Episode #48 – How Law Firms Can Increase Profit and Wealth

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I’m going to share a secret today. It’s not sexy. In fact, it’s pretty basic. But this is real and legit. And, frankly, it is a conversation I have at least once a week with different law firm owners. It’s sometimes hard to have this conversation too. Because attorneys by nature are intelligent and educated. Many do not like admitting to being wrong or unknowledgeable about a subject.

I always admit in this conversation that I too had this exact same struggle when I opened my accounting practice almost 20 years ago. As a CPA, I have financial knowledge, but as a business owner, I did not have experience until I went to the school of hard knocks.

So, here it is. The only secret to creating wealth for your law firm is knowing how to interpret your numbers. For those who may be new to following me, I intentionally use the world wealth instead of rich because I believe that the word rich is only tied to money. A specific amount in the bank. Wealth to me is creating your perfect life. Wealth is the amount of money you need to, for example, work 20-hour weeks, take a vacation every quarter, buy a boat, or volunteer every Friday at the dog shelter.

Today, I'm going to teach you how to become an amazing law firm owner. It means you'll be able to generate a profit easier for your firm, and that you'll enjoy the process. It sounds ambitious but follow the steps and I assure you it works - no exceptions.

Some law firms seem effortlessly profitable, but the truth is the owners are just experienced in following the universal laws of business ownership. There's no magic pill - nobody is born luckier in business than others. It's like how healthy people regularly exercise and eat well - there's no shortcut. 

I will admit that some of this is about your mindset. I don’t mean in the woo-woo sense that you can think about being a millionaire and tomorrow your bank account will have a million-dollar balance. 

I’ll share my story about where I got off track in my business. I think you will relate. First, as a CPA, I wanted to help everyone I could. My mantra was to use my knowledge for good. Put good karma in the world and it will repay me…eventually.

I had an idea about how long it took to prepare a tax return. I had an office that I rented with a few staff people, and I bought tax software. I knew those costs. On paper, I priced the preparation of a tax return at a small, respectable profit.

Where I went wrong is underestimating the time to prepare a return. 99% of the time, when tax documents arrived, something was missing. Or something within the documents looked weird. Both prompted discussions or emails which took time.

Then, once a return was prepared, some clients were happy with their refund. Some had questions about a family member’s or friend’s tax situation. Others complained their refund was too small or they owed too much. This resulted in additional conversations. Some of these conversations were really about tax planning, which is truly a separate engagement from tax prep. But, being that I wanted to help my clients and prove my value, I would give away these conversations for free.

My intentionally planned small profit per tax return was quickly turning into a net loss. Initially, I thought I would make it up on volume. But, that burned me out. I need at least 7-8 hours of sleep every night. Also, speed can be a factor in mistakes.

Instead of volume, I tried to sell bookkeeping and payroll services to small business owners. Great – diverse services will help, right? Wrong. I did the exact same thing. Priced these services at too low of a profit margin because I thought if my office did the bookkeeping, the related business returns would be a breeze to prepare in April. Wrong. Business owners have more going on with their tax return than just their business activity.

Even worse, is that I had fixed delivery dates with bookkeeping and payroll that stopped me during the peak of tax season from working on tax returns.

You may be thinking a few things at this point. I’m guessing that your first thought is that your practice bills primarily on an hourly rate or contingent. So, everything I just said is irrelevant to your firm. But, is it irrelevant?

What I experienced in the beginning of my firm was crazy – I actually had a full funnel of incoming leads with a high close rate. Sales and marketing were not an issue for me. So, most of my days were filled with billable work.  Take a look at your days:

• If you bill on an hourly rate, how much of your day is billable vs non-billable?
• Who is having conversations with prospective clients?
• For the work you do, how much is work that you could delegate to support staff?
• If you bill on a contingent basis, what is the average length of time to settle cases? How much longer to collect?

My point is that looking at one service with defined scenario conditions is not enough to determine your pricing.

I started doing market research on pricing. This quickly led me down the wrong path. I could not price the same or slightly below my competitors for several reasons. My services were not exactly the same. I had different overhead for my firm. I had a different standard of living at home too. Their prices could not be my prices.

I can define my issue as a mindset issue. I had money blocks – meaning, I had imposter syndrome and did not value myself to price my services for the value they brought to my clients. I held a belief that as a bootstrapped business owner, I was destined to struggle in the beginning. What BS.

