer to the margin.

This post itself is meant to provide an overview of the guide. Because of the way that we are presenting this material as a series of blog posts, we will add to this post as we go along.

Introductory post. Previous post. Next post.

Note on copyright

This material is copyright Jim Belshaw. It may be reproduced or quoted with due acknowledgement.

The Economics of Professional Services 2 - Definitions

This second post simply provides some definitions. We will add to these as we proceed.

Billings

The term billings simply describes the value of work actually billed to the client. These billings will include disbursements if these are to be recovered from the client.

Disbursements

Disbursements are simply the cash-out costs directly involved in doing the job.These may be very small, bus or taxi fares, phone costs. However, in some consulting work they can be very substantial, especially where subcontractors are used.

Financial Flows

These simply definitions provide the basic financial structure for the standard professional services firm.

As we do the work we create WIP. As our future billings, WIP is a key asset of the firm.WIP minus any write downs plus any write ups then translates into billings as we bill the client. So in balance sheet terms the WIP asset has been replaced by accounts receivable. Then as the client pays, accounts receivable become cash.

Gross Fees

Gross fees simply describes the total value of work we have or will bill the client.

Net Fees

Net fees, the amount we actually get for the job, equals gross fees minus disbursements. This is our real income.

Prepayments

Clients may pay us in advance for part of the work.In some cases, law is an example, these may be placed in a trust account and excluded from firm accounts until the funds are drawn down upon billing. In consulting, advance payments may be made upon contract start or on meeting certain milestones to help fund the job. In these cases, the prepayment is formally a liability in an accounting sense, diminishing as work is done and WIP created.

Work in Progress

Work in progress or WIP represents work done but not yet billed. It includes disbursements where these are to be charged to the client.

Write Ups, Write Downs

Actual billings need not equal WIP. When we come to bill, we may find that we cannot bill the client for all the time involved. In this case, we have to write WIP down. In other cases, we may be able to bill more than the time directly involved. In these cases WIP is written up.

As an aside, write downs are not necessarily bad, write ups not necessarily good. A firm without WIP write downs may be undercharging, a firm with write ups over charging. It depends upon the circumstances.

Previous post. Next post.

Note on copyright

This material is copyright Jim Belshaw. It may be reproduced or quoted with due acknowledgement.

The Economics of Professional Services 1 - preface

It is now eleven years since Ndarala first emerged as a network, while some Ndarala professionals have in fact been in professional practice for more than thirty years. During that time, we have generated a very wide range of material for both clients and ordinary operational purposes.

Understandably, the economics of professional services has been an enduring concern. In this context, some ten years ago I began the preparation of a book on the economics of professional services to draw some of this material together.

While I still hope to complete this at some stage, the daily pressures of life have kept intervening. For that reason, we have decided to run excerpts of some of this material both to make it more broadly accessible and to encourage further work.

As with most of these series, we will use this post as an entry point, adding details of subsequent posts at the bottom.

Comments and questions are very welcome.

Posts in the series

1. Preface - this post
2. Definitions
3. Structure of the guide
4. Sources of income
5. Normal time based charging
6. Use of associates
7. Sensitivity issues in time based charging

Note on copyright

This material is copyright Jim Belshaw. It may be reproduced or quoted with due acknowledgement.

Management Perspectives - Blog perfomance review August 07

Another month, another performance review.

In my July perfomance review I mentioned that blog traffic had been well down because of irregular posting. This has continued to be something of a problem. Still, August traffic was well up from July, September traffic will pass August, so things are heading in the right direction.

Again, the pattern of top entry pages has changed.

After the front page, by far the most popular entry page was the Importance of Demography and Demographic Change - update. This stocktake post drew together various demographic posts as at 10 February 2007.

This was followed with a reasonable lag by Changes in Public Administration and their Impact on Public Policy 1 - Introduction. As the name says, this is the first post in a series and was in fact the lead entry post after the front page in July.

Then further back came five equal posts.

The first was a case study, RANZCO Setting the Standard - Developing Ophthalmic Competencies, looking (as the name said) at the development of ophthalmic competencies.

Then came A New Way of Ranking Universities by Student Experience, a post dealing with the development of a new measure of university rankings. The following post also dealt with higher education - Changes in Higher education - UNSW's Singapore Problems.

The last two equal entry points were both management related, Common Management Problems Series 1 - Dealing with poor performers 2 and the management techniques label.

One interesting feature of the month was the ratio between visitors and page views. Each visitor looked at an average of 1.9 pages. This is quite good.

Finally, and as an afterthought, the following graphic sets out traffic by country.

Personal Networking Strategy in an On-line World

There was an interesting post by Dennis D. McDonald addressing this question: would you benefit from having a personal online networking strategy?

In Dennis's view, a "personal online networking strategy" is a coherent view of how you use various media for communicating and managing relationships with other individuals and groups.

Now I actually wish that I had read this before I gaily sailed forth. Then, a Google search on Belshaw generated less than a thousand hits. Today, there are more than 492,000. Of these, as best I can work out, something over 10,000 link in some way to me.

Now I am not complaining. It's just that when I ventured forth into the on-line world I had no idea so that so many aspects of what I do or think about in both personal and professional life would become so visible. It becomes very hard to hide!

Maybe if I had thought about it, I would have gone a different route. But then, perhaps not. Still, I would have done things in a more conscious way.

I commend Dennis's post to you as a short, simple, introduction to the things that need to be considered.