Growth and expansion are critical milestones in a law firm's journey, yet they often come with the daunting task of securing additional funding.
Episode 4 tackles a pivotal and often misunderstood aspect of this journey: the strategic use of debt. Far from being a taboo topic, understanding and utilizing debt can be a game-changer for law firms poised for growth.
Key Takeaways:
Debt as a Catalyst for Growth: Uncover the potential of debt as a powerful tool for expanding your practice. Ali debunks common misconceptions, illustrating how debt, when managed smartly, can propel your firm to new heights.
Stigma vs. Strategy: Dive into the societal stigmas surrounding debt and learn how to shift your mindset to view debt as an asset rather than a liability.
Cost-Effective Financing: Explore why debt can be a more affordable and effective funding option compared to other methods like selling equity. Understand the nuances of leveraging debt to your advantage.
Ali's Personal Insights: Gain valuable insights from Ali’s own experiences with using debt to scale her company. Learn how to align debt with your growth objectives and timelines, ensuring you don't overstretch your financial capacity.
Debt as a Tool, Not a Burden: Discover the critical difference between using debt as a strategic tool versus falling into the trap of burdensome debt. Learn tactics for employing debt in a way that fuels sustainable and responsible business expansion.
This episode is vital for any lawyer contemplating staff hiring and firm expansion. Join Ali as she coaches a Personal Family Lawyer firm leader to demystify the role of debt in business growth, offering a fresh perspective and practical strategies for making informed, intelligent decisions about financing your firm's future.
Time Stamps
00:26 The need for funding support for business growth and expansion.
02:26 The challenge of taking on additional debt and the desire for alternative funding options.
03:03 The importance of mapping out financials and investment for growth.
04:41 The entrepreneurial mindset of constantly seeking the next level of growth and the need for funding to achieve it.
06:49 Shift in perspective from consumer debt to business investment using credit.
Transcript
Ali Katz: Hello and welcome to the NewLaw podcast, where we guide entrepreneurial lawyers to build law practices into businesses they love.
Ali Katz: I'm Ali Katz.
Ali Katz: In today's episode, we're talking about how to invest to grow your business. We cover why credit is one of the main levers you can pull as a business owner to grow and expand more rapidly, and most importantly, how to do it wisely. If you're wondering how to fund the next level of your business growth, how to find the money, and how to do it smart, this episode is for you.
Ali Katz: Let's get into it.
Tony: Hi, Ali.
Ali Katz: Hi. Welcome, welcome. So let's talk here. Because you don't want to take on additional debt, you need some funding support for your business. Just give me a little bit of the history here.
Ali Katz: Tell me a little bit about what's going on here.
Tony: So I was a document review attorney. I don't know if you're familiar with that term, contract attorney in the ediscovery field. And for a very long time, and it was very stable. I got comfortable. This year, for some reason, everything got turned upside down. Most of my projects didn't last longer than two weeks. Was always dipping into savings. My last project ended, I think, in the beginning of August. I had already been looking into the estate planning field and decided to jump in, but with very little financial runway, like basically the end of October, and convinced myself that I would figure it out, because I guess the trajectory that I was on just was a dead end.
Ali Katz: Yes, for sure.
Ali Katz: So basically, no savings. And, yeah, I know I made the right decision. Just wanting some creative input in terms of funding. You know what? I will take on the additional debt if it's necessary. But at the time that I submitted, I was hoping there was an alternative. I have history with that. Actually having to pay for my father's funeral and just bad memories.
Ali Katz: Got it.
Ali Katz: Okay. It may be that it is time to create a new relationship around debt for you.
Ali Katz: Okay.
Ali Katz: And I literally was just walking through this yesterday with, we have an advanced financial program for the lawyers that have gotten so successful that they're ready to hire and they're ready to make bigger investments in their firms. And so one of the things that we do is we map out their financials for the next three years, and we look at their financials with them, and then we help them look at how are they going to fund this growth?
Ali Katz: Because it's a funny thing that the exact place that you are in right now is the exact place that these lawyers who are now, they're doing 4, 500, 600, 700,000 a year. And yet they also are looking at how am I going to fund my next level of growth?
Ali Katz: Now from where you are, you might say, oh my God, if I was making four or five or 600,000 a year, I wouldn't need more money.
Ali Katz: Right.
Ali Katz: But guess what? The vision, if you're truly entrepreneurial, not everybody is. Not everybody is. But if you're truly entrepreneurial, what happens is that you get to your place that you wanted to get to and then you see the next level and you want to go to the next level.
Ali Katz: Would you love direct support? To help you grow your law practice into a business you love, go to newlawbusinessmodel.com/show and sign up for a call with one of our trusted law business advisors. Each of our advisors has been trained directly by me over the past five years plus to help you chart your path from wherever you are now to where you want to go as efficiently and effectively as possible. You're ready to love your law practice. We're here to help.
Ali Katz: Now, this doesn't happen for everybody. Some people are like, okay, I'm good, I'm good. I'm going to stay right here and that is absolutely fine. And you can stay right there. And you don't need to invest to go to the next level. But a lot of times, at least, and it's certainly been the case for me, you want to go to the next level, and whenever you want to go to the next level, you're in the question of how am I going to fund this? It's even the case for me now. I mean, the company makes millions of dollars and yet I'm looking at the next level. How am I going to fund the next level?
Ali Katz: So I'm actually stretching into my own next level with a capital raise because I have more things I want to do, I have more projects I want to take on. I have more things that I want to create.
Ali Katz: So I'm telling you that, Tony, so that you can just start to get used to it.
Tony: Okay.
Ali Katz: This Moment, this place.
Ali Katz: And I was telling them the exact same thing that I'm going to tell you right now, which is that we have been indoctrinated with an idea about debt that comes from a consumer reality. If you are working a job and there is a cap on how much you can earn at that job, because you only have so many hours in the day and you can't get more efficient and you can't invest to be able to increase what you earn, then you should not use credit, you shouldn't use credit in that case because you're using credit to consume without being able to use. You're just consuming. You're not actually creating more. You're not expanding. You're not investing to grow.
Ali Katz: As a business owner, investing and growing your income and your business debt is one of the cheapest ways to do it. It's actually one of the cheapest ways to do it. I've always done everything using debt. I've never raised any capital from any other sources. I've only ever used credit to do it. And now that I'm going out to raise capital, what I'm seeing is, wow, it's way cheaper to use debt than it is to sell equity or give up part of the business, right? It's way cheaper. Now, the only other option would be for you to somehow earn the income.
Ali Katz: But you need to spend the time that you would be earning the income. You need to spend the time learning how to earn the income.
Ali Katz: Thanks for listening. If you want the kind of support that you heard me giving in this podcast, go to newlawbusinessmodel.com/show and book your call with a law business advisor so you can map the path to discovering exactly how you can turn your law practice into a business you absolutely love. But before you do that, connect with us on Instagram at newlawbusinessmodel and be sure to subscribe so you never miss an episode. And of course, we would love your five star reviews on wherever you're listening to this episode. And after all that, go to newlawbusinessmodel.com/show and book a call with one of our law business advisors. I look forward to seeing you on one of our future coaching calls. Bye for now.
