On this week’s episode of the Wealthy Woman Lawyer® Podcast, we speak with Brooke Lively, Founder and CEO of Cathedral Capital. As a Chartered Financial Analyst, Brooke specializes in helping entrepreneurs turn their companies into profitable businesses by working with closely held companies with revenues up to 10 million dollars. She is the author of the 6 Key Numbers book series, which includes From Panic to Profit: How 6 Key Numbers Can Make a 6 Figure Difference in Your Law Firm.
Brooke laments the fact that most law schools don’t actually teach aspiring attorneys how to run a business. “You’d think law school would prepare you better,” she says, “knowing that an attorney is going to open their own firm. But they don’t and it’s such a shame.”
We chat with Brooke about her top tips on laying a solid foundation for your business as a new attorney, as well as:
- Your ideal first hire
- Vanity numbers and what you should be looking at instead
- What “cash is king” actually means in practice
- How and why to run a law firm on the “Rule of Thirds”
- Percentage of your budget you should spend on marketing
- And more.
Listen now…
Mentioned in this episode:
Transcript
Davina Frederick: Hello and welcome to the Wealthy Woman Lawyer Podcast. We believe all women lawyers deserve to be wealthy women lawyers. Our mission is to provide thought provoking, powerful and practical information to help you in creating your own sustainable wealth generating law firm without overwork or overwhelm, so you can live your best life. I’m your host, Davina Frederick, and I’m so excited for you to meet our guest today. So let’s get started. Brooke Lively is the CEO and founder of Cathedral Capital, a team of CFOs and profitability strategists who help entrepreneurs turn their businesses into profitable companies. After earning her MBA in investment and corporate finance, Brooke built a seven figure company in under two years. As a Chartered Financial Analyst, she and her team work with hall of famers, Inc 5000, businesses, CEOs and small business owners to help you create your own profitable business. So we’re super excited to have Brooke, on the Wealthy Woman Lawyer Podcast today. Welcome, Brooke.
Brooke Lively: Thank you so much. Okay. And I’ve got to tell you, that seven figure business I built in two years.
Davina: Yeah.
Brooke: That was a law firm.
Davina: Was it. Awesome. Yeah, so were you are you, you are a financial person. Right. So you were the were you the administrator in the firm?
Brooke: I was, it was my father’s law firm. Historically, he likes to shed his partners every seven to 10 years. Can’t do that in our practices with my brother. So that’s one law partner that you can’t shed or it makes for a really awkward Thanksgiving. He had shed his partners. And he said, for the first time he had lost his firm administrator who’d been with him for you know, 20 some odd years. And so he said, c an you come help me? And I said, sure I can. So that’s how I got started.
Davina: Wonderful. That’s wonderful. So you’ve managed to escape the attorney curse, though that apparently had befallen your family. When you have your dad as an attorney, your brother’s an attorney, apparently.
Brooke: It gets so much worse than that. But yeah, most of my friends are attornies and virtually every guy I have ever dated, dated in high school grew up to become attorneys. I had a federal judge in DC tell me I needed a better class of friends.
Davina: Oh, seriously, seriously? Well, well, we’re glad to have you here. We’re super glad to have you here. And what’s really exciting about this is that you’re going to be talking to a lot of women attorneys, and we’re just way cooler than men attorneys anyway. So women law firm owners are the ones who make up our audience. So I am excited to have you here. Because, as I mentioned to you, I am always talking with my clients about the importance of really getting clear on their numbers and understanding your finances.
And I think I think it’s very common for a lot of small business owners, not just attorneys when we start out in practice, you know, we’re lawyers, and we think I’m gonna hang my shingle, and we start, and then we get years down the road, and we’re like, oh, crap, I don’t know that. I have business skills that I need to do this. And then we start scrambling around and trying to figure it out. And oftentimes, in those first few years, we’re really ignoring our financial picture a lot, just because it makes us feel uncomfortable to look at it, and talk about it. In your work with lawyers and law firms, what have you seen?
Brooke: Well, first of all, let’s be really clear. Law School teaches you how to practice law, or how to pass the bar, depending upon your law school. It doesn’t teach you how to run a business. And then this huge number of attorneys, and I can’t remember the exact number, but I know it’s somewhere over 70% of attorneys open their own firms. So knowing that an attorney is going to go open their own firm, you would think law school would prepare you better and they don’t and it’s such a shame. And and so all of a sudden, you have these very bright, very well educated people who have been taught to be the expert, you guys are the expert in what you do.
And all of a sudden, you don’t have the answer and not really can kind of knock you off base and really kind of no comfortable. No, yeah, it’s uncomfortable. And it’s, it’s a little scary and demoralizing sometimes and because all of a sudden you feel like maybe you don’t, you aren’t as smart as you thought you were and it’s just that no one’s ever taught you these things. And absolutely any attorney is bright enough to learn them. Anybody can do this. Do people need to do it to my level? No, there is no reason for an attorney to go back and get an MBA to run their business. Right? A little bit of financial education will take you a really long way.
