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How much do you have in savings? Not enough is the likely answer. We rarely have as much as we’d like.
Why? Because we spend too much.
It’s not the latte
It’s probably not the coffee that’s breaking the bank. Many of us focus on the $3 coffee or the few bucks we’re wasting on the wrong mobile phone plan, the weekly car wash, or the occasional massage. Nope, it’s not the little stuff.
For many of us, the problem isn’t happening at home. It’s happening at the office. We’re hemorrhaging cash inside the law firm before the money ever makes it to the paycheck.
It’s not just you
When I consult for lawyers, I get to look behind the balance sheet and income statements. I get to go deep and see the detailed expense reports. Law firm financial reports reveal many sins. There’s some scary stuff buried in those financials.
I’m sure you haven’t done all of the awful things I’ve seen. I’m sure there aren’t many lawyers who’ve done everything I’ll list below. But, odds are, you’re doing a few of them. Isn’t it time to stop? Are you ready to change your ways? Are you prepared to turn over a new leaf, clean up the mess, and start increasing your net worth?
Here’s my list. Brace yourself.
1. Crazy marketing schemes
“If it gets me just one client, it pays for itself.” This is how we rationalize the dumb decisions.
First of all, it won’t get one client. Second, even if it does, it probably won’t pay for itself.
Buying leads from random phone solicitors who promise riches is a crazy idea. But it’s a business model that has led quite a few lawyer-marketing vendors to riches, targeting lawyers as their customers. Why are we so gullible?
We get calls from website builders, video producers, super-duper lawyer publications, online ad sellers, and more. They all make huge promises, and we’re quick to give them our credit card numbers. Why do we do these crazy things? Because we think if we get just one client, “it pays for itself.”
Just say no. Better yet, don’t answer the phone.
2. Unused software subscriptions
I’m the worst about signing up for online services, apps, and software, and keeping them long after I’ve stopped using them. I’ve got one right now and I can’t even find the login information. It’s only $3 a month, and I can’t be bothered to cancel. It’s easier to just let the credit card expire.
When was the last time you reviewed the credit card statement and tracked down each line item to determine whether the expense still makes sense? Yeah, now you remember. That was two years ago, and you’ve spent a fortune on apps you don’t use since you did that analysis.
Those subscriptions add up to lots of lattes.
3. Unused memberships
When was the last time you went to the county bar association luncheon that you pay for every single month? How about the networking group? When was the last time you took advantage of your other voluntary bar association memberships?
I’m all for using your memberships, if they’re helping you to actually build your network and generate more referrals. But if you’re paying for someone else to eat chicken, mashed potatoes, green beans, and a slice of carrot cake, then it’s time to cancel.
An unused membership is much like an unused software subscription. Either eat the green beans or cancel the green beans. Pick one and get it done.
4. Hiring staff and associates
If your team is busy doing profitable things, then life is good and the payroll expense makes sense. But way too many lawyers hire team members for the wrong reasons, at the wrong times, and keep people long after they should have been fired.
We often hire before we’re busy. Ego drives a shocking number of first hires. We feel compelled to add a body or two even when we’re not particularly busy. All the other lawyers ask us questions like how many lawyers do you have? and we rush out and hire an associate. The associate has nothing to do, and we spend a small fortune, often with borrowed money, keeping the young lawyer on the team. Ego is powerful. We’ll feed our ego before we feed ourselves.
We also hire when we’re faux-busy. We don’t lack for work, but we’re not getting paid much for the work we’re doing. We’re so busy with this low-profit work that we hire someone to help us get caught up. It never makes sense to pay someone to do unprofitable work. Hiring before you hit appropriate revenue objectives is always a bad idea. Doing more money-losing work just makes you lose money faster.
We work in a world where it’s easier than ever to find virtual assistants, hire freelancers on a per-project basis, or outsource to vendors. In this era, it’s a mistake to hire prematurely, when we can use these options to get the work done. Even better, we can continue to use them long after we’ve proven the need is lasting.
