The Sterling Family Law Show

How Law Firm Annual Planning Scaled Us to 27+ Attorneys - #174

• Jeff Sterling Hughes

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Law firm annual planning is how we scaled Sterling Lawyers to 27+ attorneys. Here's our exact process for planning growth.


Our law firm financial planning process starts with data - understanding your client acquisition waterfall, qualified lead cost calculation, and law firm close rates optimization to reverse engineer revenue targets. 


Leadership team planning meetings bring your entire team together to review metrics, identify kinks in your system, and set quarterly rocks and goals that actually get done. The key insight from years of strategic planning for attorneys: less is more - fewer, focused goals with clear tracking through your law firm KPI dashboard will outperform ambitious plans every time.


📲 Subscribe Now: https://www.youtube.com/@jsterlinghughes 

📝 Get your FREE Law Firm Growth Guide: https://jsterlinghughes.com/

📚 Order the Waterfall Method Book Now: http://www.RocketClicks.com/pre-order


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📄 CHAPTERS
0:00 - Law Firm Annual Planning: The "Less Is More" Philosophy

1:00 - Reverse Engineering Law Firm Revenue From Growth Targets

2:00 - Your Client Acquisition Waterfall: The Metrics That Matter

5:00 - Leadership Team Planning Meetings: Agenda Breakdown

20:51 - Why Fewer Rocks Win: The Prioritization Framework

22:11 - Breaking Annual Goals Into Quarterly Rocks That Get Done

24:00 - Making Strategic Planning Fun: Team Building and Safe Space


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You could have people and I've experienced this in previous lives that maybe it's not even conscious, but subconsciously they don't want to grow. They have a fear of growth. They have a fear of something that they're going to be exposed as not a great leader, whatever. they end up sabotaging the conversation and they just become very unproductive because they're just from a place of fear. making sure you got the right people in the right seats in that room is super important or could be a very not fun meeting. Welcome back to the Sterling Family Law Show, the podcast designed to help family attorneys build the firm of their dreams. Today we have a very special episode. We brought in the president of our own law firm, Jeff Kerlin, to talk to us about the annual planning process. How do we think about planning for the next year ahead? What metrics do we look at? Who's in the room? What is the agenda? Make sure to check this episode out as you go in to thinking about 2026 for your family law firm. Gentlemen. Welcome back. We have a very special episode today. We are going to be talking about one of the most important meetings that your law firm should conduct each and every year, and that is the annual planning meeting for the next year ahead. Jeff, talk to us about how you think about annual planning for the firm. What's involved? And then we can go into the details of the, ins and outs. Yeah. First of all, thanks for having me. Glad to be here. For us, it's it's multifaceted. You know, we have obviously just growth. We're very much in growth mode. We have a pretty good idea coming into, like, right now, into this year, what we think we can do growth wise next year. So it's just all that's related to growth. Like, okay, how are we going to handle all the calls that are coming in. How are we gonna handle a follow up? How are we going to handle the actual selling of it. How are we going to handle the the management of the files? So we start with where we think we'll end up, you know, top line revenue wise and reverse engineer. Like what are all the things that have to happen for us to actually be able to accomplish, our revenue side. And then we always have projects going on. What else are we pushing forward initiatives where it could be for employees. It could be for our a technology stack. It could be what have you. We're obviously in continuous improvement mode as well, and we'll have some rocks associated with that. And the team, we as a whole, in our case, the whole leadership team to come prepared with, you know, what's working, what's not working, what's confusing, what's broken, what's missing, that sort of thing. And a lot of good fodder comes out of that, and some rocks usually come out of that as well. Love it. So, really sounds like you start with data. You start with the end in mind. Where do we want to be? And then how are we going to get there? Yeah, exactly. Talk to us a little bit about that data that you look at. we have, we have the luxury of we we understand our client acquisition. Waterfall very well. So we know how many late leads are coming in. We know that lead flow is we know by region. We know what our answer rate is. We know all of those leads are come in roughly what percentage are usually quality leads. We know our set rate is the leads come in. We know what rate. We're going to be able to sell a consoled or get someone to say yes, I'll meet with an attorney or a sales rep. For console. We know what percentage shows up. And then we know from all that, all those costs that go into that when you end up with somebody that this is truly a qualified. We know what our qualified lead cost is. So that for budgeting purposes, if we know, hey, we want to grow by 17%, we're going to need 70% more qualified leads. We can calculate that cost. And then goes into the console room. We know what our close rates are, by region. And then we know we're like value per client on average. What is that mean value per day. Which then allows us with those with that information. What is our cost per agreement. So total sales, total marketing cost, everything that goes into that we land an agreement. We know what the value of that agreement is relative to the costs associated with, winning that. And we can use that for budgeting as well. And we will set targets to improve each one of these. So we will there's there's