Davina: Right, right. And I think that finance, whether they’re just starting out with getting a bookkeeper and having their CPA, or beginning surrounding yourself with good financial people is critical. And then as your firm gets bigger, and you start growing your team and wanting to expand your capacity, then looking for those people like firm administrators. And it’s kind of interesting, because a lot of small firm owners don’t really realize that a lot of these midsize, which seem like really large firm to us, midsize, according to the Small Business Administration, to, you know, large law firms.
They have administrators who are actually running the firm, you know, and it’s about more than money, but they have administrators that actually handle everything when it comes to running the firm. And so you have these law firm owners who are starting out and they’re feeling like they have to be an expert in everything, not realizing that, no, what you really need to do is have enough of an understanding to be able to have intelligent conversations and understand your business, and then hire good people who are experts in their own field to help you, right.
Brooke: Yes, absolutely. Now, I will say most law firm administrators don’t have an MBA with a double concentration in corporate finance and investments like I do, right? And, and many, I think your bookkeeper, when you start looking at financial people, your bookkeeper is that first person you want to put in place? And I’ve had so many attorneys say I can’t afford it. I’m like, really?
Davina: You can’t afford not to have a bookkeeper.
Brooke: I’m like, you can’t afford to pay somebody $50 an hour? No, no, I’m like, but your bill at 300. You know, your one hour billing pays for, you know, almost an entire month of having a bookkeeper. Two hours of billing will probably pay for a bookkeeper for a lot of law firms. So the opportunity cost of not having a bookkeeper is huge, just from your bottom line. And then the other thing is, is they know what to do better than you do. And, and rely on them. A good bookkeeper is priceless. Because they will. Sorry, go ahead.
Davina: I was gonna say that and for somebody you know, like, I am definitely not the person who. I actually used to work as a bookkeeper when I was going through my undergrad going through college. And it just it’s absolutely laughable when I look back at it now because I’m your I’m a word person like a journalism major. An attorney like everything in my life involves revolves around people and words and communication and bookkeeping is not my thing. But it saves your not only is it does it help you with getting you’re making sure your books are accurate, it saves your mental capacity and stress. Because if you don’t like bookkeeping, you know, you just don’t like bookkeeping, you’re not gonna like it, you know, like, get, just hire that done. And it will just say it just make you feel better make your life more enjoyable if nothing else.
Brooke: Right. Absolutely. I know, an attorney in Chicago. And when I first met him, he didn’t have books. I’m like, well, what do you mean I have books. So what he would do is he would sit down the week before Christmas and New Year’s, every year, he would go downstairs into his basement office and would spend an entire week rebuilding his books for the entire year. So on January 1, he had beautiful books for the previous year.
And that was the last time he had a good bout a good cash balance and had any idea of what was going on in his firm. And one of the first things I did was I said, look, we’re gonna hire you a bookkeeper. And this person is gonna make your life so much better. And his wife was standing there cheering me on. He didn’t realize how much his family resented the fact that he spent this entire week stuck in the basement working on his books, instead of spending time with them. I’m like, I’m gonna give you a whole week of vacation.
Davina: Right, right. Not to mention how accurate can things be? They might have looked good, but how accurate could they have been? Yeah, I can’t remember what I you know, spent last week I can’t remember what I had for much. You know, let’s remember the whole year and get that right.
Brooke: Much less what that purchase was, you know, nine and a half months ago. Yeah, you have no idea.
Davina: Imagine the amount of money he was probably leaving on the table from a standpoint of capturing revenue, you know?
Brooke: Yeah, I know. He doesn’t do that anymore.
Davina: You wrote a book from Panic to Profit, How Six Key Numbers Can Make a Six Figure Difference in Your Law Firm. And I want to dive in and talk about this book and your six key numbers. I know, I don’t expect you to read the whole book for us to get us the whole inside scoop. I know people can go get book. But I first want to talk with you about numbers that people may focus on that really aren’t, don’t tell you as much as you need to know or may not be as key as the six numbers you shared your book. Do you find that there are people in focusing focusing on things that really aren’t as high value is what they need?
Brooke: I think there’s some sanity numbers that people focus on. Like your growth revenue number. I’m a million dollar law firm. That’s a big one that people focus on. And that’s just a number in isolation. And that’s not a number that that we think, is important in isolation. It is important when we combine it with other numbers, but in isolation, that’s not an important number. Another vanity number is people’s conversion rates. And when we do talk about the numbers that I think you should pay attention to, we will talk a little bit about conversion rates. But the one that most people focus on is the number of potential clients that come in for a sales call, and then become a client.
