In our experience of working with over 20,000 attorneys over the last 20 years, there are three stages that the vast majority of law firms go through:
Stage #1: A job
The first stage is that of a job. This is where you’re a solo practitioner. You don’t have a team. You do everything. You’re going paycheck to paycheck. You take very few vacations. You don’t have any systems.
Typically, law firms in this stage generate somewhere between zero (just starting out) to about a half-million dollars in annual gross revenue. As you get closer to a half-million dollars gross revenue, you start hiring– maybe a paralegal, maybe an associate, maybe a receptionist, a legal assistant, — but most firms in the job stage start off with nothing. This is how a lot of solo practitioners start their business. They max out their credit cards. They work out of their home office. Then they start getting a rented office by an hour or by a month or by a week.
To move past this stage, you have to get more leads. It’s all about the hustle. Many attorneys have faltered and failed at this stage because they believe it’s all about being a good technician. I’m going to assume that you’re competent. I’m going to assume that you know how to do the legal work. If you don’t know how to do the legal work, then you have no business being in business for yourself, and you should really go get a job and get experience working for a law firm where you can be trained and supervised by someone who’s really knowledgeable and good at this stuff so that you can have a great deal of competency in your work.
But it’s not about being a great technician that’s going to take you from startup to a half-million dollars in revenue. It’s all about the hustle. It’s all about getting that next sale. It’s all about getting more leads. Many attorneys fight, falter, and fail because they rely almost exclusively on word of mouth and referrals. If you’re just starting out, word of mouth and referrals will take you through the first 6 or 12 months, and then those referrals are going to start to fall off. The cases are going to get finalized, and your revenue is going to start to go down because you didn’t pay attention to getting more leads other than through word of mouth and referrals.
Stage #2: A practice
When you start doing half a million to a million dollars a year, the second stage that we see law firms go into is that of a practice. They’re doing somewhere between a half-million to a million a year. They have a few team members. Obviously, as they get closer to a million dollars, that team starts to grow. They start to hire some associates. But typically, the owner is the only or the primary technician, so all the tough cases end up on that desk. Maybe your associates can take the easy ones, but if there’s any kind of difficulty or any kind of client problem, it ends up on the owner’s desk. This is where you start to put some basic systems into place. At this point, it’s all about the cash flow. It’s all about managing the cash flow to be able to feed the machine. This stage is also about sales and marketing. It’s about doing more marketing and getting better at selling.
Now, here’s the problem. At this stage of a practice — and this is where a lot of law firms end up, even after they’ve been practicing 10-20 years — many firms never break a million dollars. In fact, there are about 27 million small businesses in the United States, and only between 7% and 9% of these businesses ever break a million dollars at any point in their lifespan.
The problem with most law firms staying at this stage of a practice is that the owner actually ends up making less money than they did in the job stage. Why? Because now you have payroll. Now you have an office. Now you need to drive a nicer car so that people will think that you’re successful. Maybe you upgrade your home. You start having all of this overhead, which directly feeds on your profit margin, and you end up as the owner making less money as a practice than you did as a solo.
Stage #3: A business
The third stage is that of a business and this is where you actually start creating systems. We work with a lot of law firms well over a million dollars a year. We’ve got firms right now that are doing from $5 million up to $30 million a year with a very small number of owners. We work with a lot of law firms that are doing half a million to a million because they want to break the million-dollar barrier, and they want to build a multimillion-dollar law firm and they don’t know how because they’ve been beating their head against the wall, doing the same thing over and over again and expecting different results.
What we teach them is that at this stage, it’s all about the systems and building the team. You’ve got to be able to have a strong team around you to build a multimillion-dollar business because you have to make bigger decisions faster than you ever have before. It’s very, very difficult to run this all by yourself. You can’t run a million dollar or a multimillion-dollar law firm without having a good core team of people.
You also can’t run a multimillion-dollar law firm without systems for lead generation, lead conversion, and client retention. At this point, you as an owner need to be in the state of mind that you manage the managers, the managers manage the systems, and the systems run the firm.
So how do you move your law firm to the next growth stage? Your first step is to attend a Rainmaker Retreat. This is the easiest and fastest way to get you on track for reaching your financial goals.
Don’t let another year go by being frustrated, being stymied, being dissatisfied, being stressed out. There is a better way to take your firm to the next level. Check out our upcoming sessions and sign up.