a great book, great CEOs or lazy. It talks about where the kinks in the hose. There's always a kink in the house unless you're static. If you're dynamic and you're growing there's you can always unearth another kink. It could be your answer rate. It could be your your in your consulting room. It could be wherever. And you're always constantly moving. And this happens throughout the year. This isn't just in planning, but addressing those kinks and making sure that, you free those up. And that causes the the flow of clients coming in to speed up until it hits the next kink. Then you address that. Love it. And so step one is really understanding your data. Jeff mentioned something that we use called our waterfall. And if you don't know what that is or you want to know more about it, leave a note in the comments and we'll send you a template. But once you have that and you're looking at it throughout the year, you're now starting to think about next year. You mentioned you bring your entire leadership into to one room. Is this, one day, two days? Give us some some preview of what that agenda looks like. Yeah, it's at least one full day. Our quarterly ones are one full day. Our annual ones are usually one and a half days. And some of that just some team building stuff, right? Just for fun for the team. But again, we come prepared. Everyone comes to answer those questions that I just mentioned before. We also every quarter we have a, an advocacy meeting where we have members throughout the whole organization. They come prepared with Hit to answer the same questions. We just had. Like, what were the pain points for them? We bring those to the leadership team and we go over a whole list of concerns. We go over our current rocks. How are we? Hurry. Finishing off the year? We go over the financial plan, like my CFO and I, we will come up with what we think the top line and bottom line financial plan will be, will present that to the whole team. And that takes a while because we go into quite a bit of detail by region, by, you know, in the human resource department, in the sales department, in the intake, what have you. We explain that to them, make sure they understand it. Do they have any questions? So we spent a lot of time just going over metrics, going over information, laying the groundwork for a discussion to get in a strategy like, okay, how are we going to accomplish this? Jeff, let me double tap on that financial preparation that you and Todd, the CFO, go through. So the the budgeting process is what we call it, right? Where you'll start to or he will start to put together a proposed budget for the upcoming year. And, and look at, obviously, the performance over the last couple of years to craft that budget and growth. Can you explain a little bit more about how he puts that together, how long it takes? How many drafts back and forth are you going through with him before you present it to the ELT? yeah, absolutely. He will start with him, and I will Russell, through. What do we think our top line will be? And we have to have some reason for believing what it will be. And right now, I mean, we're just we we're projecting to be we're we we pretty confident will be next year. Plus or minus. We start with that and then back into okay, we know what our collections per attorney is. So if we're going to grow by $3 million, how many more attorneys is that's going to mean how many more paralegals is that going to mean. What are the other ones? You know, we have we have a law clerk program right now where we have multiple law clerks in each region. So beyond just the pro rata, you have revenue coming in, you know, you're gonna have prorate expenses in a lot of different categories that just normally go into your cost of sales. You've got the below the line cost, you know, what else do we want to do for employee appreciation? What other what other hires are we looking at in the corporate side? We we usually start with we start with what you think the top line will be. We throw all the desired cost into it, and then he and I look at it and go, okay, where does that have us netting out from a net income or EBITDA standpoint? And then we do some rationalization. So start. I include everything and then whittle down from there. Start there and then go, okay, well, we can't afford all of this unless unless we hit unless we do $1 million more in sales. We can't afford all of this. Okay. So, and a lot of those, those things involve timing, right? You're not going to hire everybody on day one. So we literally go, okay, we're probably gonna hire seven more attorneys, but two are going to be in January, three are going to be in March. You know, the other are going to be in June, what have you. And make sure it's appropriate. And you're guessing on timing, but it's an educated guess. And the same thing with salespeople and intake quality control, what have you. But yeah, throw it all in there, see what does that look like? And then where do we need to prune? What are the what are the have to has we have to have attorneys. We have to have paralegals. And what are the one house what we'd love to do this whatever extracurricular things. Those are things that maybe we'll have in our back pocket, but we don't put it in the budget. We won't commit to doing it until we know we can afford it. Does Todd start on that in, like, September? Yeah, you know, he does. I mean, you have to have a fair amount of the year going by and have a pretty good idea how your how the next year is going to end up. But yeah, he starts that we're right in the process now of finalizing that. And we'll be discussing it with, with Jeff Hughes here shortly. And then we will present that to the leadership team at planning. So so, Jeff, also explain how you go to marketing, because marketing drives a lot of the budget for next year, because that's going to be leads that we plug in to the waterfall that tells us how many clients we're going to get. So how how do you interface with marketing and prep in prepping