Latest / Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love / 212: What is Your Law Firm Really Worth? A Tale of 3 Solos

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212: What is Your Law Firm Really Worth? A Tale of 3 Solos · Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love

• 0:00
  Davina: A job is work you do day in and day out to pay the bills, and perhaps save a little bit of money or invest money for your future. When you're not working, you're not getting paid. You may call it freelance work, contract work, or a lifestyle business, but the end result is the same. You earn the money now, do with it what you want to support your chosen lifestyle. And the minute you take yourself out of doing the work, all earning grinds to a halt.
• 0:27
  Also, earnings are capped by the number of hours you can work in any given day, week, month, or year. A business on the other hand is an asset you can sell at some point.
• 0:38
  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.
• 1:24
  Now here's Devina.
• 1:28
  Davina: Hi. This is Devina. And before we jump into today's show, I'd like first to introduce you to some of our sponsors. When prospective clients are looking for an attorney, they usually turn to Google first. Optimize My Firm helps law firms grow their practices and attract more right fit clients through on page and back end search engine optimization.
• 1:52
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• 2:28
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• 3:00
  Visit www.gavel.io and mention the Wealthy Woman Lawyer Podcast for a free fourteen day trial, or just click on the link in the show notes. Hi, everyone, and welcome back to the Wealthy Woman Lawyer Podcast. I'm your host, Davina Frederick, and today's topic was inspired by some conversations I've had recently with solo lawyers who were surprised to realize that the law practice they've spent a lot of hard work and years building was not worth what they thought it would be worth financially at the end of their career when they were ready to sell it. Let me just give you a fair warning. This episode of today's podcast may hurt somebody's feelings.
• 3:40
  It is not my intention to hurt your feelings. I did not create it for this purpose. However, if it does hurt your feelings, but it winds up saving you or making you thousands and thousands or millions of dollars, then it will be worth it to have hurt your feelings for a little bit because I think you really need to hear this. So let's talk about it. If you were to sell your law firm business today, what do you think it would be worth to a potential buyer?
• 4:08
  Go ahead and write that number down and write down why you think it would be worth that. It's a question that woman law firm owner, we're gonna call her Sandy, that's not her real name, recently was confronted with when she had an offer to buy her law firm business from a law firm in another state who wanted to move into her state. It was their thought that they wanted to expand and the best way to do that was to purchase another law firm instead of starting another firm from scratch in that state. And the potential buyer was interested because of Sandy's high profile. So you see Sandy has a significant social media following.
• 4:43
  She's the author of several books in her area of practice. And she is the creator of a nonprofit business in her area of expertise that has gained a lot of attention in recent years. In fact, she even won very recently a prestigious award for her work in this charity that she created. The potential buyer was super excited about the possibility of working with Sandy and purchasing her law firm business. That is until they looked at her books, and they realized her gross annual revenue, despite her almost two decades in business was in the low 6 figures.
• 5:20
  On top of that, they discovered Sandy had no other attorneys working with her, very little staff, and very few automated processes or documented systems. You see, she didn't need them because she was doing all the work. So while Sandy is a powerhouse when it comes to gaining exposure and visibility for her law firm business, her impact and ability to create a profitable, sustainable, wealth generating law firm business that could help thousands of needy clients a year instead of only a few dozen is severely limited. Like so many women law firm owners I meet, Sandy is highly educated, she is gifted, and she has a huge heart for helping others. But she's limited herself to only helping those she personally can help as a solo attorney.
• 6:06
  She's never considered that her lack of business skills has been holding her back from serving a much larger purpose and a larger audience. It's also about her lack of a positive money story. To her, she holds herself at a distance from wealth and money because, a, she doesn't need it. She has someone else supporting her, and so she doesn't worry about money. And b, because the way that she grew up, there's some story that she's telling herself about wealth and money being unseemly or something that she looks at with disdain.
