Latest / Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love / Episode 325: How Much Income Should a Law Firm Owner Make?

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Episode 325: How Much Income Should a Law Firm Owner Make? · Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love

• 0:01
  Intro: Welcome to the wealthy woman lawyer podcast. What if you could hang out with successful women lawyers, ask them about growing their firms, managing resources like time, team, and systems, mastering money issues, and more? Then take an insight or two to help you build a wealth generating law firm. Each week, your host, Devina Frederick, takes an in-depth look at how to think like a CEO, attract clients who you love to serve and will pay you on time, and create a profitable, sustainable firm you love. Devina is founder and CEO of Wealthy Woman Lawyer, and her goal is to give you the information you need to scale your law firm business from 6 to 7 figures in gross annual revenue so you can fully fund and still have time to enjoy the lifestyle of your dreams.
• 0:47
  Now here's Devina.
• 0:49
  Davina: Welcome back to the Wealthy Woman Lawyer podcast. I'm your host, attorney Devina Frederick, founder of Wealthy Woman Lawyer, a law firm growth strategy and business coaching company that guides women law firm owners through the process of scaling their law firm businesses to and through a million dollars in gross annual revenue. Have you ever wondered exactly how much money other women law firm owners are taking home in salary and profits? Have you ever considered how much revenue your law firm must make for you to take home your dream income? How much income should a law firm owner make is actually a trick question.
• 1:27
  There's no universal answer, no magic number that applies to every law firm owner. But what I've discovered after working with hundreds of women law firm owners over the past thirteen years is that most never do the math to determine what you need and want to earn to live the life of your dreams. You may know you want to put your kids through private school. You dream about that beach house or finally renovating your kitchen. You fantasize about taking your family to Italy for three weeks.
• 1:58
  You want to retire early or at least have that option. But have you ever sat down and calculated exactly how much money you need to take home each year to make all of that happen? What I found when I start this conversation with many of you is that you are so caught up in the day to day of working in your business and taking home just enough to feel comfortable that you never stop to consider the cost of some of your biggest, most audacious goals. And that's likely costing you more than you realize. Today, we're gonna talk about why knowing your take home number is absolutely critical, what it means for your law firm, and why you can't afford to stay in the dark about this any longer.
• 2:41
  First, let's talk about the disconnect. Let me paint a picture that might feel familiar. You're working incredibly hard in your law firm. You're bringing in clients, doing the work, managing everything. Your business bank account has money in it.
• 2:56
  You're paying yourself something. The business covers your car payment, your phone, and maybe some meals. You think you're doing okay, but then your daughter is accepted to the private high school you toured and you realize you're not sure you can afford the $30,000 annual tuition. Or you and your husband start talking seriously about buying that bigger house and you have no idea what additional income you'd need to make it work, or retirement comes up in conversation with a friend and you have that sinking feeling that you're nowhere near where you should be, so you just push it to the back of your mind to worry about another day. Here's what's really happening.
• 3:34
  You've confused having a business with enough revenue, with having enough personal income to fund your dreams. These are not the same thing. See this disconnect constantly with the women attorneys I work with. You're focused on growing your revenue, which is important, but you haven't connected that revenue growth to a specific calculated increase in your personal take home pay that's designed to fund specific life goals, you might be taking home $80,000 or $120,000 or $200,000 a year, but you don't actually know what number you need to hit to afford everything you want. And because the business pays for some of your personal expenses and you take some money and draws just whenever you need it, you're not even clear on what you're actually taking home in total compensation each year.
• 4:25
  This lack of clarity is keeping you stuck. You can't create a roadmap to somewhere when you don't know where you're trying to go. So what is this uncertainty costing you? First, it's likely costing you peace of mind. You're making financial decisions based on feelings rather than facts.
