Financial Foundations for
a Prosperous Practice

Ali Katz:
Hello and welcome to the NewLaw podcast, where we guide entrepreneurial lawyers to build law practices into businesses they love. I'm Ali Katz.

Ali Katz:
In today's episode, we're talking about how to establish strong financial systems when starting your new law practice. If you're an estate planning lawyer ready to build your practice into a profitable practice where you are not worried about money whatsoever, this episode is for you. Join us as we dive into the best practices for managing your finances, getting your bookkeeping handled, and securing your client payments to set up your practice for success from the start.

Ali Katz:
Let's get into it.

Ali Katz:
Let's go to you. Welcome. Welcome, Brooke. So glad that you are here. You're unmuted on my end.

Brooke:
Hey, Ali.

Ali Katz:
Hi. Welcome. I'm so glad that you're asking about bookkeeping right from the start, because many lawyers don't do that and try to do their own bookkeeping. And I don't think you should start out trying to do your own bookkeeping. No, definitely not. I think that one of the most important things that you can get set up right from the start is working with a bookkeeper. Really, the most important thing in the beginning is that you ideally find a bookkeeper that will meet with you every month to review your PnL. And that's what will set up your profit and loss statement in the way that we recommend where they're breaking down your income by type and what I mean by that a lot of times.

Ali Katz:
So we have a program when lawyers are ready for it. In the past, it's been called Fix your financials. And going forward in 2024, it will have a new name. But what that program has been is lawyers who are really ready, they're making like 20,000 consistently a month, and they're ready to get in right relationship with their financials will come in and work with us to help them learn how to work with their bookkeeper, help them get their profit loss set up and create a three year roadmap for their practice, turning it into a business and making hiring decision. It's an investment decisions. One of the biggest things that we see when lawyers come to work with us in that program is either they don't have a bookkeeper, or if they do have a bookkeeper, the bookkeeper isn't really breaking down their income or categorizing their expenses properly. And so if you can start that off right, right from the start, it will just help you make so much better decisions about your business going forward. And so one of the things that you want them to do is be able to break down your income into categories.

Ali Katz:
So, for example, let's imagine that you're just doing estate planning. Well, not all of your estate plans are in the same category. Some are family plans, some are trust plans, some are wealth plan. I want your income every month to be broken down. What was the income from family plans? What was the income from trust plans? And what was the income from wealth plans? If you take on other matters, you know what? How can you lump that together so that you can see how your income breaks down each month? So that's one thing that we see a lot of people overlook and not do. And then the other piece, of course, is categorizing your expenses, because categorizing your expenses is where your tax savings happens. And so we want you to have a bookkeeper who can pull all of your credit card statements and all of your bank statements every single month. Categorize them as they think that they should be categorized, and then you meet with them to review, usually the second week of the month.

Ali Katz:
By the second week of the month, they should be able to have your books closed for the prior months. And so if you have a standing meeting on the calendar, either the second or third week of the month, now they have a deadline to work towards to close your books for the prior month. And then in that meeting, you're going to look at, okay, how did November compare to October and September? You're looking at three months, the prior month that just closed and the two prior months to that. And that way you're going to be able to see, am I miscategorizing? Is something getting miscategorized? Is there, are there any anomalies? Getting in the habit of having that meeting on the calendar is really going to help you work with your bookkeeper in a really good way. Now, that's going to be more than $50 a month. Okay? Right. And so you might say, well, you know, do I really want to spend 250 or 300 or $400 a month on this? The reason that you do is because you're building a business. So if we look, Brooke, at this time next year, let me start with this question.

Ali Katz:
Are you full time in your practice?

Brooke:
No, I'm part time right now.

Ali Katz:
What are you doing in the other time?

Brooke:
My kids right now.

Ali Katz:
Okay, so you don't have another business.

Brooke:
All started and open currently.

Ali Katz:
Yeah. Yeah. But you don't have another business, you don't have another paying job? No. Okay, great. So if we look at, where do you want to be in terms of number of new clients that you're serving every month this time next year. So what's true?

Brooke:
I guess I want to get to the point, or I do. I want to get to the point where I need to hire a client services director, which is six a month, correct?

Ali Katz:
Yeah. I mean, yeah. If you, if you have four consistently a month and you know that you want to go to eight to ten, if you know that you want to have a client services director and you, you want to start building to that, then I would really say once you get to that four consistent amounts, that's really when you say, okay, it's time for me to start looking at the hiring process and hiring a client services director, which could take a couple of months. Right. And so, um, if, if you get to six and you're part time, you're going to be overwhelmed.

Brooke:
No, I will be full time by then. It's just currently getting everything started up.

Ali Katz:
Yes. Right. Okay, great. And so what I would say is that if what you're, if you're looking at six and your average fees are 4000 a month, $4000 a client, you're really looking at between 20 and $25,000 a month of revenue, would it be worth it for you to invest? And you really need to look at it this way. This was like one of the biggest shifts that I made in growing my practice into a business. Is it worth it for me to invest $500 a month? Let's say, let's imagine that you would be spending 500 a month to work with a bookkeeper to do this, to be able to help you to actually handle your financials in a way that sets you up to be able to ultimately get to $40,000 a month. And that's how you start to think about this as a real business, to make sure that you're paying yourself properly, because your bookkeeper should be doing that. Your bookkeeper should be the one that sets you up on payroll, and your bookkeeper should be the one that makes sure that your expenses are all categorized to minimize your taxes.