that budget? Yeah. Great question. We share we share it by month. So by we'll have five regions. So we'll, we'll we will share five regions in all 12 months where we think we think the growth will look like where we need the lead volume to be and what we think we'll be able to handle. And we get that over to our partners at Rocket Clicks and they plan accordingly. So, we're like, they're actually waiting for that right now from us. So, yeah, it's very, very entwined because it starts with leads, which you mentioned. Yeah, I think we know that about, over 86% of the revenue driven into sterling is from the website. And so I think we're a little unique in that and some other firms, you know, leveraging more referrals or other resources or sources of leads. But, for us, it is very much. How many leads do we need to drive in order to get to, the revenue numbers we're trying to achieve? Yep. Yeah. And it's based on it's based on assumptions that the like all the waterfall conversion rates, I mentioned the assumptions of value per agreement. And all of those things are dynamic. You know, our values are sometimes are going up. You just cost inflation. Our hopefully our metrics are getting better. So in throughout the year like we do now, we work with rocket clicks and we sometimes throttle up and throttle down in different regions depending on our flow. Because you can have too many leads. If you get too many leads at the wrong time, it can exacerbate a problem and actually cause you to close less agreements. It is absolutely. It seems counterintuitive, but it absolutely will happen. So we want the we have is that when marketing works, other things break. And if you don't have a waterfall, you're not monitoring the the lead inflow into your intake team and their answer rate and callback rate. Well, then they are going to get overwhelmed. You are going to lose that lead quality and ultimately hurt your reputation. Yeah, exactly. One of the significant changes that we've made in our budgeting and forecast and planning process, especially on the yearly basis, was shifting away from having marketing drive the entire process. And now being a, you know, a player in the process. So before we would Tony now okay how many leads can we drive over the next year. And then we would say, okay with this go out and hire that many people to support. That was those leads and that would be the the process rather than, okay, let's look at where we want to be and what will we need for marketing in order to get there. That sounds like a subtle change, and maybe it is a subtle change, but it was a significant improvement to our overall results. And so I mean, looking back, Jeff, you, you and Todd forecasted this year, what was it 17.5 million I think or 17 million. And then we're going to hit that within a few a few hundred grand based over the course of the year. So it's it's really dialed in, planning that they've been able to put together. So we're plus or minus a few percentage points over the course of an entire year, which is really, really good with our scale and the moving pieces. We've got on different in different states. And that predictability allows you to forecast and plan with a lot of confidence and hire because you were hiring attorneys way in advance of needing them. And you can only do that if you have a lot of confidence in your forecasting. Yeah, really goes back to starting with data. I want to get back to the agenda just to help people, get a picture of what what it takes to to have a successful planning. You know, we talked about gathering the data, having the meetings before the meetings, getting to the meeting, having the right people there, presenting financials as you present financials. What happens next? We start going into what what what we all what we all need to make sure we hit these numbers that we're projecting because we're projecting growth fairly significant growth. What will break it by doing this, by growing at this rate and and rationalize that and talk about that, as So, for example, your head of intake could be sitting there and you're saying, hey, we're going to add five more heads to the intake team. And you may be thinking, wait a second, we need another assistant manager. Or that's going to be too many direct reports. And so that's when that issue would surface. That's exactly. And and to be fair, we're doing we're doing as much of that as we can in advance. So to your point, we're meeting with with Mary, our sales manager who oversees the sales team and intake, and she's already answering those questions, or she's coming back with, well, here's all the things I would like, I think I think I'll need two more leads. I think I'll need this in addition to just a pro-rata, like I said, cost of sales. So I need I'm going to grow by 17%. I need 17% more intake people. Well, this could be an addition because you reach a tipping point where, hey, this one person can't manage all these people. We need to add another. So, we will put all those things in, we'll talk about them and then we'll go. What else are we missing with the whole team? My partner, Tony Carlos, just released the actual blueprint of how we grew Sterling Lawyers from 0 to 17 million. His book is called The Waterfall Method. This isn't a theory. This is our actual playbook that we still use today, every single day in our huddle. The link is in the show notes below if you want to get it. And if you order before the end of October, you will get free shipping. Jeff, who's in the room for this planning? For us, it's our the entire executive leadership team. So myself, our CFO, our head of HR, who's responsible for all the recruiting, our two managing partners, one primarily oversees Wisconsin, one oversees Illinois. Our sales manager, our operations director And do you lead the meeting, Jeff, or do you have someone come in and lead it so you can participate? You know, I lead it. Kelly, who's our project manager, she will facilitate parts of it, but generally I lead it. I kick it