Latest / Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love / Episode 341 | Saying ‘No’: The Business Case for Firing Your Worst Clients

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Episode 341 | Saying ‘No’: The Business Case for Firing Your Worst Clients · 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 Davina.
• 0:50
  Davina: There is a small group of clients in your firm right now who are quietly making you poor, not just poor in the bank account sense. Some may be paying their bills. They might even be paying premium fees on paper. They look like good clients. They may even show up in your revenue reports as black ink rather than red.
• 1:08
  But somewhere inside you, you already know exactly who they are. They're the ones whose name on the caller ID makes your stomach tighten, the ones who email you on a Saturday night with a non emergency that feels like an emergency, the ones who push every deadline, second guess every recommendation, and somehow always need just one more call before they can decide. You are paying for those clients with hours of your life, energy you can't get back, and bandwidth that should be going to build your firm. Today, we are going to do some math you have probably never done. By the end of it, you are going to know exactly what your worst clients are costing you and exactly what to do about it this week.
• 1:52
  Welcome or welcome back to the Wealthy Woman Lawyer Podcast. I am your host, Attorney Davina Frederick. And every week, we have honest conversations about what it takes to build a profitable, sustainable, wealth generating law firm that doesn't burn you out in the process. Most conversations around clients are about getting more of them. Marketing experts, including myself, will tell you to get more leads, refine your ideal client avatar, and sharpen your messaging.
• 2:22
  You may need to do all of that if you don't have enough of the right work and the right clients coming through the door. But client selection is not a marketing problem. It is a profit lever. The fastest way to increase your firm's profitability and peace is not just to add more clients to the ones you already have, it is to call the ones that are sucking up your team's time and energy to the point that the profit doesn't feel worth it. By the end of our time together, you will know exactly which clients they are, exactly what they are costing you, and exactly how to start replacing them immediately.
• 2:59
  I'll also share a one page audit you can complete this week. No special software, no CRM dashboard, a pen, a printed client list, and about 45. Let's get into it. First, I want you to picture your client list. Every active matter, every recurring engagement, every retainer.
• 3:18
  Now picture it sorted, best at the top, worst at the bottom. The bottom 20% of that list, let's call it the bottom 20, is where almost all of your hidden costs live. The bottom 20 are the clients who pay you the least, demand the most, take the longest to make decisions, generate the most write offs, eat the most non billable time, and produce the least referral business. The bottom 20 are not always your low fee clients, though they may be. Sometimes they are paying you handsomely.
• 3:51
  The amount they pay is not the problem. The problem is the ratio, what they pay you divided by what they take from you. Typically, the bottom 20 produce somewhere between 38% of total revenue and consume somewhere between 3040% of the firm's working hours. Whether you realize it, this is a tax on your firm, one you're paying every week. The premise of today's episode is simple.
• 4:18
  If you can replace 20% of your worst clients with 5% more of your best ones, you will earn more money, take back 40% of your week, and feel like a different human being on a Sunday night. That is not a stretch goal. That is conservative. Let's prove it. Before I walk you through the numbers, let's talk about the real obstacle.
• 4:41
  The numbers are easy. The math is fifth grade arithmetic. I have done it on the back of a napkin with clients more times than I can count. The hard part is not the math. The hard part is combating the voices in your head that tell you, I can't afford to lose the revenue.
• 4:59
  I made a commitment. I can't just fire a client. What if I can't replace them? Maybe it's me. Maybe I'm being difficult.
• 5:07
  Maybe if I were a better lawyer, this client wouldn't be this hard. If those thoughts sound familiar, know that you are not alone. Almost every woman law firm owner I have ever coached has heard at least one of them. There's nothing inherently wrong with these thoughts. They are part of what makes you the kind of lawyer your good clients love.
• 5:26
  The same conscientiousness that makes you a great attorney is the conscientiousness that has you tolerating people you should have released months ago. The issue arises when some clients take advantage of your conscientious nature, and you lack the discernment or courage to set a firm boundary to protect yourself and your team. Before I walk you through anyone else's numbers, I wanna tell you about mine. About three years into running my own law firm, was three years past the moment when I should have made the changes I'm about to ask you to make. I was profitable.
