If you own your own law firm, chances are pretty good that your life is not what you expected. Here are three things wildly successful law firm owners have figured out.
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Let’s say you’ve owned your law firm for five, 10 or even 25 years. Like a lot of firm owners, you thought you’d be much further along — even wildly successful. Making serious money, realizing a substantial profit and living the good life. But for most law firm owners, that’s far from reality.
How do I know? I have the privilege of speaking one-on-one with a couple of hundred attorneys every single year, and I hear a lot of stories.
The Typical Law Firm Owner: Doing OK, But Not Very Well
You probably work long hours into the night and on weekends. You’re doing the legal work, managing your support staff and vendors, and myriad other things on top of that. There never seems to be enough cases coming in. Your firm may barely be earning a profit after it pays you a modest salary.
Many law firm owners just accept that as reality. But it doesn’t have to be that way.
The Difference Between “OK” and “Wildly Successful”
In fact, if you look around in just about every metro area, in every practice area, 3% to 5% of all law firm owners are wildly successful — but not wildly better lawyers.
Their law firms grow by double digits every year, whereas most other law firms grow by just 4.3% on an annualized basis, not adjusting for inflation.
They make at least $500,000 — many make more than $1 million. Meanwhile, according to the Bureau of Labor Statistics, in 2021, the median annual income for lawyers was $128,000, and making $209,000 placed you in the top 10% of lawyers based on income. That number may seem substantial, but if you live in a high-cost area like Chicago, where I am, New York, Miami or anywhere similar, $209,000 doesn’t go far.
So how are they making this kind of money?
Here is the math behind their success:
Their law firms generate $5 million or more in revenue and pay the owner $360,000 a year for managing the firm. The firm produces a 20% net profit margin at the end of the year, which is a cool $1 million (20% of $5M in gross revenue).
You are wondering, “How did they get to $5 million in revenue?”
Keep reading, I’m getting there.
So what is it those law firm owners have that you don’t? Are they 10 times smarter, work 10 times longer hours or have 10 times more experienced? Nope.
They have figured out three things. And these three things changed their lives.
1. Successful Firm Owners Cultivate Business Acumen
In fact, many of them possess business acumen that is at least as strong as their legal acumen. This is something they learned, and you can too.
They learned how business works. They dug into each functional area of their business to learn how it works and what systems and people they need to sustainably grow their law firms. They understand what to focus on, what to ignore and how to value and scale their time.
Many of them no longer practice law because they figured out practicing law is not scalable: You are always working for someone else and there are only so many hours. But managing and owning a successful law firm is highly scalable, as you have other people practicing the law and you can get many of them working for you.
That said, you do not have to stop practicing law; you can hire a professional director of operations to run your firm for you.
2. They Surround Themselves With the Right People
You can’t figure out all the how-tos in your business; nor do you have the time to do so. That’s why sometimes you want to focus on who you need rather than how to do things. The right people will develop and implement the systems that you need for your business to grow.
3. They Have a Predictable Revenue Engine
This engine consists of two elements: marketing and intake. Once fine-tuned, it consistently attracts prospects who need the firm’s services and turns them into retainer clients.
Looking back at the $5 million example, assuming an average case value of $5,000, a firm would need roughly 84 cases per month to reach that. A fine-tuned revenue engine can deliver that in almost any practice area in just about every metropolitan area.
So, How Do You Start?
Based on the habits of successful lawyers, you start by learning as much as you can from the smartest, savviest people you can find — and you invest your cash wisely.
Get a Business Coach and a Learning Plan
You need someone to look over your shoulder and advise you. Every effective CEO has at least one advisor. Why don’t you? Once you get that business coach, build your learning plan. Create a list of books you’re going to read, conferences you will attend, and training courses you’re going to take.
If you’re saying “I don’t have the time to do this,” make the time!
Look at your daily schedule. Look at how you spend your time. Find a couple of hours that you can carve out to focus on developing your business acumen. The time you invest in your development will pay tremendous dividends. You’ll understand the legal business better than most of your competitors, which will give you a massive edge when it comes to sustainable law firm growth.
Review Your Intake Process and Fine-Tune It
Do this pronto. If your phone rings and you’re getting online inquiries, but your intake process is less than effective, things slip through the cracks and you are letting prospects walk away. This may cost you hundreds of thousands of dollars every year in lost opportunities. Multiply that by 10 years and you’ll understand the true cost of ignoring the problem.
There is usually an easy fix. A sales-minded coach will help you review the process and either fix it fast or introduce you to someone who will do this for you. (Read: “How to Fix Your Intake Process.”)
Invest in Marketing
Finally, to really grow, you must get the right marketing team working for you. I can’t overstress this point: When you have the right people working for you, you’re going to get more leads, which will lead to sustainable growth that will make your work more rewarding and profitable.
Choosing the right team is a mission-critical decision for successful law firm owners. There are a lot of bad marketing agencies out there, so you must invest time interviewing and evaluating them before you choose. (Check out my guide, “How to Choose the Best Marketing Team for Your Law Firm,” for guidelines and a list of highly rated agencies.)
Given enough time, the right team can deliver so much new business your investment will be more than worth it.
Act!
Life is too short not to squeeze the most out of it. Don’t let another day slip by without taking action. If you don’t make the needed changes now, then in 10 years, you’ll find yourself in about the same position.
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