Law firms print brochures, newsletters, business cards, document folders, and more. We’ve been printing this stuff forever, and we’re still printing it now. Why? Because we ran out of the old stuff and we don’t consider whether it makes sense to keep on printing. We step over to the computer and click on the “re-order” button.
What do clients do with our printed material? Mostly they throw it away, after making a snide remark about our high fees, wasteful spending, and ongoing use of ancient technology like FAX machines.
Do you need to keep printing all of that stuff? Does anyone want it? Are they tossing it out as soon as they walk out the door? How often do you toss out the leftover business cards when an employee leaves? How many of those cards had been used? None. But, of course, we’ll order new cards for the replacement because it’s what we do.
6. Paying rent
More and more businesses are allowing their employees to work at least some of the time remotely. Office space is increasingly vacant. The reaction to the newly available space at discount prices? Small firms increase their square footage by leasing the vacated space next door.
Do we need more space so we can brag about our square footage? Why do we even think we need the entire team in the same physical area? I have no idea, since most of us don’t collaborate well. We spend most of the day in the office with the door closed, and when the door is open, we’re grumpy about it.
Working remotely allows you to save money on rent, hire the best and brightest employees in far-flung locations, and spend your days in your pajamas. What’s not to like? Stop spending all that Class A rent money.
7. Buying office space
“It’s a great investment,” she explained.
Yes, it’s an excellent investment if you’re a real estate developer attempting to grow a real estate business. But if you’re a lawyer attempting to grow a law firm, it’s smarter to focus on your business.
Instead of dealing with the missing landscaper, the leaking roof, or the clogged toilet, you need to be dealing with getting new clients, making the existing clients happy, and learning more about how to grow your business.
There are great investments that don’t involve paying utility bills, sucking up to the fire marshall when he shows up for the extinguisher inspection, or becoming an expert with a toilet plunger. Wall Street types have built entire businesses around helping you invest your money. Call one of them for investment advice. You don’t need to buy an office building.
8. Search engine optimization
Somehow, buying search engine optimization services has become the equivalent of buying pants, in some people’s minds. Lawyers know better than to show up at the office pantsless. Many believe they need search engine optimization just as badly.
Pants matter. Buying search engine optimization services is not essential. I’ve bought lots of pants, but I’ve never bought search engine optimization. You can skip it too.
Your website isn’t going to rank well on the search engines simply because you’ve paid some slick operator to provide boring blog posts, on-page website tweaks, and a few hundred spammy links. Most lawyers hire these services, wind up disappointed, and hire someone new. Why do we keep buying more of something that rarely works as promised?
You need pants. You don’t need search engine optimization services.
9. Online advertising
I love online advertising. I’m all in, IF you can prove that it works. I love Google Adwords, Facebook ads, and I’m a particularly big fan of LinkedIn. Some firms are crushing it with YouTube ads. One day I’m sure I’ll meet a lawyer who’s generating all kinds of revenue on TikTok.
But, most law firms are spending online advertising money without knowing IF it’s working. They hope it’s working, but they don’t actually know.
It’s easy, easy, easy to spend $20,000 a month (or more) on online ads, and have zero idea of the impact of the spend. Most of us are negligent when it comes to tracking return-on-investment.
In this day and age, it’s possible to track every click. You can tell who clicked, what they did when visiting your landing page, how often they return, what they do on each subsequent visit, and whether they become a client. You should be able to accurately track your return-on-investment, or you shouldn’t spend the money.
10. Website redesigns
There’s not a good reason to redesign your website every year. Your website probably needs less design, rather than more. Strip it down to the bare minimum, unless you’re going to do something amazing like add uber-useful tools and chatbots, best-in-class content, or free document creation. Less is more, when more is crap. Don’t go all-in on crap.
A simple, single-page website makes a dramatically better impression than a site with links to social media sites that aren’t being maintained, a blog with no posts in two years, and a few testimonials from anonymous clients. Most visitors assume anonymous clients are your imaginary friends, anyway.
Most law firm websites look nearly identical to most other law firm websites. Your big redesign will, of course, make your site look more or less the same as all the others–again. Just leave it as is, unless you can find a compelling, math-based, return-on-investment reason to do otherwise.