And they’ll say, oh, I’ve got a 95% conversion rate. And I’m like, uh huh. Do you actually track that? I just know that I have that. I’m like, uh huh. So. So yeah, the vanity numbers really aren’t important. What’s important are the numbers and it was asked to me this way, once I was in an EO meeting, entrepreneurs organization, and somebody said, okay, you are on a desert island on a five star resort. And there are no phones, there’s no internet, there’s no TV, but this is the most amazing place you’ve ever stayed. Once a week, a boat comes and drops off guests, picks up guests that are leaving, and brings all the supplies for the coming week.
The only way you can make a decision about whether you can stay on the island for another week or not, is for the captain of that boat to bring you a piece of paper with three to seven numbers on it. What are those three to seven numbers that you need to decide if you can stay on the island for another week? No follow up questions. No talking to anybody in your firm. Piece of paper with three to seven numbers. And that really got me thinking, what are those numbers? Is it three? Is it five? Is it seven? Is it 16? And my team and I really struggled with this for a couple of years until we came up with what we think are the right numbers. So when we look at a law firm, we divide it into kind of six different financial areas that we think are important.
And they’re cash, ideal ratios, production, you know, we got to get work done. Your budget versus actual, marketing and sales, and case management. And in each one of those sections, there are a there are different numbers that tend to build on each other until you get the one number that’s really important. And it’s those six numbers that we think a law firm owner would want to get while sitting on the island to decide if they get more mai tais or if they’re getting on the boat and shleping back to their law firm. Because things aren’t on track. So you want to know what those are?
Davina: Yeah, I want to delve into those I want to start with start with talking about we often hear cash is king. What does that mean to you?
Brooke: Cash for a business is like oxygen for a person. If you don’t have any oxygen, you’re gonna die. If your cash doesn’t have any business, it’s going to die. You need it. And at times of great stress or times of great growth. You’re going to need more just like if you’re exercising. Your heart rate goes up and your body needs more oxygen. So, you know, we can plan for those things, we can plan for growth in business, we can plan for things like the owner going on vacation, which is going to affect possibly billing, and very probably will affect sales. So what do we need to do to know that we have enough cash. And so the number we like is the cash flow forecast. Because it tells us how much cash we are going to have, at the end of every week for the next six to eight weeks.
And I say six, eight weeks, because you have time to make a decision in there. So I was, I was working with a firm out in the Pacific Northwest. And looking at their cash flow forecast, and then there was red on it there, we were going to go negative. And there was panic, and you know, everything oh, my gosh, what are we gonna do. And so we looked at it. And sometimes you can do things like, you know, just pay the rent the next week or something like that, well, this was a bigger cash crunch than that. So we brainstorm some ideas. And they went back, and I talked to them a week later, we were no longer going to run a deficit, they had been talking about rolling out a DUI firm, they have been talking about rolling out a new product that they thought would change the way people got sentenced in Portland. And they sold this. And in fact, it has changed the way people are getting sentenced. It’s an amazing thing. But they had six weeks to figure it out. That’s not something you can roll out in three days.
Davina: Right.
Brooke: So if you have the time, you can get creative and you can find the money. My father calls it JIT money. Just In Time.
Davina: Yeah, that just in time, money is really important.
Brooke: And it is important, it is a little stressful. And you know what, you have to put some some effort into getting JIT money.
Davina: Well, kind of interesting when you say that it’s a little stressful, I think sometimes. So when you’re when you’re looking at your cash flow forecast, and you see that a few weeks from now, cash is drying up, it suddenly gives you that creative, there’s no such thing as writer’s block when the deadline is on right. So that gives you that a little bit of adrenaline and stress that you need sometimes to be creative and start thinking of things that you don’t normally think about right?
Brooke: That little kickstart it’s that little you know, push in the right direction.
Davina: Sometimes we need that, where they say diamonds are created under pressure, right and sometimes, right or that that’s so we pay attention to that number that can that can maybe help us get a little more creative. And that adds up over time.
Brooke: It does. And just like a diamond, a diamond takes a little bit of time. So having that pressure and having a little time having a runway until you need the cash will make all the difference.
Davina: Okay, so we’ve got cash, we know that we know what cash flow forecasts can do for us. Is there are certain is, is there a certain amount of cash like a percentage wise, that we should want to keep in our operating account, let’s say for, you know, above and beyond just your expenses? I mean, we know we know we need we need to cover our net right?
Brooke: Yeah.
Davina: What about above that should we be trying to keep to keep our cash flow, you know.
Brooke: Everybody’s everybody is different. So I’m going to answer it two ways. The first is, I would like every law firm, to have access to three months of operating expenses. Now, when I say access, that is not just cash, that can be a mix of cash and debt. You know, you can have one month of cash and a line of credit equal to two months of operating expenses.
