#217: The Real Reason You Aren’t Achieving Your Business Goals

[00:01:14] Hello. Hello. Welcome to Life & Law. This is your host, Heather Moulder. In today’s episode, we are going to get into the real reason you aren’t achieving your business goals. So this is for anyone who set business growth, scaling, or BD goals this year who did not meet them. And this is especially for you if this has happened to you before; this is not the first year it has happened.

Now, even if it hasn’t happened to you before or maybe you barely missed them, I want you to listen to today’s episode because we’re going to get behind something that I see a lot in my new clients. And I see a lot when I’m just talking to attorneys. And also, back when I practiced this, this was obviously happening, and I think it’s one of the biggest reasons why you don’t achieve your goals.

The Real Reason You Aren’t Achieving Your Business Goals: It’s About The Numbers

[00:02:06] And we’re just going to get right into it, and it’s really about not looking at/measuring/ tracking the right numbers.

So we’re going to get into this through a few – I think it’s four common examples that I see over and over again. Now, a quick note…

Some of these examples are going to relate to virtually any lawyer out there. Regardless of whether you’re a solo attorney, you own your own law firm, small to mid sized law firm, or you are a lawyer in a bigger law firm where you’re trying to grow your own book. Some of these examples are specific to one or the other, but there are all lessons within each example. So I want you to really challenge yourself as you listen to this and think through, okay, how does this apply to me?

[00:02:53] And how, you know, how could I apply this lesson? And what Heather’s saying here about what I need to be measuring and tracking and paying more attention to and how to do that, and then the decision making that comes from that to my specific practice or law firm. All right, so let’s dive right in.

Business Development Goal Trap: Measuring/Focusing On The Wrong Numbers

Example number one. So let’s say you have an audacious business development goal.

[00:03:15] Bring in a million dollars of new business or originations over the course of one year. So the first thing I will say is, good for you for actually setting a dollar goal. One of the things that I’ve noticed a lot in many attorneys is that they set these new cases, new clients, new matter goals instead of dollar goals. And that is something that I actually push my clients to do when they try to say, no, I just want to bring in X number of new matters. And, and sometimes that’s okay. It really depends on their situation and the why behind why they’re doing that.

But this scenario that I’m about to tell you about shows the fallacy in that.

So you have this million-dollar goal. And so the first question I’m going to ask is, what were your actual originations and numbers this past year? Well, 150,000.

[00:04:07] Okay, so you’re going to go from 150,000 to 1 million in a year. Now, is that impossible? No, actually it’s not, but it’s not as likely.

And if you’re going to go that big from that original number, you need to make sure you understand where your work is. So the next thing I would ask is, okay, so where did that come from? Was it one client? Was it from a lot of clients?

Oh, well, it was eight new matters. Okay, so then you need to get into where your work is coming from and what kind of practice you actually want to build. Because if you brought in eight new matters that only generated $150,000 and you’re thinking you’re going to be able to generate a million with those types of matters the next year, that is very unlikely to happen. In fact, I’d say it’s not going to happen. So let me give you a scenario here.

[00:05:01] Let’s say that you are a litigator, and this past year you brought in those eight new matters. None of them were big, they were all very small. And the truth is, your current spread is to be working on a couple of big matters for other people. So they’re not your originations.

And then you’re trying to build your own book, but your own book is coming in in these small, tiny little things, right? So you have too many small matters, no big ones of your own.

[00:05:31] And that probably means you do not have the right network currently to bring in those big ones. And maybe you don’t have the. The right, you know, expertise or background, either. Sometimes this takes time. So you’ve got to get really honest about the real numbers, not just the number of my goal, but let’s look at what we actually have and where that’s coming from. So this person wanted to focus on the easy, what I call the easy numbers, new matters, new clients. Instead, start taking a look at what.

What business do I need to have to bring in the originations I want?

So the person I’m thinking of was like, okay, at least 60% of my originations probably need to come from one or two big matters, big cases.

