People Produce Profit

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Allison Williams: [00:00:05] Hi, everybody. It’s Allison Williams here, your host of The Crushing Chaos with Law Firm Mentor podcast. Law Firm Mentor is a business coaching service for solo and small law firm attorneys. We help you to grow your revenues, crush chaos in business and make more money.

 

Allison Williams: [00:00:26] Welcome to another episode of The Crushing Chaos with Law Firm Mentor podcast, where this week we’re going to talk about my favorite topic in the law, which is how people produce profit. Okay, this topic has come up really straight out of the annals of our public Facebook group, the Law Firm Mentor Movement. And I remember seeing this discussion thread that started where someone suggested that they couldn’t afford to hire and they were really struggling with when would be the right time for them to make a decision to hire someone. And there were a lot of answers and a lot of ideas thrown around about this. But one of the things that immediately came to mind that was pretty evident from the answers and the suggestions that I saw is that people believed that what they had to do was save up for an employee and to make sure that they had enough retained earnings, enough savings set aside to be able to afford the employee for some period of time before growth would kick in and more fueled activity would support the, the economics of the law firm higher.

 

Allison Williams: [00:01:40] And of course, I know that this is a completely wrong way of looking at it. It really is derived from a lack mindset. The mindset that says I don’t have when I am looking to hire an employee, so therefore I can’t secure the employee. And it’s kind of like the which came first, the chicken or the egg, do I have the money and then hire the person? Or do I hire the person to make the money? And hiring the person to make the money is not just going to support your economic needs in the present, it is also going to fuel the growth of your law firm. And this is something that we talk about a lot here at Law Firm Mentor that people produce profit. That is not just a catchy slogan. That is not just an ideal. It is not something that you work your way into. It is a belief system that if you adopt it and you truly learn how to see people as profit in your business, how you will have a much better business and you will be producing both economic profit as well as additional time for yourself so that you’re not manically working like a slave more than you desire to work in your law firm, and you can have the best of both worlds.

 

Allison Williams: [00:02:53] So I wanted to give you guys just a little example of how this principle played itself out recently for someone that you would probably never expect to be in a position to hire, but yet this person stepped into the people, produce profit mindset, and was able to get to a great result. And then we’re going to talk a little bit about some of the considerations that you have to have, some of the things you have to go over in your mind when you are trying to get to a profit-producing plan around the people in your law firm.

 

Allison Williams: [00:03:27] So first the story. This is one of our clients here at Law Firm Mentor. This person has been with us just over a year. She signed up for her second year a few months back now. And this person joined us really with a desire to create for herself a true maternity leave. She had had two children before. One child, her very first child, essentially tanked her business. And not because she wasn’t working. She was working while she was also out on maternity leave. In terms of what that looked like, we won’t go into. But she was working as well as taking time off but it was very helter skelter. Right. It was kind of one of those circumstances that I see a lot of women lawyers talk about, which is how do I fit in maternity leave? So in other words, it becomes one of those. All right, I got to I got to take care of some clients.I have to produce some income. I’ll have to do some work. And I want to bond with baby. So I’ll bond with baby and then I’ll do some work and I’ll bond with baby and I’ll do some work. And then you feel frustrated by your entire existence during that process because you haven’t given yourself time to physically heal. You haven’t given yourself time to emotionally adapt to the new undertaking of motherhood, and you haven’t given yourself the time to truly enjoy either of the parts of your life that you’re servicing. So when you’re with the baby, you’re thinking about all of the stressful activity back at the office that you are neglecting. And when you are at the office, you are feeling resentful and frustrated because you want to be with your new infant.

 

Allison Williams: [00:05:08] And so that was her experience and she did not want to have that experience the second time around. So she tried something a little bit different, second time around. This time she had more of a business and said, I got to keep this going. So she juggled a little bit better, having learned some of the things that do and don’t work for communications and do and don’t work for client maintenance and doing don’t work for managing a litigation calendar. So she learned from the first time out, if you will, and she made a better choice and a better structure for herself. But she still felt unfulfilled and frustrated and resentful during that process.