Davina: Oh my gosh, I’m so glad that you just said that up because I just had a group call with some clients who are in a new program I created. And we were talking about that and I was telling them, my million dollar earners and above all, have some sort of backup system. They have a line of credit. They have something they’re not just depending on what they’re bringing in. Month after month and a level up they have that that and that often empowers And sort of gives you that confidence to make little riskier decisions to increase your capacity. Because you know, this is going to give me that runway I need, if there was something to happen that it took a little longer, whatever, I would have this backup plan, right, that’s going to help me make sure that the business stays operational while I grow.
Brooke: It gives you some confidence. And it gives you the ability to make decisions that you might not have made before. It’s a security blanket. And the other thing about having a mix of cash and debt is that there is an opportunity cost to holding cash. Think about what the market has done in the past year. If you were sitting on three months of operating cash, if you had sat on one month, and taken those other two months worth of cash, gotten debt instead and put that in the market, what was the market up last year? 30, some odd percent, something like that some huge number.
So really look at what’s the right mix for you. So to go back to your question, how much cash should you have? I think you should have access to three months. There is a separate question here. And that is, how much cash do you need to feel comfortable? That’s different for everybody. I’ve got a law firm owner in Wyoming. And if she doesn’t have $50,000 in the account, her eyes get huge. Right? I have other firm owners that want 200,000 in the account. Right? I’m like, okay, that every everybody has what, you know, we kind of call a deck, what’s that hard deck? What is that line beneath which you start to feel uncomfortable and get twitchy? For some people? It’s $10. And that’s so, so to answer your queastion, it’s a mix of those two things.
Davina: Right. Right.
Brooke: Does that help?
Davina: Yes, yes, that’s tremendous. I think a lot of people will appreciate hearing that. And also having some sort of framework to know that there’s such a range of people of different size firms and different personalities, and all of those kinds of things, different practice areas are going to have different so for instance you for I can see if you have a personal injury firm, you might need more cash in your account to feel comfortable, because you don’t know how long it’s going to take if you take two years to settle your case, or whatever, you know,
Brooke: You don’t know when the next pay day is going to be.
Davina: Right. So you definitely need to, you know, you take into account your practice area when you’re thinking of this, and also your risk tolerance. And, you know, like you said, what makes you, you know, get squirrely when you start thinking, oh, my God, does that mean our account, right?
Brooke: I mean, for me, personally, my number that I need to feel comfortable in the account is one payroll. That’s all I need. I don’t need to hold a lot of cash personally, because I have a really high risk tolerance. And I also know how my business is structured. So the number that I need to look at to be responsible, is access to three months. But there are other people that need 200,00 and 3 months operating since this may only be 100,000. So yeah, it’s not works. But I think you’re right, I think those you know, in personal injury firms, it’s so important to have big huge lines of credit setup, because you don’t know when the next pay day is going to be. And those cases can be expensive to work. Right? So you need that. And here’s a little tip about lines of credit. The bank only wants to give you a line of credit when you don’t need it.
Davina: So true. That’s the most hashtag accurate, is what that is.
Brooke: It is. So quick tips on when to go get it and do it when you have a lot of money in your trust account. And make sure if you do carry a big trust balance, or any trust balance, that you’re working with that bank to get your line of credit, because that’s what’s considered sticky money. With that account has $100,000 in it all the time the bank is going to feel like they have a deeper relationship with you. Then if you’ve got, you know, an operating account that has $20,000. So use your use your trust account as a negotiating tool.
Davina: Yes, it’s always malarious to me when you were, you know, the amount of offers I get for money when I have to have a ton of money, I start getting the offers and start rolling in then.
Brooke: That’s right.
Davina: You need another loan?
Brooke: You probably don’t need another loan. The answer is yes. Take it.
Davina: Yeah, yeah. Okay. Okay. So all right. Moving on from cash, I want to get in and discuss a couple, at least a couple of these other numbers here, because I know people are gonna want to know. And if we give them enough of a peek inside, I think they’re gonna run out get your book, because you delve into a lot of this a lot deeper in the book, but tell me another. So we got cash is king. So tell me something else that you think of your six numbers. What would be the next one that you want to talk about.
Brooke: So I want to talk about I mentioned ideal ratios, there are ideal ratios in law firms. Well, we believe that you should run a law firm on the rule of thirds. 1/3 of your revenue should go to the people doing the work. So that means that 33% of your expenses should be your payroll. We believe that 1/3 should go to overhead. This includes marketing, so marketing, rent, copy paper, you know, whatever. And 1/3 should be going to profit to the owner. So the number we really look at the key number here is under compensation. And I’ve gotten a lot of pushback out in the marketplace in the world that this is a number you should be looking at. People are like, why is that important? Like it is important to every stinking owner. If you own a law firm, you should be compensated for the work that you’re doing and the risk that you are taking.