• 6:00
  I had a small team. Our firm had a stellar reputation, And I had also gained 30 pounds. My marriage wasn't going well. And I was on a path that would ultimately take me into the kind of crisis I have talked about on this show before. If you had asked me at the time why I was so depleted, I probably would have told you that it was the stress of owning and operating a growing law firm.
• 6:23
  The real story, when I finally sat down and ran the numbers on my own practice, was that about a quarter of my client list consisted of non payers, smooth talkers, or energy vampires. I remember one client, in particular, a friend who persuaded me to take her judgment case on contingency and then sucked up hours of my time and energy with drama. When I finally fired her, the firm had sunk costs of $40,000 And surprise, surprise, instead of appreciating all the free legal work she had received, she was upset that she wouldn't continue to receive more. Sadly, she wasn't the only one of the bottom 20 I said yes to. As a new lawyer and law firm owner, it was not uncommon for other lawyers and judges to send work my way that required me to significantly discount my fees.
• 7:13
  They thought they were helping me out by sending duds my way as learning opportunities. Have you ever noticed that there seems to be a direct correlation between low bono and high demand clients? I soon discovered that. When I finally decided enough was enough and that my law firm could no longer afford the bottom 20, I began to fire them. Here's what did and didn't happen.
• 7:36
  My revenue did not drop. My average matter value increased. And for the first time in years, I had much greater capacity, mental, emotional, and physical capacity. The important part is that my team did too. I want you to imagine a firm I'll describe as a composite.
• 7:55
  Every detail is real, drawn from women I've worked with through Wealthy Woman Lawyer, but combined into one firm so I can walk you through clean numbers. Let's call her Marisol, family law firm, solo attorney, two paralegals, one part time admin, annual revenue, $600,000. She is taking home roughly $220,000 in annual personal income. By every external measure, she is doing well. Marisol has about 60 active matters in any given month.
• 8:27
  When we sat down and looked at her client list sorted by realization rate, the percentage of billed time she collected, the bottom 12 clients accounted for 20% of her client list. Those 12 clients generated $29,000 in total revenue for the year. That's less than 5% of her annual top line. Now here is where it stops being a story about revenue and starts being a story about cost. Marisol's two paralegals each tracked roughly 1,500 per year.
• 9:00
  Marisol herself logged closer to 1,800 billable hours. That's a total of 4,800 billable hours per year. When we mapped time entries against client matters, those 12 bottom of list clients had consumed almost 26% of the firm's total hours. If you do the simple math, 26% of her firm's labor produced $29,000 Marisol's effective hourly rate on the bottom 20 was about $23 an hour. She was running a $600,000 law firm and for a quarter of the year, working at $23 an hour.
• 9:38
  When I showed her the numbers, she cried. She cried because she had felt it in her body for two years, the exhaustion, the flatness, the sense that she was running on a treadmill, someone had turned up a notch without telling her, and here on a piece of paper was the explanation. It had a name, it had a number, it was not her imagination, and it was not her fault. If you have ever felt the same way busy, productive, doing well by every external standard, and still vaguely going under it is not your work ethic. It is almost certainly your bottom 20.
• 10:16
  Revenue is the math everyone leads with because those top line dollars are easy to see and understand. But for women law firm owners scaling towards 7 figures, time math is where the real story is. You can replace dollars. You cannot replace time. Let's stay with Marisol for a moment.
• 10:35
  26% of her labor went to her bottom 12 clients. That means about a quarter of her week for her and her team combined was spent on people who produced less than 5% of revenue a quarter of her week every week. Now scale that out across a year, that is roughly thirteen working weeks, three months, an entire fiscal quarter of her firm's working life given over to the wrong people. If she removed those clients and replaced even half of that capacity with average fee clients from her best of list distribution, the firm would have picked up an additional $140,000 in annual revenue. But that's not the headline.
• 11:15
  The headline is what she did with the remaining recovered capacity. She used six of those recovered weeks to redesign her intake process and rethink her marketing strategy. In other words, removing the bottom 20 didn't just save her twelve weeks of labor. It gave her thirteen weeks of strategic bandwidth she had never had before in her career. That is the part nobody talks about.