• 6:42
  Another woman law firm owner had a similar revelation recently when we looked at her numbers and we discussed how her law firm growth goals measured up with what she was doing in her business, while this woman law firm owner, we're gonna call her Alice, has built a nice lifestyle business through her law firm. If she tried to sell her business tomorrow, there would be no buyers. Why? Because she's a solo with a few virtual assistants and contract attorneys, but no real team or documented systems. Essentially, without her, there is no business to sell.
• 7:18
  She takes home about $200,000 a year from about 300 that she earns. And that's the lion's share. So she's kept it small, she's kept it all. And that's been working for her up until now because she's been enjoying the freedom of working from the road. So freedom of place, being a remote worker has really been her motivating factor.
• 7:39
  She loves to travel. And so she's not worried about it. 200 k a year is not bad money, right? However, recently she's begun to consider what it would be like to have a law firm that makes 10 times that amount of money so she can be free to travel year round with her family without working the whole time or even at all if she doesn't want to. And she's begun to think about her future needs and desires.
• 8:04
  She's in her mid forties, and she's begun to wonder what it would be like to create a business that also could be an asset that she could ultimately sell one day. It's an issue that I've witnessed time and again with solo law firm owners who believe that they own a business when in reality what they really own is a job that they have created for themselves. So what is the difference? A job is work you do day in and day out to pay the bills, and perhaps save a little bit of money or invest money for your future. When you're not working, you're not getting paid.
• 8:39
  You may call it freelance work, contract work, or a lifestyle business, but the end result is the same. You earn the money now, do with it what you want to support your chosen lifestyle. And the minute you take yourself out of doing the work, all earning grinds to a halt. Also your earnings are capped by the number of hours you can work in any given day, week, month, or year. A business on the other hand is an asset you can sell at some point.
• 9:06
  To work day in and day out of it for as long as you want or anytime you want, you don't have to. It will not fall apart if you are not there because there are systems and processes and employees that have the ability to keep that business running and keep it profiting even in your absence. It can make you money now and in the future when you're no longer interested in working in the business day in and day out. If you build and manage it correctly, it also can free you up more now in your time as well as in the future. So let's consider for a moment the story of one more solo attorney whose career spanned three decades.
• 9:44
  She's remained a solo with a few staffers working with her throughout most of her career. During that time, she squirreled away as much as she could for the future when she knew she'd no longer be able to work. But ultimately, she knew it was not going to be enough when the time came because she waited too long to really start saving or investing for retirement. Recently, she closed down her law firm and took a government job with good benefits. So she didn't have to worry as much about her future and the retirement benefits.
• 10:15
  Eleanor will call her, tried to sell her law firm, but there weren't any interested buyers. Why? Because potential buyers knew that when she went away, many of the client relationships she'd spent years building would go away too. That loyalty was not transferable to any new potential owners. If they purchased current caseload, they stood to lose at least half of the clients immediately, if not all of them, because the clients had hired Eleanor as their attorney and could easily decide to choose another attorney once Eleanor left and there would be nothing for the new owners to change that because we all know that clients have a right to choose their lawyer.
• 10:56
  Had Eleanor created a law firm business instead of a solo practice, she might have been able to sell her law firm for millions of dollars or even a 100 just hundreds of thousands of dollars even instead of just closing the doors, shutting off the lights, and walking away with nothing. And don't get me wrong. A lifestyle business can be great for some people. However, if you have any inkling in your mind that you'd like to one day be able to sell your law firm business that you work so hard to build, then I encourage you to actually build a business, not just a job that works for you today. So what does it mean to build a law firm business and create an asset?
• 11:34
  Here are some of my initial thoughts of what you need to be thinking about. Number one is you need more lawyers. There are many reasons why. One is so you can truly be away from your law firm when you're out sick or on vacation or for whatever reason. Two is because this will allow clients to develop a relationship with your law firm business instead of thinking they are hiring you personally.