It’s not really about the number of clients. And what that meant was, oh, we need to look a little more closely at the types of cases I’m saying yes and no to, because certain types of cases do tend to go to trial and be bigger and. And generate more fees than others. And once we did that, we could see very clearly that the network where he had been networking wasn’t quite right for the practice. He actually wanted to get him to that million dollars.

Because he was getting small, little referrals, not the big ones.

[00:06:55] So what, what we basically mapped out, okay, where do we go to get the bigger ones? How do we get in front of the right people? What do we need to be talking about in our marketing to show experience in those areas?

So this is an example of: It’s not enough to just focus on what I call the easy numbers, new matters, how many new clients? You actually need to go behind that and think about, okay, what kind of matters, what kind of clients, what fees will get generated from that to ensure you’re networking in the right places, to ensure you’re bringing in the type of matters, deals, cases, whatever it is that will generate the revenue you want and need to meet the bigger numbers.

Okay, so that was example number one.

Growth Trap: Thinking Busy Means Profitable

[00:07:43] Example number two, and this comes from numerous meetings with people over the last three years. Prospect comes to me, says, Heather, I want to. I think I want to hire you as a coach. I’m great at bringing in business, so I don’t need help there. I just need help with systems, scaling properly and hiring more people. I’m starting to be pulled in too many directions.

Okay, great.

Now sometimes we get hired and we get in there and we realize, okay, you may be great at bringing in certain types of business, but not necessarily the business that will pay the big bucks that you want. So, just because again, you’re bringing in a lot of business does not mean it’s the right business.

But then this happens. And this has happened a number of times over the last two years, and it breaks my heart when it does.

[00:08:29] A couple of weeks they come back and say I can’t hire you because I’m in the red and I have no clue what to do. And I don’t know how to get out of it. And I just, I can’t even afford to hire you at this point.

So this happens a lot with solo practitioners who’ve been in practice for usually 6 to 12 to 18 months. And small law firm owners who started as a solo and started to build their own firm. And they’ve been scaling for 6 to 12 to 18 months. And these folks are trying to do it all on their own. They’re piecing it all together. They are hair on fire busy with work and assume that means they are financially fine. But no, they are not. And we’ll get into why in a second.

[00:09:14] This also happens to big law and big law adjacent attorneys who are also not tracking the right numbers. They are again, like the example before, are tracking the number of new clients and matters, but not the type and how much it’s going to bring in. And they get to the point where they desperately need me, but their distributions have been cut, and they’re not quite sure how to afford me.

So what is going on when this happens? So again, they are not tracking the right numbers. It is not about the number of cases, deals, it’s not about how busy you are. It’s about what you’re collecting versus what your expenses are.

[00:09:53] And I am sometimes amazed at how few attorneys actually track these from the get-go. Now here’s what I see happening a lot, especially with solopreneurs who have just gone out on their own and are getting started. Those who are starting a law firm or have done decently well as a solopreneur, and they want to go into growth mode. So they go in with this assumption that you don’t need to track it initially because your real goal is just to focus on the BD and get business in the door.

And there’s an assumption that, well, in three, five, six, seven, eight months, when I get good at that, and enough starts coming in, then I’ll start focusing and tracking.

But then you get busy. And because you’re busy, you assume you’re okay until you suddenly realize it isn’t okay. Things are in the red. You are not okay.

[00:10:46] You’ve got to track the numbers from the very beginning. And you need to make sure you’re tracking the right numbers.

So here’s what I want you to start paying attention to. Here’s what to track. And this is not wholly expansive, but this is what I see a lot of attorneys really missing and not doing.

What To Start Tracking

Number one is expenses.

[00:11:08] And not just the obvious ones. You need to know everything you’re spending money on, what’s every month, what’s quarterly, what’s annual, et cetera.

And here are the ones I see a lot of people not tracking well:f payments owed to contract attorneys and paralegals. I see a lot of lawyers getting into trouble because they’re not tracking how much money has to be paid out to contract attorneys and contract paralegals.

Instead, they’re just looking at the collections coming in and not pulling out that money so they think they have more than they actually do.

[00:11:44] The second piece is for those who scale: benefits and bonuses.