Because let’s be very clear, if you own law firm, you own the risk, you are responsible for making payroll, you are the one whose name is on that guarantee on that list, your name is guaranteeing the lines of credit. So I want to make sure that you’re getting compensated for that. So we look really carefully at at owners comp to make sure that they are getting what they need. Let’s also be really clear, you get compensated different ways. You get compensated through payroll, you get compensated through all that stuff that you run through the firm that I know you run through the firm, that I’m totally fine that you run through the firm, as long as you and your tax preparer are good with it. The meals, your children’s, you know school supplies, whatever, I don’t care. And you get profit. So you do get compensated different ways. For what you do.
Davina: That’s gonna be my next question for you. What was the recommendation on that, because that’s one of the things that when I’m talking with my clients, I, a lot of them may start right out. So there’s a methodology that a lot of people are using, where they start right out, and from the very getgo from the first month or in business, they have this expectation of taking profit. And what I often ask them is, like, I’m not against, you know, being profitable at all. But what I asked them is, are you have you paid the attorney like you’re the only attorney in the firm, and have you paid the attorney yet, because if you haven’t paid the attorney, a reasonable salary, you haven’t met the obligation of just paying the expenses. Because without an attorney, the firm could not exist because you have to have an attorney to run a law firm, right? So I always say start with paying your salary part start paying yourself and, and dividends, profit from profits will come after you’ve built up the business right?
Brooke: I agree with that. You know, in an ideal world, I would like attorneys to take their drawls on a quarterly basis so they can look at how much profit they have over the quarter and make a reasoned decision about how much they’ll pay out to themselves, and how much they’ll leave and the firm again, oxygen for the firm to operate, how much they’ll leave in the firm to be able to take care of take advantage of things that may come up come up. There are also some reasons why you need to give yourself a salary. The biggest is if you have taken an S corp election, the IRS requires you to take a quote, reasonable salary, they have not given guidance on what reasonable is. But my feeling is, it’s whatever you would hire an attorney, whatever you would pay an attorney to do your job.
Davina: Right. As an attorney, not as not as the business owner or CEO, but as an attorney.
Brooke: Yeah, how much you would have to pay someone to get your billable work done, that you’re currently doing. And then there’s some other things, you know, if you want it to show up as payroll for oh, my gosh, when you retire, you get paid Social Security. So you know, Social Security will go a lot off of your W2 salary that maxes out at 225,000 a year or about there. It will also do, there’s just some other reasons why you might want to do that. And when it’s good to do that. So I agree. Yeah, you know, pay yourself in the salary of what you would pay an attorney to do your attorney work. And then at the end, see if there is profit left over. Because if you’re not paying yourself in payroll, you’re right, you’re skewing the profitability of your firm. And you’re not being honest with yourself or anyone else about how profitable your firm is.
Davina: Right, right. I call it false profits. And one day, one day, I’m like, write that book. So. So talk tme about you mentioned marketing, being in this a 33%. So talk to me about the marketing and sales numbers that we need to be looking at that we think are important. What should we it’s a common question among women, law firm owners, what percentage should I be spending on marketing now just display you know, I am a marketer, I was a marketer before I became a lawyer, and I’m a huge believer in the importance of marketing and sales in any business, and particularly professional service businesses. So I offered to the skewed a little higher side with regard to marketing, but tell me what you tell me what you think we should be paying attention to, with marketing and sales.
Brooke: So part of it is based on the size of your firm, of how much you should be spending on marketing. I say it’s a range between five and 10%. And before you start to hyperventilate, that 5% is really low. Let’s be realistic. When you have a firm that’s doing less than half a million dollars a year. Your cases are not coming through paid marketing. Your cases are coming through shoe leather, from you getting out and networking and talking to people and getting both professional referrals and referrals from your clients. As you get up to a million dollars. Yeah, one person, it gets hard for one person to generate a million dollars through shoe lava. So you are starting to look into paid paid options. Whether it’s pay per click SEO, you know, you’ll start small and kind of build.
So when you hit that, that million dollar share, you probably are spent spending 10%. And then, and then it drops as you go up towards, you know, five and 15 million, it’s going to drop down to about eight. But also remember, when we’re dropping from 10 to eight, your budget is still going up every year. Because we’re talking 100,000 when you’re a million dollar firm, right? And then a $10 million firm at 8% is 800,000. So, you know, you still have a nice budget.
Davina: I used to work in house for a marketing campaign for a law firm. It was a good sized law firm it had, we had about 50 partners, I think you’d probably have about 100 partners now. And at the time, this was in the 90s in the late 90s. Their marketing budget, which I ran was $500,000. Which is pretty, pretty nice chunk of change.
Brooke: That’s a pretty hefty budget.