• 11:59
  Three is so that when you decide to sell, there are other lawyers who have relationships with your clients, who will be staying and keeping the value in your law firm business instead of with you personally when you leave. Four, your law firm will make more money because you'll be able to have more people doing the billable work. Yes. Even if you charge flat fees, that's another discussion for another day. Five, you'll have more lawyers bringing their relationships and expertise into the firm and increasing its value, not only to you during the life of the firm, and your ownership of the firm, but to potential buyers as well.
• 12:37
  So I could go on and on about all the reasons you need to hire lawyers. But if that doesn't convince you, I'm really not sure what will. That's at least food for thought for you to start thinking about. Number two, you need documented processes and procedures. High value businesses are systems driven, so that no matter how many employees come and go in the business, the business will continue to operate in a reliable, consistent manner to better serve the clients and achieve profitability.
• 13:03
  In my book, The Wealthy Woman Lawyer's Guide to Building a Systems Driven Law Firm Business, I've identified seven essential systems that you need to have, that every law firm needs to have if they want to create a profitable, sustainable wealth generating law firm. Number three, you need a system particularly for generating business that does not rely solely on you and your personal reputation. This can be developed over time. So you don't need to teach everyone right out of the gate how to bring in business and be a rainmaker. Some people are better suited for that.
• 13:36
  Some people are not. This may be something that you focus on as you're growing the firm. But eventually you'll need to have a systematic approach for bringing in leads and business that does not rely on you personally doing that. Number four, you need to stop being afraid to look at your numbers and instead get real with yourself about your numbers, what they mean, any negative money stories that you have, any fear that you may have about taking care of your financial business or fear around not being able to understand it, whatever it is. Of course, we all want to do work that is fulfilling.
• 14:13
  And I'm not suggesting that you focus just on money, money, money. But most of us got into the lawyering business because we wanted to be of service. However, you cannot build a business you can afraid to sell your services to begin with. If you are afraid to put money and talking about money and wanting money and wanting to create a profitable business, the purpose of a business of any kind, including a law firm business is to be profitable. Like it or not, money is one of the ways, the primary way actually, that we measure success in business, at least in a capitalist society.
• 14:50
  If you don't care about money, go work for a nonprofit or a charity. A for profit business is not successful. And I know this is gonna be controversial to people, but I speak it as the truth as I understand it. A for profit business is not successful no matter how many awards or accolades you receive, if it is not making enough money for you to expand it, to market, to hire employees, to train them, to give them raises, to allow them to support their families, to create jobs for your community, and of course, if it is not making money for you to do the same thing as an owner or a shareholder. The purpose of a business of any kind is to make profits for shareholders.
• 15:32
  There may be other purposes, but with this element missing, it is not a business, it is a hobby or a charity. It's okay to donate your time and energy to charity. Just don't confuse your business for a charity. If you are getting ready to sell your business sometime in the near future, I really encourage you to hire an attorney with long experience in evaluation of businesses, particularly law firm businesses to help you prepare. If you are committed to growing your law firm, you're not anywhere near ready to sell, you're in the growing stage and you're committed to do that and create an asset that's not just a day to day moneymaker, but also not just creating a job for you as a solo lawyer, but creating a business that can operate without you and make profits and create jobs in your community and serve more and more clients.
• 16:23
  So you can have a greater positive impact in the world. But you aren't sure the exact steps that you need to take to get there, then I encourage you to schedule an appointment with Wealthy Woman Lawyer to see if we are a right fit to work together toward achieving your law firm growth goals. The link is in the show notes, you can just grab it there. I made it super easy for you. Until next time, this is Davina Frederick, and I appreciate you listening today's episode of the Wealthy Woman Lawyer Podcast.
• 16:48
  If you liked it, please leave us a review. As always, my my forever request. Every five star review helps us attract more women law firm owners who may need our help in achieving their law firm growth goals. I'll be back next week with another episode. Until then, I hope you have a wonderful, productive week growing your law firm business as a successful law firm owner.
• 17:13
  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.