This is not a trick question. When the nurse takes your blood pressure you get a reading of one number over another. When you step on a scale, you curse yourself for overeating the night before. When you look at the clock, you see what time it is. All of these numbers have meaning. You have critical number for your business. A single number. It can be a beacon in the darkness. I will tell you now that it is the most important number in your business and it is the one that next to the bottom line of your checkbook that you can influence. Need a fancy dashboard, not until you master this one number.

If you think I am making this up as another Hodaism, I am not. My mentor Jack Stack, the author of The Great Game of Business, defines it as the one number that people in the company can look at that relates to their role. It tells them that if they hit that number whether it’s daily, weekly, monthly, quarterly, or yearly, that they should be okay-that they are making their contribution.

My number was 26. Yep. twenty-six. For years, that was the number of billable hours a week that I had to maintain in order to be profitable. In other words, that number is what kept the doors open. Every day, I tallied the number of billable hours. If I worked on a flat rate Locate, it was worth 1.5 billable hours. If I worked on a budget case, I divided the budget by say $131 per hour to create a billable hour. (one year I took my total revenue dollars and divided it by the number of billable hours and it came out to around $131). If I piled up the numbers in the beginning of the week, I could take my foot off the pedal come Friday. If I didn’t, I was staring at some Saturday work as well. I had a goal to strive for every week. I don’t like missing my goals. I set them intelligently and try not to get complacent.

My billable hours were worth $131 that year. I am not talking about total hours in your business, just time spent working on the cases that you can bill on. Some drive time is not billable; the same goes for administrative time or time paying bills or marketing. I average 52 work hours a week that year. Yes, I tracked the other hours too in my Day-timer. (a great tool by the way)

26 billable hours that year at $131 per totaled $3,406 per week for the 48 weeks I worked. I grossed $163,488 over expenses of $52,250 leaving me a taxable income of $111,238. Uncle Sam and the Nutmeg State took 34% of that leaving me with $73,417 or a little over six grand a month to pay my personal bills and my set-asides for my SEP IRA.

In 2016, my son rejoined the firm and we set a goal of 39 billable hours by year’s end on $59,000 in expenses. Every quarter, we worked to grow the number of billable hours incrementally to accomplish that 50% increase by Christmas. Every week, I tallied the number of revenue dollars versus what we planned. Most weeks we were in the black, some weeks we were in the red. It was recorded on a flip chart in our office, staring us in the face every day.

To increase the billable hours, we had to increase our marketing. We gave value in up-sells by doing great work that resulted in more work in some cases. We asked for referrals from happy customers to their peers in their office buildings or in the bar association. When the dust settled at the end of the year, we hit 90.5% of our billable goals, but less overall in Net as our marketing expenses were higher than projected. Every month, the weekly critical number increased. It made us more efficient in planning travel time between jobs. It kept us focused on making marketing calls during the good weeks to keep the pipeline full for weeks or months to come. We had long discussions on whether to take on more expenses or reduce a different one, knowing that one might grow revenue while the other definitely reduced expenses. Overall, we did great. It was a great learning experience for him and me and although we didn’t take home the gold, we were able to stand on the podium while they played the national anthem for a lot of silver.

How to get started. Take last year’s Total Revenue number and tabulate by hand the total number of billable hours you worked from your invoices, divide the total by the hours and that will give you your average billable hour. Yeah, all those hours worked on the court-appointed criminal defense cases really dragged the average down, didn’t it? What about the grinders who gave you a regular amount of cases but you had to jump through hoops and then bleed through your eye-balls collecting from them? You will see immediately why you need to target a market of better-

paying, faster-paying clients. Just keep that in the back of your mind for now.

Then you divide the total number of billable hours you worked by the number of weeks your worked and that will give you your critical number. Could I have won the gold that year if I worked Christmas week and the not visited my daughter on the West Coast in June? Maybe. Would I have incurred the wrath of my wife? Definitely. There is a greater benefit to a healthy work/life balance I am told. As I get older, I am starting to realize that all work and no play makes John a rather dull boy.

When you set a goal of a weekly billing number and you put it somewhere that you have to face it, you are holding yourself accountable and you quickly see where the gaps and shortfalls occur. You can blame it on circumstance or you can think of ways to attack the problem and overcome the obstacle. I had to limit our company to only 40 hours of court-appointed criminal cases a quarter. I had to be very careful in selecting the case and the attorney. I called it my Low Bono work instead of Pro Bono work. 160 hours of this work a year out of 1,760 billable hours meant that I was giving those cases 10% of my time. I considered it to be like a biblical tithe.

Setting a weekly billable goal and budgeting for expenses gives you the basics of running a business. Knowing how you made or didn’t make your Critical Number for the week is your first and most important analysis of how you are doing. Most PIs shy away from doing this. That is why most PIs become ex-PIs. Face the numbers and do something about them. What’s your critical number?

For the next issue, I am gathering input from investigators around the country as to what they mean when they say, “I get most of my business from word of mouth.” How do they earn word of mouth business? I am asking you what you understand word of mouth marketing to be and I will attribute the quote to you in the issue.