If you are hiring full-time employees and giving them benefits and have bonuses, you need to be very cognizant and careful around how you are packaging those benefits and bonuses. So one area I see a lot that gets people into trouble is giving bonuses based on hours billed without taking into account what’s collected.

This can hurt you in a very big way and especially if you’re hiring younger people or really even anybody. It takes a while to integrate new people and to get them not just billing. It takes them to get them billing, but it takes them a while to get their billables, what they’re working / everything they’re working or most of what they’re working, billing and then everything or most of what they’re billing collected.

So you’ve got to pay attention to those numbers and really be cognizant.

[00:12:36] The other one is any type of other overhead that isn’t regular. So sometimes there are things that you have to pay for upfront with certain types of deals or within specific industries, things that are case-specific that if you’re not tracking those expenses carefully, all of a sudden you have money due that you didn’t remember or realize, and you don’t have it there.

So pay attention to expenses, every single one.

Second: Hours Worked vs. Billed

[00:13:03] The other area that I want you to really pay attention to is worked hours versus billed hours versus hours actually collected.

So, how much are you writing down or not even billing before the bill goes out? And why? What are you billing versus what are you collecting?

It is so easy to watch. Oh so and so has 40 hours per week for the last two months. Wonderful. They’re great.

If you’re writing a lot of that down or you’re not able to collect on all of it or a large portion of it, that’s a problem.

Third: Pricing vs. Expenses

You’ve got to pay careful attention on a month-to-month basis to this next area. I see that a lot of people, especially this happens early on, when solopreneurs go out, and also when it comes to those trying to grow their own law firms. What are you charging versus your expenses?

[00:13:58] So a lot of attorneys solo and those in small firms, I’m not talking about big law or larger law firms here because I think sometimes they charge too much. But a lot of the solopreneurs and small law firm owners who are trying to scale aren’t charging enough.

And I hate to say it, but you do not have a business if you aren’t able to make money.

[00:14:18] So you need to pay close attention to what you’re actually charging, whether it’s an hourly billing rate or you’re giving flat fees or package-based fees. I see a lot of people who are trying to scale, especially and this is where that person that I mentioned earlier, who said, oh my gosh, business is coming in, I’m crazy busy but I’m in the red. How did this happen?

A lot of times what happens is so that you can scale and bring in more and more and more business, you give quote unquote deals, you give flat fee rates, you give, you know, package rates that really aren’t enough for the work that is involved and isn’t taking into account while you’re scaling the extra expenses of that scaling of the new tech that you need, of the people you’re going to hire or the contractors you have to pay. So you need to pay very careful attention to that and adjust what you’re charging along the way. You don’t really know until you get started. So this is something you want to track monthly and quarterly and make adjustments as you go.

Fourth: What Are You Paying Yourself (and How)?

[00:15:23] The next thing and last thing that I see really hurting people in this area is what are you paying yourself, and when are you paying it. So, full stop… If you’re growing your own law firm, you need to make a profit first before you pay yourself. And I know that’s controversial for some people, and a lot of people don’t like hearing this.

You need to be able to pay the bills, right? You need to be able to pay the people you’ve hired. You need to be able, able to pay for those things. You need to then have a profit. That’s what you pay yourself with.

And you really should have a profit, pay yourself with a portion of that, and then have money left over for the future. Because we all know there are ups and downs.

If you do it that way, it is incentive to fix things more quickly. You will more clearly see what’s going on and why you have, you know, you’re in the red or almost in the red, and it will help lead you to quicker answers. I see a lot of attorneys trying to grow their own law firms who mandate that they get paid first. And that is the exact opposite way to look at this. When you are growing your own firm, make a profit first.

Scaling Trap: Hiring At The Wrong Time (& The Wrong People)

[00:16:41] All right, so that was example number two. Example number three is paying attention to the numbers, the right numbers on when to hire and who to hire as you scale and grow.

So, where I see people get really messed up here is they assume that busy means you can afford to hire someone and anyone, especially a full-time lawyer or paralegal.