Davina: Yeah. And but they didn’t really do it on advertising. It was a lot of investing in philanthropy and community projects and attorneys being on board a lot of traditional. They were very traditional law firm in there, you know, Real Estate Attorneys, that kind of thing. So they tend to follow a lot of traditional sort of marketing models. Of course, all of that is turned on its head and has been a great equalizer and game changer for young attorneys is, you know, with social media, because there’s so many opportunities through the internet and social media marketing to really connect with people and one thing that pandemic has shown us is we need to be able to do that more and more these days and perform It’s a way to there’s a way to do that. give you your time back.
Whereas used to you would take you hours to do rainmaking marketing. You’re like, how am I ever going to get work done? Because I spend so much time out at networking events. Right. And I think that has been a game changer for a lot smaller firms. So I’m not No, actually I do not disagree. Now, percentage wise, I don’t know. But I do not disagree with you that in those first years, when you, you know, you’re not yet you’re on your climb to half million, you definitely are looking for more low cost opportunities for marketing, you might have some costs associated with hiring, you know, people to help you creating content or posting on social media or something like that.
Brooke: Yeah. Website. Stuff like that.
Davina: At the actual, you know, marketing itself and relationship building is coming from you connecting with other others. And then I do, you know, I do have some people who start to invest in advertising, before they hit that half million, but not, you know, probably more when they’re in the 350 or so range, you start to do that, but, and that just all depends too on how you prefer to spend your time. I have some people who just love rainmaking and love marketing. And they’re willing to spend a lot of time to do it and hire people to do more legal work or other types of things. And then you have some that they don’t like, I actually want to be a lawyer. And in that case, they may need to have leads coming to them. And they may need to look, you know, in some other manner.
Brooke: Everybody’s different, you have to find what works for your, for you. And your firm. Okay, but you had asked me about marketing and sales numbers. And when when we talk about marketing and sales, the key number that we want to track is how many sales calls you have booked. And the reason this is the number we track is because we track a lot of numbers in there. But you should know from the time someone books a sales call, you should know what percentage of those people become clients. And if you know that, for instance, 75% of the people that like a sales call with you become clients, then you should know how much extra you’re going to build next month. Because that tells you how many clients you have coming in. Right. But that will help you know, do you have enough work to fill your people? Do you have enough people to do the work? It’s a great number.
Davina: Yeah.
Brooke: I love getting sales calls booked.
Davina: Yeah. Well, what’s interesting about that, as you mentioned earlier, the conversion rate. And so the numbers tell you different things. So one of them is if you’re not getting enough calls booked. So that’s important to get that first, right. If you’re not getting enough calls booked, you’re not going to get enough clients, enough cash coming in enough, you know, so that you debt, then you need to address your lead generation, what am I doing to generate leads? Where are they?
You know, what’s, where’s that going wrong? Am I not doing enough of that I’m not investing your time in that or money matter, whatever it is, right? If you’re getting a lot of calls booked, and you’re not closing a lot of them, either because they’re not the right people booking calls with you, or you’re not very good at closing one of those other you. So looking at that, and say, well, you mentioned people sort of fooling themselves about their conversion rate. Sometimes people who don’t have a lot of calls booked, but the ones that are coming in, they close. And so it feels like they have a high conversion rate.
But they’re not making the amount of money that they could be making if they had more calls coming in up those ideal prospective clients. And they might need to fix that. And then other people you may be getting a lot of calls coming in a lot of them are less than ideal. And they say, Well, my conversion rate is not that great. But it’s because all these people want to hire me who are not my ideal client, I don’t want to work with them. Then you got to start looking at tweaking How do we fix that? And then if you have that situation with somebody where you’re closing them, but you’re you’re closing some but you’re not closing on some of the good fish are getting away, then you’ve got to really work at how do I know how to have a sales conversation.
Brooke: Here’s the thing. Your sales pipeline is a series of yeses. And they need to to pass each hurdle and at each stage it tells you something different. So the stages that we really like to look at is first contact qualified and you talked about this a little bit. You know, are they an ideal client? Are you a DUI firm and everybody keeps calling you for divorce? Okay, if that’s true, and you’re doing a bunch of SEO and pay per click and things like that, you need to go back to your PPC person and say, look, you’re screwing up I’m paying for leads that I don’t like that that aren’t right for me. If those leads are coming from a referral source, and they’re not an ideal lead, somehow, you have not communicated to your referral sources who your ideal client is, and you need to go back and have that conversation.
Davina: Right. Well going to be clear on it yourself. When you’re out talking to people, you know. That’s often a big problem.
Brooke: This is all you are very clear on who you work with you work on women who own law firms. That’s it, that’s very clear. The next step is qualified to set. Okay, so they’re qualified to work with you, they can afford you, which is a big, you know, you can have whoever answers the phone screening for those questions. So they’re qualified, do they set an appointment? And if they’re not setting appointments, you have to ask yourself, why is it because they have to wait three and a half weeks to get in to see you for a sales call? Okay, that’s a probably you need to work on your schedule some.