Ali Katz:
And so that's really the investment that you're making. You're making the investment in turning this practice into a business and making sure that you're making your hiring decisions well. And that once you're getting paid, then your client services director is getting paid. And, and so I just want you to get into that habit of starting to think about, okay, I'm building a business. My first real goal here is 20 to 25,000 a month. Is that $500 a month person who's just handling the financials, handling the books, a good investment, even though right now, well, I'm only seeing one to two clients a month. But this is when you're establishing the habit, the practice, finding the right person, getting the system set up. And so even if you know there's someone that you're maybe paying only 250 a month right now because you don't have that many transactions that they really need to be tracking, is this someone I'm going to be able to grow with, that will charge me more overtime, that will schedule that meeting with me every month proactively.

Ali Katz:
It's just on the calendar. We know we have it. Maybe it's only a 30 minutes meeting, you know, in Q1, but then it becomes an hour long meeting in, you know, towards the end of the year when you're making more decisions. Right. You have more transactions. Does that make sense?

Brooke:
Yeah, no, that's great.

Brooke:
That's helpful.

Ali Katz:
Yeah. You're really going to grow into that. And then what financing options do we offer when your clients seem to be in need or if they ask? And so in my office, this is, you know, I think things were quite different back then in terms of like, it was a huge pain to even set up ACH where I could pull from their bank account on a monthly basis. Now those things are kind of easy, but what I really like is if you know the cost of a plan and you can collect at least that amount upfront. And when I say the cost of a plan, what I mean is you've got a cost to draft the plan, especially if you're using an outsourced service. You've got a cost for the paper and the binder and all the materials to deliver on the plan. And so let's just imagine that you say, okay, the cost of a plan is $1,000, then collecting that thousand dollars upfront and then doing a payment arrangement for the rest of the plan, payment plan based on what actually works for them, and then making sure that you've got it set up to auto pull from either their credit card or their bank account is the way to go. Because if you base it on the meetings and then they don't have their second meeting or their third meeting, you get stuck. So I'd rather see it where you set it up, where you collect a big enough payment upfront to cover your out of pocket costs, and then you can do as long of a payment plan as they want, or you're willing to do as long as you can auto pull it and you don't have to chase them down for it. Right.

Brooke:
No, that sounds good.

Ali Katz:
Yeah. And then the client payment on the day of the family wealth planning session. Yes. You take the client's credit card information or bank account information and run the card. Absolutely. If possible. Collecting everything upfront is most ideal, of course. But if they can't do that, then at least you can receive that first payment.

Ali Katz:
And I want you all to note that while you can take credit cards, there is a cost to you. Right. There's a 3% fee for taking credit cards that you pay. And so it's possible if you can do a direct debit from their bank account, that's better for you and that saves you money rather than taking a credit card. Now, some people can't do that. They don't have the money in their bank account. They need to put it on a credit card. That's fine.

Ali Katz:
But you may want to offer some sort of an incentive to not run it through the credit card. Of course, we also do see merchants that will, that will charge the client. If you're going to put it on a credit card, that's fine, but you'll pay an extra 3% for that because that's really what you are paying to the credit card company. So you can think about if you want to do that. Oftentimes what I did is if they pay in full, I'll waive the credit card processing fee. That way I get it all in full and it's worth it to me to get it all upfront and that then waives the credit card processing fee. But if they're going to want to pay it over time, then I definitely want to charge for the credit card processing.

Brooke:
Right. That makes sense.

Ali Katz:
Yeah. That's just fair to you because you're taking on that cost.

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 grow. We are here to help.

Brooke:
Okay, and did you invoice when you. I know the systems that people are using nowadays, like quickbooks and law a lot. There's an invoicing thing, but then that goes to their email, but you're wanting to collect payment, obviously, at least some of it that day. So, yeah, I'm just trying to think through, obviously, like, practically speaking, like that day, how I would do that.

Ali Katz:
Yeah, you would just run the card. You can just run the card through your system or, you know, enter in the information and law pay or whatever way you're using to collect payment, and then the system should send them a receipt. A payment receipt.

Brooke:
Great.

Ali Katz:
Okay. Yeah, yeah. So that should. That should handle it all for you. And then Daniel is saying that he used to offer a 1% discount for paid in full by cash or check. So I think incentivizing a pay in full can work. Alternatively charging extra when they're making you stretch it out as the alternative.

Brooke:
Okay, wonderful. Thank you so much.

Ali Katz:
Right. Thank you, Brooke. Thank you so much.

Ali Katz:
When it comes to setting up your law practice like a business, don't go it alone. If you're serving families with estate planning, we have it all done for you. You don't need to reinvent the wheel, and you can get this kind of support directly. Simply go to newlaw.co/show and start the process of talking to one of our law business advisors about how we can map your path from exactly where you are now. Whether you're just starting out or you've been in practice for 20-25 years and you're ready for a change to exactly where you want to go. Whether it's our solo practice model taking home around 100,000 a year, our staffed practice with a small team taking home 200, 250 a year, or you want to build an empire, taking home more than 400,000 a year, we can help to map your path to get there and then give you everything that you need to go from where you are now to exactly where you want to be. Simply go to newlaw.co/show and start the process.