[00:17:07] I’m just going to say it. Scaling is not easy. There is risk with it, and sometimes you have to hire somebody before you can really afford them, which means taking on debt or having some sort of savings that you’re utilizing. To do that, you need to be super honest about the cost up front and how you’re going to pay for it.

I see a lot of people just make assumptions because they don’t want to go there. They don’t want to have the difficult thought, you know, thinking about the difficult things and then maybe coming up with other solutions and not hiring somebody, so they don’t look at these numbers.

[00:17:42] Please note, just because you’re getting more work than you can handle does not mean it’s time to hire somebody. It could mean that the work is a short-term cycle only. It could mean that the work isn’t going to pay enough to be able to hire someone else. It could mean a lot of things.

If you have been listening and you follow the advice I’ve already given you in the example above, you will be able to run the numbers and understand the costs of the new employee based on the packages you’re offering, the bonuses you’re offering, the salary, et cetera, and what that means for the money you need to be making to be able to hire them.

And I will note this: A lot of times, lawyers want to hire that attorney first. The full-time, younger attorney who works for them, whom they can train. That’s not always the wrong answer, but a lot of times it’s not the right one.

[00:18:37] A lot of times the place to start is part-time or contract help, or to hire a full-time admin. And then a paralegal and then an attorney.

Do not be afraid to utilize contract attorneys as you grow. And contract paralegals, who can be in a really effective way. And it makes it easier to understand the numbers while you’re growing the business, so that then, when it really is the right time, you understand where you are.

[00:19:08] All right, final example that I see a lot.

Law Firm Growth Trap: Not Tracking Your Specific Overhead

[00:19:13] You actually have a good book, but you’re not making the kind of money you think you should be making for the size of the book that you have and the amount of work you might be doing. And you’re especially incensed by the fact that there are other partners in your law firm that are making as much money, maybe even more than you, and they don’t have as big a book or they don’t work as much as you do.

So you go to war over this within your firm, and unfortunately, you lose. Deservedly so.

[00:19:41] Here’s why: You’re not paying attention to your overhead. So what is your overhead versus their overhead? It’s not just about office expenses, by the way. It’s about staffing and the people who are utilized by you (other people on your deals or cases or matters) versus theirs. It’s about the marketing expenses that the firm is paying on your behalf.

We often don’t track the right numbers. I see this a lot. I saw this when I was in the law firm environment. There were partners who were constantly complaining that they didn’t make enough. But they never took into account the amount of marketing that the firm paid on their behalf. It’s part of your overhead, y’all.

I saw people who didn’t bill a lot on their own and had a lot of people working for them, a whole lot of people. Well, those people have to get paid. So that’s part of your overhead for the book that you have.

Track the right numbers.

Why Lawyers Don’t Track The Right Numbers (Spoiler: It’s Not Because You Don’t Understand the Business Side)

[00:20:39] So, a quick note about why we do this. I actually believe it’s not that we don’t know. It’s not that we’re stupid when it comes to business. We all say that about ourselves. Many of us say I’m not a business person. That’s an excuse. You’re smart, you’re savvy. This is not that hard.

It is actually a mindset issue. We don’t like looking at these numbers because they make us feel like we’re not in control. There’s luck involved, the economy, all these other things. But here’s the deal y’all.

[00:21:10] You actually have more control than you realize. And the only way to take control is to know your numbers. Just look at the examples above. Knowing the numbers would help those attorneys in:

• Identifying that they have to change their percentage breakdown of the type of cases they’re bringing in, which means changing where they network and who with.
• Identifying expenses clearly so that you can cut back on unnecessary ones.
• Getting contract help for overflow so that you can still make a profit as you grow and then hire at the right time.
• Identifying your actual overhead and what is and isn’t worth it. Plus, where and how to grow in a way that doesn’t exponentially increase your overhead, giving you more take-home.

[00:21:51] When you know your real numbers and track them, you’re not going to get blindsided.

Know them, track them from the very beginning. It will give you a clearer picture. It will open up more options for you, and you will do much better at achieving your goals in the long term.

That is it for today. Bye for now.