 

Allison Williams: [00:05:52] So this time around, when she knew that she was going to have a third child, she said, I’m not doing this again. There’s got to be a better way. So she presented myself and other members of our coach team here at Law Firm Mentor with the challenge, and she said, I want to take a real maternity leave. And when I say leave, I want to be on leave and I don’t want to be working part-time and breastfeeding in one room, and then rushing over to the next room to have a client consult and then rushing to the courthouse. I want to truly be off and enjoying my maternity leave to do the things that I need to do as a mother as well as to, you know, physically recover from what I just went through.

 

Allison Williams: [00:06:34] And so with that, as her goal, we had a defined definition of what success would look like. Success for her would look like out of office, not working while she is on maternity leave. That means extended periods of time, several months that clip where she would not be available, which meant she had to coming into a, coming into our ecosphere as a super solo. She had no staff. Well, not exactly true. She had a part time VA, but that was really it. That person was kind of like the, the kind of eyes and ears half, half paper pushing, half admin, half girl Friday type person.

 

Allison Williams: [00:07:19] But that person was a part-time assistant. She was obviously going to need a full-time lawyer. She was going to need to have some administrative staff to take care of things like paying the bills and organizing the activity and making sure that clients matters were handled appropriately. And we had to staff her up. And the question became, how do I staff up when I’m only making, you know, a couple hundred thousand dollars? Not even. Right. I got to I still got to support myself. I still have to support my kids. I still have a lifestyle to maintain and people cost money. Right. That’s the first thought that everyone has. People cost money. So I acquainted her with the people produce profit mindset. And the first thing that we did was come up with a profit plan for how she was going to be able to increase her income, not just her revenue, her income. That meant revenue had to go up and she had to increase the amount of that revenue that she is taking. A greater percentage of it had to come to her to sustain and grow her economic lifestyle. So we had to produce a profit plan for increasing her income. But it also had to take into account the fact that she could not be the producer of her income.

 

Allison Williams: [00:08:35] And in law so many times we think of ourselves as the product, right? We’re the thing being sold to the client. And so our egos get wrapped up in that, i.e. it has to be me, the client is coming here for me, they only want me. And by the way, I speak about this principle as someone with a very big ego. And for most of my adult life, I identified myself as the quote it girl, if you will, in the law. I had a statewide reputation and an international speaking career by the time that I started my law firm. So when I said people came here for me, that was very much guided by data outside of myself. My ego needed that to be true, and the things that I had attracted into my life confirmed that that was true, right? I was the one in the newspaper articles. I was the one who had been on Katie Couric. I was the one that was featured in the news. They are coming for me, and I had to extract myself from that mindset and from that belief system in order to build a law firm that did not require me in order to produce income. And if I could do that, I can tell you every lawyer can do that. No matter how big your ego or your reputation, you too can escape being the product that you are serving and selling to your clients.

 

Allison Williams: [00:09:57] Ok, but I digress. This particular client accepted the challenge and said, I need to know how I’m going to hire people if I don’t immediately have more money with which to hire people. So we essentially pulled three levers at once. In order to get her there, we had to hire people, which means we had to create a profit plan around the people. So in other words, how do we bring in people at the right pricing point, at the right strategy in order to get those people producing more money than you could produce on your own. By the way, just a little aside, the fastest way to do that almost invariably is hiring up the food chain. It is hiring someone more experienced than you’re going to want to hire. You do not want to hire someone who is an assistant. If you hire someone with less skill and ability than you have, you are typically going to have to coach and train that person. They’re going to require more time, not less. You want to bring in somebody who is greater than you at what you do. So that, that person can be handed your clients and your clients can enjoy the process. Your clients can hear and believe that they are getting something better than you, and it’s triggering as that will be for your ego. That is the pathway to freedom if you’re going to ultimately hand off work of people who hired you.