• 4:43
  I think we can or can't afford this becomes your framework, and that creates constant low level anxiety. Every major purchase or life decision becomes stressful because you're not operating from a place of clarity and confidence. Second, it's costing you opportunities. How many times have you hesitated on an investment in your business, hiring that operations manager or another attorney, working with a business coach, implementing a new system because you weren't sure you could afford it? But here's the truth, you can't evaluate whether an investment makes sense if you don't know what return you need from your business in the first place.
• 5:23
  Third, it's costing you time. And for many of you, this is the highest cost of all. You're working incredibly hard, but you're not working strategically. You're saying yes to clients and cases based on what comes in the door rather than what you need to hit your income goals. You're spending time on $20 an hour work when you need to be doing $500 an hour work to reach your targets.
• 5:46
  Finally, it's costing you your dreams. That trip to Europe keeps getting postponed. The kitchen renovation stays on Pinterest. Early retirement remains a fantasy rather than a plan, if you even think about it at all. Not because these things are impossible, but because you haven't done the math to make them inevitable.
• 6:05
  The women I work with who have done this math, they're making different decisions, better decisions, strategic decisions, and they're living those dreams instead of just talking about them. So, as I say to my clients, let's do the math. This isn't about creating a restrictive budget that makes you feel guilty about every latte. This is about getting crystal clear on the life you want to live and understanding exactly what that life costs. Start with your big ticket dreams.
• 6:34
  Let's say you want to put two kids through private school for the next ten years, buy a $800,000 home upgrading from your current $500,000 home, take a $15,000 international family vacation every year, fully fund college for both kids, retire at 55 with $4,000,000 in investments, renovate your current kitchen and bathrooms. Each of these has a price tag. A private school might be $60,000 per year for two kids. That bigger house might mean an additional $2,000 per month in mortgage payments, 24,000 per year. The vacation is $15,000 annually, likely more if you are like most of us who want to travel throughout the year.
• 7:20
  To retire at 55 with $4,000,000 you might need to invest $100,000 per year starting now. College funding might require another $30,000 annually. The renovation might be $80,000 total, which you want to save for over two years. Are you starting to see real numbers here? Now add in your regular lifestyle expenses.
• 7:41
  What does it cost you to live the way you want to live day to day, not survive, live, the nice dinners out, the personal trainer, the housekeeper who gives you your weekends back, the high quality groceries, the comfortable car payment. When you add all of this up, you might discover that to live the life you want, not some downsized version of it, you need to take home $300,000 or $400,000 or even $500,000 per year after taxes. For most of you reading this, that number is higher than what you're currently taking home, maybe significantly higher. And here's where it gets interesting. Once you know you need to take home 400,000 per year to fund your dream life, you can reverse engineer exactly what your business needs to generate in revenue to make that happen.
• 8:31
  If you're a solo practitioner keeping 40% of revenue as profit, you'd need to generate $1,000,000 in revenue to take home $400,000 If you build a team and systems that allow you to keep 30% as profit, you'd need about $1,350,000 in revenue. Suddenly, I want to grow my law firm becomes, I need to generate $1,350,000 in revenue to take home $400,000 so I can send my kids to private school, buy that bigger house, travel internationally every year, and retire at 55. That's a completely different conversation. That's a plan. Now here's where most law firm owners get stuck.
• 9:12
  They do the math, they see the number, and they think, That's impossible. I can't make that much. But what they're really saying is, I can't make that much doing what I'm doing now. And that's absolutely true. If you're currently generating $400,000 in revenue and taking home $160,000 you cannot triple your income by simply working harder.
• 9:35
  You're probably already working as hard as you can. You certainly don't want to work any harder. To get from where you are to where you want to be requires transformation, not just incremental improvement. It might require building a team so you can leverage your time and expertise instead of trading hours for dollars. That means hiring associates, paralegals, and an operations manager people who can handle the work while you focus on the highest value activities only you can do.
• 10:06
  It might require investing in systems and processes that allow your firm to run more efficiently and serve more clients at a higher level. That means practice management software, documented procedures, and marketing systems that consistently bring in ideal clients. Might require working with a business coach, someone who's been where you are and can show you the exact road map to where you wanna go. Because figuring it out on your own is expensive, and time is your most valuable asset. It probably took me ten years of doing it the hard way before I learned what I now teach to others in one year.