off, I try to come up with something inspirational and get them excited about growth. Thankfully, our team is super excited about growth, and that's why they're on the team. So they're looking their chops at, oh my gosh, we're going to go make this much. We're gonna have this many attorneys and we're going to conquer the world. You know, we get all excited and then get into the nitty gritty. You want it to be fun to you. Don't just be this stale planning meeting. When we get. We should all leave. They're really jacked up. Like, yeah, we can do this. We have a solid plan that we all weighed in on. We all agree with it. We're locked arms. We're all going to, you know, win or, win or fail together in this. That's great. I think that's a really, really important part is that if you're a firm that's looking to grow, you need buy in from your entire staff. And so building that at the beginning of the meeting so that everyone's aligned as you're going through what what it's going to take is very important. Yeah. You could have people and I've experienced this in previous lives that they, they maybe it's not even conscious, but subconsciously they don't want to grow. They have a fear of growth. They have a fear of something that they're going to be exposed as not a great leader, whatever. And they they end up sabotaging the conversation and they just become very unproductive because they're just coming from a place of fear. So, making sure you got the right people in the right seats in that room is super important or could be a very not fun meeting. Was it always the leadership team. And did you ever add anyone or subtract someone based on that scenario? Playing out? Yeah, we've certainly we've had to, help 1 or 2 people that were in the leadership team years ago, you know, find something different. They just weren't in the right seat. And, and sometimes it's sometimes, like I said, it's just out of fear. They're just not in a good place. Sometimes it's just they're they're really not the person. We don't we don't have the perfect role for them. And they're not in a place where they can really make a big impact and be productive member of the team, and we just help them find something else. So the thing I really appreciate is all the work that happens before this meeting. Right? This meeting is kind of a culmination of all the other meetings that you've had where everything's kind of already been sold in, and now you're just working through the minute details. Would that be true to say? Yeah, it is. And in our planning, meetings are probably shorter than a lot of of me, in fact. Or plenty of meetings are shorter than they used to be. We go over a metrics every single day. Every single day. We spend five minutes and we go over each waterfall and every region, we share our financials every hour with our leadership team every single month, both a summary view and one week when we get the flat, we got a flash report. And then the week after that we get into the minutia and we're the variances. So the team is very well informed. We're not having to start from scratch to educate them in half a day in planning, so that we can have a constructive conversation. They already they're very aware of where we're at. It's great. Okay. So I just want to make sure we stay on the agenda of the day. You have presented financials, the team has worked through some of the kinks and you know how that financial goal is going to impact the operations of the firm. Is there anything else that happens on that day that, is worth noting? Yeah, we we everyone comes with ideas and things they would like done know we have some big initiatives going on a client portal. Some changes in our, in our case management system. That would just be a little bit more automated. Some dashboards and things like, you know, things that aren't we have to have them, but we want to have them. They make our lives easier. And we we put them all in a list, and then we go through a voting process because we want to come up with we can't usually stop at five rocks. I think if you have more than five rocks, you can't focus. You can't. You can barely focus on five rocks, but five rocks you can focus on, This if everything is an initiative, nothing is. yeah, exactly. So we vote and we wrestle and we advocate and it gets it's fun because sometimes someone's rock won't get picked and they'll just like, can I just can I just say a little bit more about this? And just advocated and we've had we've changed minds doing that. One of our managing partners is a really good, So you don't. It's, one thing that I've seen over the years is sometimes a leadership team will say, okay, that's not a rock, but everyone in the room knows. Well, it's going to get done anyway. Like we're going to do it anyway. How do you how do you stop that from happening? Or what have you done to, to curb that in the past to keep your team focus? Sometimes things just are. It's just a normal course of business. Like, okay, we can call that a rock and make ourselves feel good, like we got something accomplished, but we're going to do that regardless. To me, a rock is something that it this is a big deal. Come hell or high water, we're going to get this done and we're going to present this to the organization that we met as leaders. Team. We we brought the advocacy information to this team. We heard from you. This is what we're going to do. These are the five things we're going to focus on this quarter or this year. And we put it out there because we want you to hold us accountable. So it means that that's that important. And some things it's like if it's just going to happen through normal course of business, it I don't know, you can present it that way, but I wouldn't presented as a rock. I want people to people know that we are focused. We're serious. We're gonna get these things done. And then we report how did we do every quarter? How do we do on the rocks and the things we said we're going to get done? To me, the most powerful part of that, for our