“If you aren’t making money, you’re running a hobby!”
Those are the wise words of my friend, Davina Frederick. Davina is a recovering lawyer turned marketing pro. She is a successful entrepreneur, a client, my business partner in a software startup, a good friend since law school, and someone I completely trust to give me a swift kick in the pants when I need one. Especially when I’m wearing my business owner hat.
Davina was giving me just such a swift kick because she saw some things that I just flat out need to do better. “You’re a really good lawyer, and you are an awesome rainmaker,” she said. “But you aren’t as productive as you need to be to be truly profitable.”
Don’t get me wrong – I make a good living as a lawyer. Davina was helping me strategize for 2016, and that meant looking back over prior years’ financials. I don’t know about you but I (and most of the small business owners I work with) rarely look past cash flow to the bigger picture, and then usually only when we are filing our tax returns.
Davina took one look at my numbers and told me that my firm (and by extension, I) should be making a lot more than we are. Like, up to twice as much as we are. I stared wide-eyed at her when she said this.
“Really? My clients are NOT going to be happy if I suddenly double my rates.” But, what I charge for my services is only a small part of the problem.
The real problem was that I had achieved my 3-year business plan financial goal in 1 year and my 5-year plan in 3., but I never went back and revisited the plan. I am still doing what I was doing in years 2 and 3, and while we have grown slowly, we are simply not as profitable as we could be or maybe should be. Like most small business owners, I am better at executing once I have a plan than I am at doing the planning, and so I’ve been spinning my wheels.
My firm has relied on trial and error more than strategy and preparation. I haven’t pulled my business plan out of a drawer and revamped it in more than a year. I haven’t revised my budget in a while. It has been too long since I sat down with my financial planner. My marketing plan has been mostly nonexistent.My staff does a good job of keeping the procedural manual up to date, but I haven’t reviewed it in a long time. I have not documented my personal procedures and systems well, either.
We just celebrated five years in business. It is past time for the firm to grow up. Davina and I talked strategies for business and marketing, and I’ve started taking baby steps toward turning my law firm into the lean, mean revenue-generating machine I know it can be:
I signed up with a proper payroll service. I’ve been doing it myself – something I would never advise my own clients to do. A payroll service handles all apsects of paying you and your employees, files your payroll tax returns, pays your taxes for you, and assumes the liability if they screw it up. And it is relatively cheap – on par with what I pay for the payroll option on my accounting system, in fact. Plus, handling payroll takes a significant chunk of time each month, and my time is better spent elsewhere.
I met with my financial advisor. Not staying accountable to my personal financial goals has led me astray in managing the money my practice generates. As long as the cash flow stays positive and the balance sheet balances, I’ve been OK with whatever I took home at the end of the month. I met with my financial advisor yesterday and I now have a strategy. He encouraged me to make personal investments that are both realistic enough that I can achieve them and meaningful enough that it makes a difference in my net worth. Plus, I kind of have to take a regular salary in order to make the plan work.
Networking is getting cut down to size. My waistline and my bottom line need me to bring my own lunch once in awhile. I spend a lot of time doing networking activities that don’t necessarily yield new business. I can put that face time into building stronger relationships with existing, top-tier referral sources and clients, and I can claw back a few hundred bucks in dining expenses every month.
Processes are getting documented. In addition to revising the business plan, it’s time to take a cold hard look at operations and find some ways to be more efficient with our time and resources. I preach to my clients that systems are the way to ensure productivity and profitability, but my own systems have been allowed to evolve to the “but this is how we have always done it” stage. You know the story about the woman who always cut the ends off her ham before putting it in the oven because that’s the way her grandmother did it, and it turns out Gramma did it that way because her pan was too small for a ham? Yeah, that.
My firm is on a diet. It’s that time of year. I am writing my 2016 budget and it is lean. Not ridiculously frugal, but definitely not frivolous. Back to the “meaningful but realistic” standard my financial planner put in place.
I’m accountable. It’s my bottom line. I’m the one responsible for it. I have to keep an eye on everything from how much business we really get from the annual Holiday Party, to whether we stayed on budget and hit monthly revenue goals, to whether customer service was on par for each client, to how much we saved by buying generic toilet paper. I hate doing this the way I hate lima beans, which means it’s probably good for me. This is how I tell my clients how to run their businesses and it’s time for me to take some of my own advice.
This isn’t just a list of New Year’s Resolutions. These are concrete steps I’m taking toward making a good firm into a better firm. There will be more changes, no doubt, but it’s a start. I’m fired up and ready for 2016!