SmallLaw, a popular email newsletter for solo practitioners and those who manage and work in small law firms, reviews hundreds of articles published every week. From these articles, they select one as their SmallLaw Pick of the Week — something they feel is a must-read for this audience.
While I’m making merry over the holidays, I’m going to reprint the posts that have earned us the SmallLaw Pick of the Week. Here’s the 5th one:
How to Run Your Law Firm Like a Business
You may have become interested in the law as a noble profession, but to break the seven-figure barrier, you must run your law firm like a business. As a solo practitioner or the owner of a small law firm, your primary focus – after gaining competency as an attorney – is to understand and apply the key principles of business development, operations, management and law firm marketing every single day.
There are 10 major parts every successful law firm owner must focus on – in this order:
Marketing: The purpose of marketing is to generate leads. There are a wide variety of ways to do this. All of them work, but they are not always suited for all situations, practice areas or attorneys. Find 3-5 different ways that work for you and use them frequently. Not every attorney will be a top Rainmaker, but everyone can do something to grow and market his or her practice.
Sales: The purpose of sales is to close the deal or sign up the client. Once you start generating leads, you must become better at getting prospects to become paying clients.
Services: Once you have become proficient at generating leads and closing the deal, you must perform the services for the client. When you fix your marketing, then you have a sales problem. When you fix your sales problem, then you have a services problem. See how this works?
Staff: When you become successful at marketing and sales, eventually you will also need more staff to do the work. You cannot hire just any staff; they must be the right staff for you. What kind of culture do you want your firm to have? Who will best fit that culture? Develop a list of qualities and characteristics you need your team members to have.
Systems: Policies, procedures and systems allow you to scale to the next level. Without documented systems, you cannot scale your business. You will hit a breaking point. It may be at half a million or more, but eventually you will experience a lot of unnecessary pain and suffering because you didn’t invest in creating written policies, procedures and systems for your law firm. You need written systems for every major part of your business. From marketing and intake to money and metrics, it all must be logically written down so even a brand new team member who knows nothing about your business can follow it.
Space: After you start hiring the right staff because you have more clients to serve, eventually you will need more office space to house them. Far too many attorneys get caught up in renting a much bigger or nicer space than they can afford in an attempt to “keep up with the Joneses” or give off the appearance of being more successful than they are. The pleasure you may gain from a fancy office is nothing compared with the worry of making those big payments every month. Don’t strap yourself with too many financial obligations and be careful about signing long-term agreements, especially when you’re just starting off.
Money: Very few attorneys went to school to become a bookkeeper or an accountant, but to manage a growing business you must know how to manage your money. You need to know the basics of finances for small business, from reading a profit and loss statement to analyzing your cash flow. Being an owner means other people are depending on you to manage the money wisely.
Metrics: To consistently break a million dollars per year in revenues, there are over a dozen numbers you must be monitoring and measuring consistently. Here are a few of them:
- Number of leads per month and where they came from
- Number of new appointments or consultations per month
- Number of new clients who signed up per month
- Total amount of new retainer agreements
- Total amount of cash in the door (actual gross revenues)
- Total amount of accounts receivable and how long overdue
- Total amount of cost of goods sold (COGS)
- Total amount of payroll & non-payroll expenses each month
- Total amount of net operating income (net profit) each month
This is not a comprehensive list, but if you know, measure and track each of those metrics every month, you’re on your way to comprehensively monitoring your business.
Strategy: While having a great strategy is necessary, most attorneys spend too much time developing a strategy and too little time implementing the strategy! Get some leads in the door. Make the sale. Collect the money. Do great work. Obtain some referrals. Wash, rinse and repeat! Then work on your next level strategy.
Self: Upgrading yourself is the last, but most important step. You need to read business growth books or take classes or seminars if that fits your style of learning better. Hang out around other successful business owners. Join a mastermind group of successful attorneys. Push yourself outside of your comfort zone. You will never build a multimillion-dollar law firm by staying inside your comfort zone.