• 11:39
  They will tell you to delegate. They will tell you to systemize. They will tell you to hire. You need to learn to do all of that. But if you need the capacity to act on those initiatives, consider firing the clients causing you the biggest headaches.
• 11:55
  You cannot delegate your way out of a bottom 20 problem. You can only fire your way out of one. There is one more cost I want to name because if I leave it out, the math is incomplete. Let's call it the Sunday night tax. It is the tightening in your chest when you think about Monday morning.
• 12:12
  It is the way certain client names appear in your dreams. It is the email subject line that ruins your evening before you have even opened the message. You cannot put the Sunday night tax on a spreadsheet, but it shows up in your marriage, your lack of good sleep, and your kids' school activities, where you are physically present and mentally rehearsing a difficult client call. The bottom 20 are the clients who collect the Sunday night tax from you. The reason you became a law firm owner was almost certainly not the money alone.
• 12:45
  You wanted autonomy and flexibility. You wanted a life that fit who you are. You wanted to build something that produced wealth and well-being, not wealth at the cost of well-being. That third way, wealth and well-being, is the entire reason Wealthy Woman Lawyer exists. The bottom 20% of clients are the single biggest thing standing between you and that life.
• 13:09
  You don't have to choose between being a generous, principled lawyer and being a profitable, peaceful one. That is the false choice you have been sold for your entire career. The third way is to be both, and firing the bottom 20 is one of the first concrete acts of building that life. Here's what I want you to take away from this episode. What would it be like to replace 20% of your worst clients with 5% better ones?
• 13:39
  You are not trying to fire every difficult person you have ever taken on. You're not trying to overhaul your client list overnight. You are not trying to be ruthless, cold, or unlike yourself. You are simply replacing 20% of your worst with 5% better. In Marisol's case, the math worked out as follows.
• 14:00
  She released her 12 bottom clients over a sixty day period. She raised her fees on the new clients walking in the door. She redirected her intake process to attract the kind of client her best ones already were. She did not need 12 replacement clients. She needed three.
• 14:16
  Three good clients more than replaced the revenue of 12 bad ones on a fraction of the hours. Good clients are not just slightly more valuable than bad ones. They are an order of magnitude more valuable. This is also why you cannot grow your firm by adding good clients to the top of a list that still has the bottom 20 at the bottom. Your best clients pay for the existence of your worst ones.
• 14:42
  Until you remove the worst, you will not have the capacity, the energy, or the strategic clarity to attract more of the best. If this is resonating with you, here's your homework for the week. I want you to take forty five minutes, Just pick a window this week when you are not exhausted, not just out of court, not five minutes before your next call. Put it on your schedule and then follow through when it's time to do it. You will need three things.
• 15:11
  One, a printed list of your active clients or matters. Two, a pen. Three, a single piece of paper, or you can use AI if you prefer. Many of my clients and I love claude.ai. Here's the audit.
• 15:24
  Create six columns. In column one, list your clients' names, every active matter. In column two, list the amount of revenue collected from each client, not billed, but collected. In column three, list the estimated firm hours, your hours, your associate's hours, your paralegal's hours, your admin's hours. If you don't track this precisely, estimate honestly.
• 15:48
  Use ranges if you must. In column four, list the effective hourly rate. Column two divided by column three. This is the only column that matters mathematically. In column five, list the gut score.
• 16:03
  On a scale of one to five, how does this client feel? One is I lose sleep over this client. Five is, I would clone this client if I could. Don't overthink it. The first number that comes to mind is the right one.
• 16:17
  In column six, list the referral source. Did this client come from a great referrer, an average one, or a problematic one? Because bad clients are almost always referred by bad referral sources. You cannot fix the bottom 20 without also looking at where they came from. You may need to reeducate some referral sources about the types of clients you desire.
• 16:42
  Now sort the whole list by column four, effective hourly rate, lowest to highest. Look at the bottom 20%. Don't fire them just yet. Just look to see if you can spot a pattern. What you will most likely find is that your bottom 20% will have something in common.