 

Allison Williams: [00:11:21] So that was part of it, right? We had to get the right people in place with the right pricing strategy so that she could make more money and the right profit strategy. In other words, we had to compensate that person very well, but also fairly and with the money that was left out of the revenue stream from that person, we had to get more people producing more profit on a lower scale. So that there could be enough additional money coming in that the person who owned the firm could take more and also still have enough left over to run the firm. So that was step number one. That’s one lever.

 

Allison Williams: [00:11:59] The second lever is we had to get sales up. Right. Getting sales up is not about hoping that when you have a conversation with someone, they are in the mood to hire you or they love the little audition that you put on, you know? Very recently, one of my favorite movies was, was on as I was, I was flying from Arizona to New Jersey, and I got the chance to watch A League of Their Own with Tom Hanks and Geena Davis. One of my favorite movies of all time. And if you remember, for those of you that have seen the movie, you know, Tom Hanks comes out. He is a, a washed-up drunk has been baseball player who basically drank his career away, but he still had a big name, Jimmy Dugan. Right. So how does Jimmy Dugan define value for this baseball league? Jimmy did not like the idea of being a coach to girls. He was like, girls don’t play baseball. And, you know, the owners of the league said, Yeah, these are real ballplayers and we need you to be their coach. But listen, what you’re really going to do is you’re going to be there for show. You’re going to come out, you’re going to wave your little hat around. You’re going to give the people what they want, right? So it’s the same idea. And when you apply it to your law firm. Right, you as the owner. Are going to be the person who’s going to come out and give the people what they want, right? You’re going to wave your little hat around. And the way that you do that is by creating a certain level of value intrinsic in who you are. So part of that is stepping into the confidence of who you are, but part of that is putting yourself out into the market from a marketing perspective in a way that drives people into the law firm, but contemporaneously drives them in with an expectation that they get to work with your brand and not with you.

 

Allison Williams: [00:13:57] So that is both a sophistication of marketing message, right? You have to change what you are saying to the marketplace, but it also is about how you are marketing so that your proliferation of marketing messages reaches the right number of people in the right way to give you enough opportunities to sell at the price point that’s necessary for you to drive in more revenue.

 

Allison Williams: [00:14:19] So again, we’re pulling the people lever, we’re pulling the marketing lever. And then finally, is the sales lever, right? The sales lever is the lever that a lot of people overlook, but it is what ultimately gets butts in seats. Right. You have to have a sales conversation.

 

Allison Williams: [00:14:38] So how do you do that? Well, one of our signature retreats here at Law Firm Mentor is Legal Sales for Attorneys and Non-Attorneys. And we have that both as a live event and for our momentum level clients and higher. We also have that as a virtual course. And of course, we have a boot camp in sales every month. And so there’s a deluge of information about how to have sales conversations and this client took it on as a true challenge and she said, listen, I don’t have time to pussyfoot around this, right? I don’t have time to go into resistance around why I’m not giving legal advice. I don’t have time to question the process as to whether or not this is going to get me more clients than I had before or fewer. All that I can do is trust the process because I got 40 weeks of gestation. That’s it, right? I have a defined deadline and she committed herself and still commits herself every day and she has more than tripled the amount of revenue that she was able to produce in the course of one year working this plan. But by virtue of hiring the people and using the people and the fact that you have to make payroll every two weeks, using the people and the economic pressure that’s created by adding the people and having to monetize them in a certain way to fuel the growth. Right. Those three levers, the people, the marketing, and the sales all together are going to be the base of your launchpad to fuel your growth.

 

Allison Williams: [00:15:18] Having said that, now I want to go over very quickly three different areas of concern that you have to consider when you are trying to get to the mindset and the system of people producing profit.

 

Allison Williams: [00:16:21] So first you have to start with a profit plan for your people, just as with our client, right? You have to know how you’re going to make money off people. Far too often I see lawyers hire people with kind of a build it and they will come attitude and sometimes that works. Sometimes you are growing so rapidly that if you don’t get butts in seats, if you don’t have people come into the office to do the work, you’re going to have to turn the work away.Right.

