A legal bookkeeper walks through the Eat What You Kill compensation model, where attorneys earn based on revenue they generate. Track each attorney's revenue in QuickBooks, subtract direct expenses and overhead, then allocate the net profit as their pay. The model rewards rainmakers but can create staff tension, so regular reviews and open conversations with partners matter.
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This week I thought we would touch upon probably the most famous or infamous model for compensation for attorneys, and it's got such a creative name. It's called Eat What You Kill. The first time I heard that name, I thought, oh my, who would name something like that? Well, attorneys did. So it's an interesting model. You're going to see this if you work with attorneys. So I wanted to bring this up. In a video to kind of walk you through it. And it's a model that's really, I mean, a lot of times law firms used to work with, I think it's, I'm trying to think of the name of it, but there's, it was like you had your seniority. So the longer you'd been at the law firm, the more money you'd get in bonus structure. Or maybe you did it, they did it based on billable hours, which we touched upon a little bit last week. But it left a bit of a gap between the attorney's effort and the rewards that they receive. So with the eat what you kill model, it bridges this gap and it aligns the compensation directly with the revenue the attorney generates. So it pretty much benefits the rainmakers. That's what they're called, the people that bring in the most business, the ones that really bring in the cash basically in the door. So if you're calculating this, first thing you're gonna do is obviously track the revenue. Begin by accurately tracking revenue and any revenue coming in the door by attorney. So it's really important. We use the class feature in QuickBooks to do that. You want to be able to track whatever fees are collected per the attorney that's bringing the work in. And that's probably the most critical, and the class tracking is really the only way to do it. You want to subtract any direct expenses associated with generating that revenue. Now, That means client expenses. But if they're recouped, they're not as important. But any client-related expenses in the realm of marketing, or any administrative support that's included, that has to get deducted off the top, off the top of what's brought in for the firm. And then you're gonna make that net profit calculation. You're gonna calculate the net profit by taking the income that came in, the revenue that came in, the attorney's share, and subtract the expenses or the overhead on the, on the work. So you're going to disregard any of the client costs that have been recouped. That's recouped. They net to zero whether you're doing billable expenses, billable income, or advanced client costs. They're really irrelevant in this calculation. But you want to look at things, expenses, overhead, like office space, utilities, any shared resources. Maybe the paralegal was involved, maybe the legal assistant was involved, or a legal admin. And then the remaining net profit after the expenses is typically allocated to the attorney as compensation. So you really need to make sure that this all ties to the books. Same thing I mentioned last week. It all has to tie to the books, and it aligns directly with what the business that they're bringing in the door, right? They're bringing in the business, growing the firm. You also will need to calculate if they've got a scenario where you've got an originating attorney and then the worker bee attorney. And then also some collections in the mix. You're gonna have to make sure you collect on— you track on all of these particular items. You're obviously not going to do any compensation on any work, not— the money hasn't come in the door. So that's the first step. Um, they might get— sometimes you'll see law firms that they just recognize the attorney bringing the work in, and they might get some of the— they might get some kind of a bump off of their consultation fee. So you might see that as well. You wanna do a periodic review of this to make sure that any compensation is fair and motivating to the staff. And this is one of those models that you might see that it's fair, and in some cases, depending on the practice here, it's not fair. So you wanna have that conversation with the attorney. And then you really wanna tie it all back to the books because that's the most important thing. Everything's gotta bounce back to the books. And I can tell you personally, if you don't scrutinize the data and make sure it all ties back, If it's not tying back, and I have seen that happen with law firms where it doesn't tie back to the books, they're doing it on a side spreadsheet, and then nobody's really making sure that it's being tracked. Maybe they tracked invoices that weren't paid, or whatever. You really want to make sure that this is kept pristine so that everything ties back to the books. So under the eat what you kill model, attorneys are incentivized to build strong client relationships. That's a good part of this this type of compensation and actively expand their networks. So they're bringing in work, they're in court, they're bringing in work and, you know, they're marketing right there. Super important. From the bookkeeper's perspective, this, this, this creates a dynamic environment where precision in the financial management is crucial. Bookkeepers have to ensure that the financial transactions are recorded accurately and that the revenue is transparent. It's— this is where sometimes these models can fall apart. So helping the attorneys understand their financial standing is really critical. And this model also fosters a culture of accountability and performance within the firm. It's the positive of this type of compensation. So attorneys are driven continuously to improve and grow their client base, knowing their efforts are directly— their efforts directly in effect their earnings. So they're trying to push this forward and trying to grow, bring in the business to try to grow the firm. They get more money. So there's their incentive, incentivization for doing, for this type of a model. This is where the bump is. And you really want to make sure that the customer is happy, the client, the law firm client is happy, the attorneys are all happy with this situation, which you might find that's not always the case. If you're doing that kind of work with the client that you're doing kind of more of a situation where you're doing advisory work with the client, you wanna look at that, those pieces when you start to discuss compensation models with your client because you might find that there's dissatisfaction amongst the staff. Best way to find that out is to have conversations with the staff, of course with the partners' approval. You'd be amazed at what they tell us that they don't speak up in front of their, their boss, their, the partner of the firm. So having a good job satisfaction in this day and age when it's hard to get people to come in the door to work for you, they love it because they can control their earnings. They, they're the one driving the extra money in the door. And then supporting this autonomy includes delivering accurate and timely reports. And this is— And this is where you have the good reports and then you're able to do the payouts. Set some goals with your clients if you have the ability to do that, and then check in with them, see what their professional ambitions are. What are they looking to achieve? Where in the firm are they looking to go? So this eat what you kill model not only refines the way attorney compensation is, but it also elevates the role of our, our job, the legal bookkeeper, where we come into play, that our role is critical, that they're not doing this on a side spreadsheet. Yeah. Spreadsheet. They're doing it in tandem with us, we're making sure that the data is accurate. Again, that's our biggest job as a legal bookkeeper or accountant is making sure the data is perfect. So I hope this is helpful. If you have any questions, comments, please feel free to reach out. We've got a few more compensation models to hit up this month, so stay tuned. Bye now.