You need to have some time open. The The next one is booked to show and they booked an appointment. Did they show up or not? If they’re not showing up? What are you doing to help people show up? Are you sending them a reminder? Do they know where to park there’s a an attorney in Dallas that I love this email went out that said, if you’re coming from the north, this is how you get here. If you’re coming from the south, this is how you get here. Here is a picture of our parking lot. Here’s a picture of the elevator. And here’s the picture of our the door to our office suite that I went, I went to visit a practice in Pennsylvania one time, and I got there. We were doing a one day like one on one deal.
And I got there. And the door the buildings locked. I’m like, Huh, and I’m looking at my calendar. Yes, I’m here the right day, I look at the address, I see a sign for the practice out front. I’m like, okay, this is all looking right. What’s the problem? Why is it locked? And I called the receptionist was like, oh, if you go around the side of the building down a couple of steps, then there’s an entrance directly into our office. Okay. How many people would have turned around and left?
Davina: Right? Oh, just just a moment of panic that you have, like, oh, my God, where did I screw up? What I do, right. That moment of panic.
Brooke: Yeah. So, you know, you look at all these different series of yeses, these all these places where decision gets made, some of them are being made on your side, some of them are being made on the client side. But where can you go back and change the narrative, change the messaging, change the way you operate? To help clients say yes to you, ultimately, because what you want is for them to get into the room for them to have had a great experience to get into that room for that sales call. So they do say yes. And you’re right. If they’re getting into that room, and they’re qualified. And they’re not saying yes, it’s probably you and you need to get some sales training.
Davina: It does, it does. And I do know there are a lot of firms who are, you know, when you get to start when you’re, when you’re starting out, it’s you. But over time, you can train other people and these other people in those touch points, to make sure that we’re maximizing the highest and best use of your time. There are other people who can help lead that client down that path. And they it doesn’t necessarily it’s not necessarily the you’re the first person that they talk to. Right, you can have some pre screening, right before we wrap up, and we’re going to need to in a minute, I want to touch on one thing that I know is a hot button for attorneys and our money.
And that is you have in here a fee agreement that get you paid. And I want to talk about that because one of the there’s nothing that irritates me more than having to chase my money. So I like to get more money up front and I advise my clients to get your money upfront. But there are certain circumstances where you know that doesn’t work. It doesn’t make sense or whatever. But what kind of tips do you have in creating a fee agreement to get this paid?
Brooke: Okay. So there are a few parts to this. The first one is get an initial retainer. The initial retainer should be equal to the first three months of work. And I’m big on three months, because let’s say you have a client that comes to you on March 1, you sign them up, you work all of March, you send them a bill on April 1. I don’t care what your bill says, that client thinks they have 30 days to pay it. I promise you like, don’t even try to, like, they just believe that you can put, you know, due in 10 days, all you want, they’re gonna pay it in 30. So you work all of March, send the bill on April 1 to work all of April, when you get to the end of April, the client is just now thinking about paying you, you send out the bill on March 1. And that is the point where the client thinks they really do owe you money.
And so then you spent March trying to get money collected. And that is going to tell you whether you have a deadbeat client or not. If you have a deadbeat client, you’ve gotten three months up front, you have covered yourself for the work done in March, April and May. But that’s why three months. The second part is to have an evergreen retainer, figure out what an average again three months is. When you’re working these cases, a client can stop paying you at any time. And it rarely has anything to do with you as an attorney. You know, if someone loses a job, someone goes to college and we have tuition, you bought someone a car, they decided to go on vacation, so to pay their attorney. So have three months because that will give you enough time to figure out that your client is not going to pay you and hopefully get out of the case.
Davina: Right, right, right. You need an escape hatch there.
Brooke: Right. The third thing is have a stop work policy. If a client stops paying you, for any reason, have a way to stop working on that case, the I think one of the ones that I liked the best is probably the lowest tech, there was a law firm out in the Pacific Northwest, she went out and bought red rubber bands. If someone stopped paying, then she put a rubber band around their file. And if you went to grab a file and had a red rubber band around it, you didn’t work it. And if somebody saw a file with a red rubber band on your desk, or even just the red rubber band, they’re going to go whoa, whoa, whoa, we don’t work on red rubber band files.
Davina: I love that. I was thinking you were gonna say to shoot rubber bands at the clients when they come in the door. No, I love the red rubber band tip. If we’re looking for low tech, that is the way to go. We need to find some sort of equivalent now because so many, you know, are doing paperless offices and their files are all electronic. But there’s got to be there’s red flags, you can put on things I know that.