 

Allison Williams: [00:16:46] And economically, you know that that is going to cost you. So you just hire someone and you pay what you think the market is telling you is required for the person. You don’t necessarily plan what is going to be required for their production in order to produce a high enough economic yield from their labor. In other words, you have to make enough more than what you pay them in order to use them more to not only pay your overhead and expenses for the firm, but to have sufficient profit to reinvest in the firm. And as you add people and you add payroll, you have to also be adding retained earnings. And you do that through having enough money in excess of what you pay people to be able to stock some away. So that profit plan has to be designed before you add people. If you just go adding people, oftentimes what lawyers do is they ask around and they say, what are you paying for a 3 to 5-year associate? And then you do the math on that and you say, okay, well, what is the hourly rate I can get for a 3 to 5-year associate? And you stick those two together and you hire somebody without any gumption of how many hours they are absolutely required to bill or how many cases they are absolutely required to handle over what period of time or without any idea of how much time on desk each file should take.

 

Allison Williams: [00:18:11] And then when you have less money left over after you pay people, then you would like, you say, Oh crap, this is costing me money because you stop working your profit plan, You stop working your hours so that you can come over here and teach this person that has far fewer credentials than you really should have hired in the first place. And your time is now reducing your profit, and this person is underproducing what is required for their highest profitability. Because you didn’t set a requirement, you set a goal, or maybe you had a general range in mind, but you never required anything. So that profit plan has to go in first. It has to take into account how much is needed for the employee, how much is needed for the overhead, and how much is needed for profit. And profit is not just the fund money that you get because you own the business. It sustains and fuels the growth of the business.

 

Allison Williams: [00:19:07] All right. Number two, you have to expand your work. Every action of value must be valued. Everything that is possible to be done on a file has an economic value. And you really have to understand that at a granular level. Right. What is the true value that you are giving to people? It is not phone calls and emails.

 

Allison Williams: [00:19:32] It is information. It is guidance. It is support. It is counsel. Right. There’s a reason why attorneys are referred to as counselors of law. We give people more than just the name of the case and the likely outcome of a fact pattern. We are giving them strategy. We are giving them hope. We are giving them process. We are giving them intuition. We are giving them experience. And we are bundling that in a way that is digestible for them. That is an immense value. But you have to recognize all that value that is oftentimes, frankly glossed over when we own a law firm, not because we don’t care about our clients, but because we have so many things pulling at us that we do the minimum for our clients, not the maximum. And if you are in many lack-minded owner law firms, you have also probably gotten the message somewhere that you do people the greatest service by doing as little as possible so you can build them as little as possible and keep their legal fees down. So instead of being thinking, being thoughtful of I need to do as much as possible for this person and monetize that economic value so that I get the most out of this and they get the most out of this. We instead go in the opposite direction to as little as possible and oftentimes feel resentful when the people who are paying us are unhappy about paying us because they feel like they’re getting the short end of the stick. And they are. And they then begrudgingly pay us oftentimes not what we have even billed them. And we have an accounts receivable and we start to feel frustrated and then our relationship with our client is strained.

 

Allison Williams: [00:21:15] Ok, Third consideration for the people produce profit plan of your law firm. It is that your pricing structure can increase revenue. Now there are some coaches that will tell you the first thing you ought to do is go out and increase your prices. That is never going to be the first punch line, if you will. When you start working with our coach team here at Law Firm Mentor. We are very methodical in looking at your pricing structure. What is appropriate for your marketplace? What do the RPC tell you is appropriate for your structure or pricing? Raising prices is not something that you should just do on a whim. But having said that, oftentimes a $25 or $50 per hour increase is going to be felt far less by your clients. And when you spread that increase across 20 or 30 or 50 or 100 clients, depending on your practice area, and you contemporaneously structure the work in a way that you are increasing the activity that’s necessary on a file, but in a way that adds more value to your client. Your client is getting more value. They are contemporaneously paying more for value. So there’s an even exchange there and you’re not doing more work. That’s the beautiful thing, right? You can expand value without expanding hours, right? I tell people this all the time, kind of think about the different ways that we communicate, right? If there’s something I got to tell my client, I got to tell my client that the court has issued an order that is not favorable to them. And I got to discuss with them why the court decided what it decided, what can be done, if anything about that. Are we going to appeal or are we going to seek some form of reconsideration, or are we going to seek to vacate portions of the order? Are we going to seek to negotiate the next stage of the case of resolution because of the order? What are we going to do next? Right. I can put that in any email. I can have that conversation in a phone call or I can bring the client in face to face.