listeners, is that it becomes a lens for prioritization. If we were only going to do one thing today or this month or this quarter of this year, that gives us a guide to leverage to say, hey, we decided that these five things are the most important things that we're going to do this year. And so it helps, you know, maintain distractions, right. Yeah. You know, I don't I don't attend the Plannings anymore, but, after having watched you do them, Jeff. And of course, Tony and I doing them for a decade together. My most important takeaway from all of those plannings is less is more of a fewer rocks, the better. So four is better than five. Three is better than four. Two is better than three. That's that's been my experience. Yep. And to add to that, Jeff, a lot of these rocks, we try to make them like Smart goals, right. Like you can truly measure them. You can report on them. You can articulate what they are. A lot of the rocks have to be broken up. Like, what are we literally going to get done in the next quarter? We're not going to have this whole thing done and deployed in one quarter. Okay. Well, this quarter we're going to go out. We're just going to do some we're going to create something Q2 or do some beta test testing Q3 we're going to launch it, what have you. But break it into chunks that are truly achievable. Still hard but realistic because a lot of times we get in there and we it's easy to put things down on paper. Well, yeah, we can get that done. And then we get caught up in life, especially after planning when all our inboxes are packed full again and you get behind and you don't get them done, you know, like, Yeah. A few really key lessons there. One, you're doing annual planning and holiday season. So people are going to be excited and amped up and commit to things. And and in reality, you lose weeks of productivity, during the holidays. And then two, as you think about annual planning, right, you're building annual goals that probably will break up into quarterly rocks. And so I used to, I used to live in this world, like, well, if we don't get the rock done this quarter, it's it's not done well. And in reality, we didn't do a great job planning. This was a bigger rock than that. I quarter's worth of work. We need to go back and decide what is the things about this goal that we can actually get done over these 90 days? exactly. And are you to feel good? I mean, that's a question of one of the last questions, like, okay, if we get these Fox five rocks done, if it's five and we articulate what is, you know, really what is done look like. So you don't have scope creep. And what have you really articulate. What is done look like for that quarter? Are we going to be happy with that, or are we going to be glad that we spent the time on these five? If there's anyone here that will be like, yeah, what was the point? Okay, why is it a rock? So. great. Another point you just mentioned that I don't want to leave out is that if you are a leader that leads with lots of power and authority, and you ask your leadership team to come into planning, don't expect them to push back on you and be extremely valuable in that meeting. You need to empower your leadership team in that room in that moment to be an equal, to have an equal voice, to be able to push back. Something we learned very early on. And and having that as a safe place where you can really wrestle, like you mentioned, through some of those issues, makes that meeting that much more productive. couldn't agree more. couldn’t agree more. And and really watch your team. Some folks are. They're always the one that are quick to speak up. They'll dominate the whole time if you let them. And others. They have a lot to say, but they're just they're never going to be the first one to speak up and just make sure you have room to hear from everybody's voice in the room and speak it almost as little as you have to to keep things going. Yeah. There's an art to to having a successful planning. And I appreciate your insights as it relates to the agenda and and everything involved there. Is there anything else that you would recommend, for someone listening to this, thinking about maybe doing their annual planning for the first time or doing it in a new way? Anything else they should think about? Make it fun. You know, I'm I'm not I'm not great at the fun aspect. I'm Oh, you're a lot of fun Jeff. Yeah I know. Thanks. I more I love business, I love numbers. Me and my CFO, we get along great, and I love having fun, but I'm not the guy who's going to come up with fun activities. So I we have people on our leadership team that do. I'm like, can you what could we do that would be fun. And and they we might go go kart racing at this next planning. Actually as a result of that question. So which would be fun, I love that. I never would have came up with that idea on my own. But that's important. And and just make sure you have people that are complimenting, you know, they have strengths that compliment your weaknesses and vice versa. Anything else that we may have left out, or that someone should think about as they're going into their annual planning season this year? What. Just what I already said. Less is more. Do fewer goals, fewer rocks. Yeah, I think I would. The only thing I would add is be really intentional and be really prepared beforehand. You don't want to come to that meeting and say, okay, well, let's start from the beginning and figure everything out in here. You know, now we're going to get done. That's a really, really good point, Tyler. I learned that earlier in my career. The leader of the meeting should be spending quite a bit of time preparing for the meeting, just out of respect to the teammates are shown up so that you could have a constructive meeting right off the bat. It's great. Gentlemen, I appreciate your time and insights. Looking forward to the next one. All right.

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Jeff Hughes

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