• 10:42
  It definitely requires reprioritizing your time. You'll need to stop doing $20 an hour work and start spending your days on $500 an hour work. That means delegating, eliminating, and automating everything that doesn't directly move your business and your income forward. It might require you to get comfortable with discomfort, with being visible in your marketing, with having sales conversations, with leading a team, with investing money before you see the return. Here's what I want you to understand: all of this is possible.
• 11:17
  Women law firm owners are doing this every single day. They're building multiple 7 figure firms and even 8 figure businesses that fund extraordinary lives without requiring them to burn out in the process. But it doesn't happen by accident, and it doesn't happen by just working harder at what you're already doing. So let's come back to that original question, how much income should a law firm owner make? The answer is however much you need to make to live the life you want to live, not what your law school classmate makes, not what some article said the average law firm owner makes, not what you think you should be satisfied with.
• 11:59
  What do you need to make to send your kids to the schools you want them to attend, to live in the home you want to live in, to take the vacations you want to take, to retire when and how you want to retire, to give generously, to feel financially secure and abundant, that's your number. And once you know your number, the next question becomes, am I willing to do what it takes to get there? Because here's the truth, and I say this with love, you can have the life you want, but you might not be able to have it while keeping everything else exactly the same. You might need to hire people, which means learning to lead and delegate. You might need to invest money in your business before you see a return.
• 12:42
  You might need to change your practice areas or ideal client profile. You might need to get help from someone who's already built what you're trying to build. The question isn't whether it's possible. The question is whether you're willing to do what's required, and that's a question only you can answer. This is exactly the work we do at Wealthy Woman Lawyer.
• 13:02
  We help women law firm owners get clear on their take home number, build the strategy to get there, and implement the systems and team that make it sustainable. We don't about growth the abstract. We start by getting crystal clear on what you want your life to look like and exactly how much money you need to take home to make that happen. Then we reverse engineer your business model to make that number inevitable rather than accidental. We help you build the team, implement the systems, develop the leadership skills, and create the marketing and sales processes that allow you to scale your income without sacrificing your life in the process.
• 13:43
  Because what's the point of building a successful law firm if it doesn't give you the life you actually want to live? If what I've talked about today resonates with you, if you're ready to get clear on your take home number and build the roadmap to get there, I want to invite you to book a call with me or someone on the team. This isn't a sales pitch, it's a strategy session where we'll help you get clear on what you want, what it costs, what your business needs to generate to get you there, and what the path forward looks like, you can book that call by going to www.wealthywomanlawyer.com and clicking on the Apply Now button in the top right corner. This call is complimentary, there's no obligation, And at the very least, you'll walk away with more clarity than you have right now. Here's what I want you to take away from today's episode.
• 14:34
  There is no right amount for a law firm owner to make. There's only what you need to make to live the life you want to live. And the first step to getting there is doing the math. Price out your dreams, get clear on your number, then build your business intentionally to hit that target. You don't have to figure this out alone.
• 14:54
  That's what we're here for. Just remember that every year you let go by without wrapping your mind around the actual price tag of your chosen lifestyle is a year that costs you big time because investments in your future compound and have the power to grow exponentially. That's it for today's episode. I do hope you've enjoyed it. If so, please leave us a review on Apply podcast or share it with another woman law firm owner you think will enjoy it.
• 15:23
  If you'd like to schedule an appointment with me or someone on my team to discuss your law firm growth goals and your personal take home number, go to www.wealthywomanlawyer.com right now and apply. I look forward to meeting you and hearing about your law firm growth journey.
• 15:40
  Intro: If you're ready to create more of what you truly desire in your business and your life, then you'll want to visit us at wealthywomanlawyer.com to learn more about how we help our clients create wealth generating law firms with ease.