Redwood Analytics

Planning Overview

The LexisNexis Redwood Planning application is a sophisticated management tool that uses a firm's profitability model to look at client planning and alternative choices in the staffing and pricing of new matters as well as the consequences of re-staffing and re-pricing existing matters.

The Planning application allows users to create scenarios for new matters or view the results of an existing matter. Users can employ historic data to make decisions affecting future performance.

Planning Concepts

In order to be successful with the Planning application, it's important to understand some basic concepts related to planning.  In planning, you are adjusting levers relating to pricing and staffing to achieve a favorable outcome.  There is a fairly straightforward approach to planning for both clients and matters that I will describe here, and since the Planning application was developed based on these best practices for planning, I will share with you a sneak peek at some of the screens within the application.

Past Matters

Firstly, you will want to consider similar matters you have done in the past that had good outcomes, both financially and in terms of client satisfaction. 

Using the client history in the application, you can even explore up to 2 years of historical data to help you plan.

Staffing

The next step is to select your team.  You will need to estimate the number and type of legal professionals that you will need at each level.  You should also consider the capacity of your team at this time.  (You may not have information about utilization available when planning far into the future, but considering availability of staff can save headaches down the road.)  In the LexisNexis Redwood Planning application you can staff with actual timekeeper or staff with generic titles, whose costs and standard rates are the average for their Office, Department, and Section.

Budget Time

Next, develop your time budget, either by assigning a block of the time to the matter or client, and then dividing it up amongst the timekeepers, or by assigning time to your timekeepers and then arrive at a total.  The Planning Application allows you to come at this from both directions. 

The Planning Application will then multiply the expected hours by the standard rates of the identified timekeepers.  You can assign new standard rates if you're planning for an event in a future year, or, as we will discuss later, you can discount the rates if you desire.

You will also want to explore the mix of staffing to see if it is leveraged appropriately.   Look at your financials.  When you add staff to a matter, the cost rates for that timekeeper are also factored in to the bottom line.  Profitability is determined by the difference, or spread, between a timekeeper's billing rate and his or her costs.   As you know, Partners and other senior attorneys cost more to the firm than Associates and Paralegals, so allocating time the right mix of timekeepers can is one way to tweak profitability.  Within the Planning Application, you can play with the Partner Hours % field to see how increasing or decreasing the hours allocated to Partners impacts your financials.  Of course your focus should always be on the quality of the legal work. 

Address Pricing Concerns

Now that you have a baseline plan, it's time to consider the client's budget and desired billing arrangement.  The client may have requested discounts, a blended rate, or a flat fee.  Your goal here should be to create a plan that is priced to benefit both the firm and your client.

The Planning application supports negotiated discounts, which are those which are agreed to before any work is done, as well as Volume Discounts, which are percentage discounts based on the Fees Billed (Standard Amount * Hours Worked, less any Negotiated Discount).  Another way to be responsive to a client's budgetary needs without offering a straight discount is to suggest a Blended Rate (one hourly rate for the entire plan) or Fixed Fees, one flat rate for the entire plan.  These are known as Alternative Fee Arrangements. 

Additionally, you can use your knowledge of the client's payment history to help you plan future matters.  If you know that a client always pays only 90% of what you bill, you can factor this into your financials, and also into your pricing.

Manage the Budget

Once you have committed a plan - meaning the client has agreed to it - it is now a Budget, and you can compare Redwood actuals to your Budget plan to track performance.  If the approved budget varies widely from the time actually invested, or if the scope of the matter changes, you may wish to pursue an updated plan with the client.  If the scope hasn't changed but the firm is not approaching the realization you planned for, then you may need to make staffing changes to improve performance against the plan.  A good plan should inform pricing decisions for future work from this client, or similar matters for new clients.

For more information, or to schedule a demo on the LexisNexis Redwood Planning application, call 804-288-5185 or email us.