11. Law firm retreats
We spend a year searching for a facilitator, followed by numerous meetings to tweak the program. The law firm leadership fine tunes the message they want to be delivered.
The retreat happens. Someone gets drunk. Someone else sprains an ankle. A few someones have a sexual encounter. The meeting ends in big hugs and some tears. It’s a great success.
Six months later, thirty percent of the team has left the law firm, and we’re hunting for a new facilitator for the next retreat.
Why do we do this to ourselves? Retreats are not required, they’re mostly ineffective, and they nearly always result in unanticipated fallout. Anticipate the fallout now, and cancel the retreat.
12. Holiday parties
Ask yourself: what’s the point of the expenditure, and is the mission being accomplished? Do the guests (employees or clients) come to the party because they want to come? Or because they have to?
Holiday parties lend themselves to getting bigger every year. We had a party. Then we had an award at the party. Then the award came with a commissioned sculpture. Then there was a gift-exchange. Then there was an after-party. And on, and on, and on.
Parties quickly become a tradition and get repeated year after year simply because they are a tradition. Traditions are made to be broken.
What’s the return on investment for the event? Is it possible that the party is such an annoying, obligatory function that the return is negative? Do most attendees spend hours dreading the gathering beforehand, and hours afterward complaining about how awful it was? Are you the only person who likes your law firm holiday party? Or do you hate it too, but feel like you’re supposed to do it?
Parties are great. But don’t invest thousands of dollars without thoughtful consideration of the business objective, followed by careful review of which goals were achieved. Is a party a party if everyone hates the party?
13. Holiday cards
Many firms still mail paper holiday cards. Why? Again, it’s because it’s what has always been done. Why not stop?
Watching the holiday card production (which frequently involves a photoshoot, address list corrections, passing the cards around for signatures, etc.) is amazing. It makes filing an appellate brief look easy.
In the best case, the card gets displayed by the recipient for a few days, taped to the door frame in the foyer. Then it gets trashed. Realistically, they mostly get trashed without even being displayed.
What’s the return-on-investment on holiday cards? Not much.
14. Holiday gifts
Each December I lost track of who sent me what. I got so much crap I had no idea where it had come from, unless it was the coolest thing I’d ever received (and that probably wasn’t the gift you sent–sorry). Mostly, I passed the gifts along to the staff because
I had no more use for the stuff I received I’m generous.
Lawyers sent gifts because I’d referred. Experts sent gifts because I’d hired them. Vendors sent gifts because I bought their stuff. Chocolate, cheese, wine, gadgets, books, leather things, and on and on.
Your holiday gifts are getting lost in the chaos. Nobody cares. You’re doing it on automatic pilot, which is exactly how it’s being received.
What would happen if you just stopped? Nothing. Nobody would notice or care, and you’d save the money.
15. Employee benefits
I paid for a great health plan for decades. Plus, we added dental, vision, life, disability, retirement plan match, paid vacation, sick leave, a three-month sabbatical after 5 years, and more.
How’d that work out for me?
Not especially well. Employees still came, and then they went.
Employees–young employees, in particular–didn’t know enough, or care, about the perks. We gave them a generous plan in which they had no interest. Older employees weren’t dramatically different. Mostly our team focused on their net income and what they had available when they checked their bank balance online.
I’m a big fan of employee benefits, but you need to figure out whether the people you’re giving them to care, before you spend the money. There’s little point in investing in benefits which aren’t increasing employee satisfaction, reducing turnover, or enhancing the client experience.
Employee benefits are expensive. Make sure you’re getting something for your money.
I do some consulting. I think I’m amazing.
But a lot of coaching, consulting, counseling, etc. is crap. And it’s expensive crap. You wouldn’t believe what I charge, and I’m not as expensive as some.
I know lawyers who have spent tens of thousands of dollars on gurus, and see no results after the initial glow fades.