So, like many ambitious business owners, I went on a journey of self-discovery to find the secret to wealth. I tried endless seminars, marketing schemes, and techniques to push through my money blocks through sheer force of will. Sound familiar? I read every book with "millionaire" in the title. But I was in debt and sabotaging my income potential.

I wasn't homeless or anything extreme. I was just scraping by with an average salary, debt, and living paycheck-to-paycheck. I didn't want to be ordinary. I wanted wealth to buy what I wanted, dining out, vacations, and get rewarded for my firm's impact. My friends continued to climb the corporate ladder while I looked for that missing abundance puzzle piece.

Here’s what I learned. Don't get caught up in one "silver bullet" tool. Randomly trying stuff doesn't work either. It’s about being consistent and persistent. 

Trust me, it doesn't have to be hard work and struggle. Most of my clients tell me how impatient they are in the beginning. I get it. You are drowning. You see the lifeboat but why is it not arriving fast enough?

Because you need to pause for a moment. 

So many firm owners settle for mediocrity and don't reach big income goals - they're unwilling to put in the work for an extraordinary life. Look at it this way, just like most people are unwilling to commit to becoming a great athlete, singer, or dancer. Most are unwilling to put in the work to becoming a great business owner. 

But you're different - you want this badly enough to do what it takes, and I've figured out the process so you can follow it.

Napoleon Hill said, "When riches begin to come, they come so quickly in such abundance that one wonders where they have been hiding during the lean years." I know that feeling of impatience, wanting your firm's finances to thrive now. But when I look at the formula, I realize I wasn't following the steps. I was just wishing for wealth to appear while sitting idle. Just like dreaming of a fit body as I sit on the couch eating a bag of chips.

Your progress will seem apathetic if you don't actively and consistently work the process. Some days I'd see money flowing rapidly into my accounts. Then I'd get complacent, skip a few days, and the income would dry up predictably. Don't think I get shortcuts just because I work with clients on this - for each new business goal, I go back to step one of the process.

I don't have magical powers; I just follow the steps consistently like you will. This is the process that I work with my clients on a daily basis. My formula provides techniques so you can create a healthy money mindset and see real profits.

By applying this formula, you'll set exciting but realistic financial goals for your firm. You'll know your "why" and exactly what to do to achieve the wealth you want. 

Are you ready? The formula is:

1. Document your WHY – why did you open your firm?
2. Define your long-term goals with your firm
3. Divide your long-term goals into shorter goals (by one year, one quarter and one month)
4. Link each short-term goal to a key metric
5. Review current metrics on a consistent basis
6. Adjust polices and procedures to move key metrics forward

Consistent analysis of your key metrics makes your visions and goals for your firm's wealth a tangible reality you can experience. The fact is what gets measured gets done.  If a goal isn't being achieved quickly enough, go back and start over from step one. Dedicate yourself to making your firm's dream finances a reality - it's what you deserve.

This formula works continuously. If you get to the last step without your desired results, re-commit by returning to step 1. You can get even more specific in defining your goals, take more inspired action, and trust the process.

This formula is how I work with clients as a fractional CFO. It simply works. If you are struggling to see tangible results with this for your firm, please reach out to me HERE.

Remember, owning a law firm is business. Do not strive for perfection. This formula works for any type of law firm owner who commits to it. So, keep asking yourself "Why not me too?" to achieve your desired wealth for your firm.

If you have any questions about today’s episode, feel free to comment if you are watching on YouTube or send me an email at [email protected].

If you know someone who might need to hear this information, please share this episode with them or if you are on YouTube, tag them below! 

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And before I go – remember - profit is something you intentionally plan for in the beginning. It is not a potential bonus at the end of the year!

Thanks, and have an amazing day!

Struggling to increase profits at your law firm and build your wealth as a firm owner? Learn a proven system to generate wealth using practical techniques. 

In this episode, Kelley reveals the real-life formula used by law firm owners just like you to create wealth and success in their practices. 

You'll discover how to set clear monetary goals, take inspired income-generating actions, and receive the wealth you deserve. 

This is your guide to step out of the role of an attorney who practices law and into the role of law firm owner to create wealth for you and your law firm.

✉️ EMAIL: [email protected]
📞CALL: (234) 207-5772
💻 VISIT: ProfitScaleThrive.com

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