Is your firm struggling with cash? Are you not bringing home enough money?
If the answer is yes, then it’s time to implement the Profit First system (from the book Profit First by Mike Michalowicz).
Owner’s Pay v.s. Profit
Before we get into anything let’s define Owner’s Pay and Profit.
Owner’s Pay is your salary for working.
Profit is what the firm made after all expenses were paid.
What is causing this cash problem?
The root of the problem is human nature.
Mike Michalowicz likes to call what we do “bank balanced accounting” and that is where we naturally look at our bank accounts each morning and one of three things will happen:
Our lives revolve around money and we don’t always make the right decisions about how to handle our money.
There was a time many years ago that I did not handle my money correctly and I went through bankruptcy. All my money was going to child support and religious school tuition (a part of the legalized divorce agreement), so to survive I took out loans. In the end I couldn’t pay them off and I couldn’t get more loans, so I went through bankruptcy.
There was no way I would allow that to happen again. I analyzed my situation and where I went wrong, so I wouldn’t make the same mistake twice. I want to share my knowledge of debt with you, so that you won’t make the same mistakes I did.
What makes debt bad?
Do your taxes pile up to impossible numbers? Are you not taking home the amount of money you should be?
Why is that?
There are a lot of things that contribute to this, for example:
Your Top line Number
Everyone has a top line number they want their firm to achieve. You’ll aim for that number, but that number on its own is irrelevant. You have all your expenses you need to take into consideration.
Revenue v.s. Profit
The difference between these two is that
Revenue = the amount of money you make before any expenses
Profit = the money you take home after all expenses are paid
So, the revenue number (like your top line number) is irrelevant. All it means is that you’re getting clients. If you’re expenses are twice the amount of your revenue, then that’s a problem.
What you need to be looking at is your...
It’s important to understand marketing before you start marketing or getting someone else to market for your firm.
We’re going to get into the very basics and work our way through the different concepts of marketing.
What is marketing?
Marketing is the progression of a prospect on the journey from unaware to a promoter.
These are the steps the prospect will take on their journey:
Are you working tirelessly for hours on end?
Well guess what? You don’t have to.
We interviewed Chris Small, a SUCCESSFUL law firm owner who ONLY works 25 hours a week for his firm.
That can be you because we are going to share his marketing strategy with you right now.
Chris used to use SEO, but that doesn’t work anymore. Now he uses what he calls “Longtail SEO”. Which means he creates a lot of content to put out there. He does a Facebook live video everyday and then turns it into a video, podcast, blog post, and transcript.
Also, when creating the content he tries to do it in answer to a question someone might be typing into Google.
Moshe has a similar strategy as well. When someone reaches out to you, think about what there first question would be. Now answer that question in a blog post and pay for it to be an ad. People are more likely to click on an ad for a piece of content that answers their question than an ad for a law firm.
Who said that, that wasn’t ethical?
I’ve found that many law firm owners shy away from certain business practices, claiming that they are unethical. Now, there may be some nuances that aren’t allowed, but most of the time that is untrue. Most of these business practices are perfectly fine to do.
Ethics are definitely not something to mess with, but there are many things that people think are unethical that are simply just not true. Here are four examples of common misunderstandings when it comes to ethics:
(It could be that some states have laws against these practices or certain aspects of them, so make sure to double check the ethical guidelines, but don’t assume that they’re not allowed)
When you are being marketed to, it can be quite convincing to get that product/solution. How do you know if it’s something that is worth your time and money? You can’t say yes to it all, so how do you make sure you are saying yes to the right things, the things that will improve your business while costing less money and being less time consuming?
First, you have to understand the different types of marketing and how they affect you. There are two types of marketing:
Response Marketing is when you are looking for a certain product or solution to a problem you know you have. So, you give over your information and in return you are now marketed to. You look for response marketing and are happy when you are given materials and offers on what you were looking for.
2. Interruption Based Marketing is when you are unaware of a problem or that this particular solution existed and you are interrupted and made aware of a problem you have or given a solution you were...
Both Neil and Moshe have had multiple careers and they manage to balance work, family, and other activities they enjoy. How do they do it? Where do they manage to get the time? Continue reading to find out the different ways you can create more time for yourself. (All resource links are located at the bottom)
Your mind has a lot of control over whether you’re successful or not. When you are positive and you put your mind to something you can be successful in anything you set out to do.
“Even if you fail, you’re going to fail forward. If you don’t do it, you’re going to fail by not doing it” - Moshe
You don’t have to say “yes” to everything. Save your “yes”s for the things you actually want to do. Saying “no” doesn’t mean you’re losing out. On the contrary, you’ll be creating new opportunities for yourself, to do the things you truly want to do.
Your law firm is like a baby going through the different stages it has to go through in order to be an adult.
At each stage the child needs to learn specific lessons to mature through each stage through adulthood.
When you first start your law firm you have to take those baby steps (the basic necessities) first, otherwise it’s like you are a newborn trying to be an adult. At each stage there is a different lever you can use to complete that stage and move on to the next one.
These decisions can change. You just need to start with something.
In this stage you’ll access the lever of time. Make the most of your time and learn to use it well. All these things take time and now is when you need to master it.
How do you hire that first employee when you just start? First make sure you’re not starting your own law firm right out of law school. So far all you’ve done is read books. You need to actually practice law before you open your own firm. Start off working for someone and by a year or two you’ll have enough experience and you’ll have built up a good client base. This way you already start off with clients. Once you start your law firm you should hire someone (as long as you can afford it), so that the customer service level is maintained at what your clients are used to.
Although lawyers see hiring employees as an expense, it’s really a necessary investment. You should really hire your first employee as soon as possible because it’s just not feasible to get everything done when you are doing everything on your own.
It’s not even like you have to lay out a lot of money right then and there. You’re paying your employee...