• 16:57
  It might be a practice area you took on because it paid the bills early in your career and you never let go of it, or a referral source you keep accepting from because you don't wanna disappoint them or reeducate them, or a type of matter that runs longer and harder than every other type of matter you handle. That pattern is your bottom 20 profile. That is the demographic you must stop saying yes to. Let me give you a quick worked example so you know what this looks like on the page. Imagine you finish the audit and your bottom 12 clients show this kind of pattern.
• 17:31
  Their average collected revenue over the last twelve months is $2,200 per client. Their average firm hours per client are $58 That gives you an effective hourly rate of about $38 Compare that with your top 12 clients, whose average is $12,000 and forty two hours per client. An effective rate of $286 per hour. The ratio is more than seven to one. When you can see the ratio in your own handwriting on your own piece of paper, the decision to release these clients stops feeling brave and starts feeling obvious.
• 18:07
  Now in the right margin of your single piece of paper, write these three action steps. Action number one, who am I releasing in the next sixty days and how? Action number two, what referral source do I stop accepting from starting today, or how do I reeducate them? Action number three, what does my new ideal client look like in concrete terms? What is the practice area, fee range, decision making style, and referral source?
• 18:37
  Those three questions answered honestly on a single sheet of paper have the power to dramatically transform your practice. What you may be thinking right now is, What if I release these clients and the new ones don't come? That's fear talking, and I get it. I've been there and many of my clients have. Here's the honest answer.
• 18:57
  The new ones don't show up because you have the capacity to take them. They show up because you have the capacity to find them, to attract them, to design your marketing, to target them, and to convert them. And you do not have any of that capacity right now because the bottom 20% are eating it. Here's what I always remind myself when I'm making changes in my business or life. Nature abhors a vacuum.
• 19:21
  And if you create one by letting go of something that's no longer serving you, then nature will fill that vacuum with something else you desire. If there is no space in your business for something new, you must create space. You are not creating risk by firing wrong fit clients. You are creating capacity by releasing them. And honestly, you are doing them a favor because they are now free to find an attorney that better suits their needs.
• 19:50
  This is one of the most counterintuitive truths in business, and it is the one most women law firm owners never grasp until they have done it once and lived through it. Releasing the wrong client almost never creates a revenue hole. It creates a vacuum, and good clients rush into vacuums faster than bad ones do. I am not asking you to fire every client tomorrow. I am asking you to review the list, identify the worst 20%, and design a sixty-ninety day release plan.
• 20:21
  Some you transition to other firms. Some you complete and don't renew. Sometimes you have a direct professional conversation about the scope and fee. Some you let go gracefully and quickly. The plan is yours.
• 20:35
  The principle is the same. And remember, you can do this in a kind way. It's not mean to sever relationships with clients that no longer work for your law firm. Your law firm is not a charity or a hobby. The way you serve your community is not by carrying every client who walks through your door.
• 20:55
  The way you serve your community is by building a firm strong enough, profitable enough, and sustainable enough that it can keep serving for the next twenty years. To sum up, the bottom 20% are not your fault. You did not set out to build a firm that ran on the wrong clients. You built a firm by saying yes to opportunities, referrals, and anyone who needed help in a season when that was the right answer. That was good business at the time.
• 21:24
  It no longer serves where you are now and where you are headed. You can keep paying the bottom 20 with your weekends, your evenings, and the life you wanted when you opened this firm, or you can do the math, run the audit, and reclaim those thirteen weeks for the firm and the life you're trying to build. Women lawyers work too hard serving others not to live fulfilled, prosperous, and enriched lives. That is the mission of Wealthy Woman Lawyer, and saying no to the wrong clients is one of the first hard, real acts of living it. If you have listened to this episode and recognized your firm in it and you are beyond ready for guidance and support to help you take your law firm to the next level, I invite you to book a call with me.
• 22:09
  You can do so by visiting ww.wealthywomanlawyer.com and clicking on the Apply button at the top of the page. There's a short form to complete, and then you can select a date and time to meet at your convenience. This is not a high pressure sales call. This is a call to discuss whether we are a right fit to work together and which options may be the best for you. Thanks for tuning in.
• 22:34
  If you enjoyed this episode, please leave us a review on Apple Podcasts so other women lawyers can enjoy it too. See you next week.
• 22:41
  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.