Test yourself before you invest in coaching. Prove to yourself that you’re willing to do the hard work, before paying someone to fire you up, hold you accountable, or keep you moving. If you can’t keep yourself going, even for short periods, then don’t expect someone else to do it for you. It’s possible, even likely, that your problem is you, and fixing that is mostly a you thing.
My coaching, and most of the coaching I’ve witnessed, work well at helping successful lawyers gain more success. But lawyers who are struggling mostly continue to struggle, no matter how great the coach. Marshall Goldsmith, arguably the greatest business coach, explains the secret to being a successful coach. Pick the right clients, he says. Clients already on a path to success will keep succeeding. Others rarely turn themselves around.
Why? Because they don’t want to change. Prove to yourself that you want to change by making some changes happen. Then you’ll know that spending the money is more likely to get you results.
I know that everyone needs a coach is a saying today. After all, Tiger Woods and all the other athletes have a coach, so we must need one too. But don’t forget: these folks used as examples demonstrated a bunch of talent, commitment, and achievement before the coach got involved. Demonstrate your willingness to do the work before you spend the money on the coach.
I suppose there are good reasons to borrow money to run a law firm. But I can’t think of any.
Borrowing money usually means the law firm is losing money. Losing money is never good. Lawyers who are losing money tell themselves that it’s a temporary problem. They reassure themselves that they’ll pay the money back when this problematic period passes and they go back to making money.
My experience is that they are losing money because their business model is broken. They’ll pay the money back when they start making more money. That usually happens because they cut expenses, which always involves firing staff, and amp the marketing effort back up.
Why not just fix the model instead of borrowing money? That way, you’ll save the interest plus the stress, misery, and pain of being in debt.
18. Bonuses and gifts
I’ve heard too many lawyers say, “I just paid her a big bonus and then she quit.”
It happens all the time.
We love making money. We assume others feel the same way we do about money. We’re wrong.
Stop paying bonuses, and start paying whatever form of compensation the employee needs. Many need praise, acknowledgment, appreciation, and/or love (not that kind of love).
Money doesn’t work on most employees like we think it works, and then we don’t have the money any more. We lose, and we lose again. Cash bonuses and gifts rarely work out as planned.
19. Keeping up with the Joneses
I still hate this (now disbarred) lawyer who teased me about my Honda Civic in my first year of practice. We stood side by side at the gas station, as he filled up his Jaguar convertible.
“You still have a car like that?” he asked.
I, of course, reacted by quickly buying a more expensive car.
Lawyers, as a group, are keenly status conscious. Maybe it’s just me? I don’t think so.
Worrying about what other lawyers think is a full-time job for many of us. We spend too much money on cars, houses, office space, associates, websites, and more. We don’t like it when the Joneses of the world get ahead of us.
They say that “the one who dies with the most toys wins,” but they fail to point out that then we’re dead. Did we really win?
There’s always a Jones with more. We pass one Jones, and there’s another. We move into the biggest house in the neighborhood, and realize there’s a better neighborhood just down the road.
Status games are for suckers. We can’t win. We can only lose.
Are you ready for some real money in your account?
Isn’t it time for more of the money coming into the front door of your law firm to make it out the back door, on its way to your bank account? Aren’t you ready for your net worth to grow? Can you see how that requires smarter spending–usually less of it–on purchases inside the firm?
Maybe your firm is already streamlined, and your only wasteful expenditure is the Kuerig pods for the coffee machine. It’s likely, though, that the money being wasted is more significant, rooted in following other law firms or following your unquestioned traditions. It’s time to reevaluate the big expenses that accrue minimal or unknown value.
Digging deep, taking a risk on change, and questioning the unquestioned is how you put more digits in your net worth.
You’ll be glad you forced yourself to evaluate the value you’re getting for your money. You’ll be happy you considered whether the impact of your spending has much impact at all.
Next time you look at your savings, evaluate your net worth and contemplate your financial future, it would be nice to know you’re on the right path. It’s time for you to know with certainty that your balances are increasing. That’ll happen, if you make well-considered financial decisions. Spend your law firm money only on things which are good for your law firm–and for you.