 

[00:23:29] For most people, they will decide that they have gotten a greater value if they have a 1 to 1 conversation with you, when they can hear the inflection of your voice, when they can see your body language as you are leaning in trying to give them comfort about the outcome that you have to relay when they can see the frustration on your face as you describe what you consider to be the unjust result of not winning when you felt you should have won.

 

Allison Williams: [00:23:58] Right? All of that that you are conveying face to face, sitting in a room with your client so they can see, hear and experience your energy very different than what they would get if you shot them a quick Hey, we lost. Do you want to appeal email? Right. Even though one is inherently going to take more time, it’s going to inherently take more time for you to have a face to face conversation with your client. That quick email one and done boom. You knock it out. Even though you have spent more time in the face-to-face meeting, your client will perceive a greater value. It will mean more to them, and thus whether they have a flush fund of money that they’re paying you with or they have to struggle, check to check to pay you, they’re going to be more inclined to pay for the service where they got that, that extra touch, that time, that attention, that counsel. Then when they got the quick one and done email and by virtue of you saying that because that value, the value that you just relayed in that 1 to 1 meeting because that value gave a heightened awareness to your client, it gave them the benefit of your expertize and your analytical frame and your emotional guidance and your compassion for them.

 

Allison Williams: [00:25:18] And it gave them a step-by-step process as to how they can approach an appeal and whether that is in their best interest and what is going to ultimately cost them. And they can weigh the pros and cons with you. They’re someone who can help them think through what is the best course of action. And they get your recommendation because you put a higher value on that and you charge them $50 more per hour. It has not cost you anything more to spend that time than if you had spent that same amount of time for $50 less per hour, but same amount of time yielded something more for you.

 

Allison Williams: [00:25:53]  When you think about your pricing structure that way, when you think about how you can elevate the quality of what you give to your client and contemporaneously elevate the price that you are going to charge them for that service you are giving yourselves, you and your client a win-win, and you are making more off of the same amount of labor. When you use a pricing strategy that takes into account a win-win that gives to your client and gets to you contemporaneously, the people producing profit is inevitable. Because you don’t then have to go out and stack more bodies to make more money. You are stacking more value for which your clients will be happy to pay.

 

Allison Williams: [00:26:39] All right, everyone, I’m Allison Williams for Law Firm Mentor. You’re listening to The Crushing Chaos with Law Firm Mentor podcast. And if you have a people produce profit issue, if you are thinking about how you can monetize or better monetize the people and the activity in your law firm in order to get your law firm to grow without having to go out and buy more leads, without having to go out and spend more money by just learning the things that are necessary in order for you to get to a greater result on the same amount of labor. Then reach out to us. Let’s have a conversation. You can book a call with one of our growth strategists here at Law Firm Mentor. The link to do that will be in the show notes for today’s episode and I will see you on our next episode.

 

Allison Williams: [00:27:31] Thank you for tuning in to the Crushing Chaos with Law Firm Mentor podcast. To learn more about today’s show and take advantage of the resources mentioned, check out our show notes. And if you enjoy today’s episode, take a moment to follow the podcast wherever you get your podcast and leave us a rating and review. This helps us to reach even more law firm owners from around the country who want to crush chaos in business and make more money. I’m Allison Williams, your Law Firm Mentor everyone. Have a great day.