Brooke: Virtually every practice management system will let you physically lock the file so that people can access that. The the next part is take payment, take payment timing out of clients hands. And I’m going to explain it this way. I was visiting my best friend. She lives in Pennsylvania. We walked in on a Sunday night she opened a drawer and took out a pile of mail. Like she could hardly get the drawer open. It was so stuffed with mail. Like what is that? She’s like, oh, it’s about you know, six weeks worth of mail. So she sits down, she gets a letter opener. And as we’re chatting, she opens it all at the kitchen table. Most of it goes in the trash. But there was a small stack left.
And we finished talking and we’re gonna go to bed and she gets up and she puts it back in the drawer. I’m like, what’s that? She’s like they’re bills I have to pay. Oh, my goodness, like, what are we going to pay them? Like what do you mean? Well, they’re one off her all of her major bills, her credit cards, all of that are all on auto pay. And these are the one off bills. If you are an attorney, that is your bill. Getting shoved back in the drawer with your client going I have worked on bills enough today. I’m going to all pay them another day. Right? And I have a lot of attorneys say, Oh, I work with businesses. We don’t have that problem. Yes, you do. Because what happens is you send the bill out the beginning of the month. Most businesses run checks twice a month. So you’re not going to make the first check run because they think they have 30 days to pay it.
Second check run comes around the bookkeeper is going to add up all the bills. They’re going to look at how much cash they have. And then they’re going to prioritize which bills get paid. Yours may or may not be one of them. So take payment timing out of the client pants, don’t let them make that decision. You do this by accepting credit cards, and having a credit card agreement in your fee agreement that says you are authorized to charge their card to stay in compliance with the fee agreement. And so you send a bill out on the first, most states require you to give a client an amount of time to dispute the bill. And then if they don’t dispute the bill, you charge it. So our clients collect, we aim for 92, or usually between 95 and 98% collection rate. Because we do this. All the things I’ve told you, we’ve got money and trust, and we accept credit cards. And that makes all the difference in the world.
Davina: Yeah, and it really is. So it’s really important now, because we live in such a virtual world, and people are just accustomed to, you know, just buying things online and clicking the button, then, you know, the ease with which you can make purchases now. So many people are just accustomed to it and have that expectation. And it actually, you know, you become a lower priority if you don’t function in that manner.
Brooke: Oh my gosh. You make me write checks. I’m like, you know how to write a physical check?
Davina: But there are people out there who still do that. Right, you know.
Brooke: Yeah. And you’re not getting paid for a while.
Davina: Where are those checks anyway? Right?
Brooke: Yeah, you gotta find them.
Davina: Exactly. So all right, so we do need to wrap up. But before we go, I want to make sure that people know where to buy your book, and where to check out a Cathedral Capital. And I wish we had more time because I’d love to go into the story of how you named your company. But this will encourage them to get the book because you tell the story in the book. So tell us where we can connect with you.
Brooke: First of all the book’s available on Amazon. So From Panic to Profit, How Six Key Numbers Can Make a Six Figure Difference in Your Law Firm. Available, at the Amazon near you, or the Amazon on your phone, let’s face it, that’s where we all use Amazon. And you can connect with us at cathcap.com. That’s c a t h c a p.com And if you want to follow us on social media, we’d love to do that. So on Facebook, we’re Cathedral Capital Inc. And we do a Facebook live every Friday on something that we think our clients would find really useful. So, you know, recently we’ve been talking about whether you should refinance your mortgage or not. So we kind of bring in some outside experts to talk about things. We’re doing one, I think this week is marketing. So that’s great. We also are on Instagram, I think where Cathedral Capital Inc. We are on LinkedIn, Cathedral Capital Inc. And we actually have a YouTube channel that is Cathedral Capital CFO. And you can see all of our past Facebook Lives.
Davina: Wonderful Thanks so much for being here, Brooke. I really appreciate it. I think we’ve had a wonderful conversation that is going to be helpful to a lot of women law firm owners who have listened to this podcast. So thanks for being here.
Brooke: I really appreciate you having me on.
Davina: We hope you’ve enjoyed today’s episode of the Wealthy Woman Lawyer Podcast. If you have we invite you to leave us a review on your preferred podcast platform. The more five star reviews we have, the more women law firm owners will be able to positively impact. Your thoughts and opinions are so important to us. If you are a woman law firm owner who wants to scale your law firm to a million dollars or more in gross annual revenue, and do it in a way that’s sustainable and feels good to you, then we invite you to join us in the wealthy woman lawyer league.
The league is a community of highly intelligent, goal oriented and driven women law firm owners who are excited to support one another on their journeys to becoming wealthy women lawyers. We’ll be sharing so much in the league in the coming year, including the exclusive million dollar law firm framework that until now, I’ve only shared with my private one to one clients. For more information and to join us go now to www.wealthywomanlawyer.com/league. That’s www.wealthywomanlawyer.com/league. League is spelled L E A G U E. We look forward to seeing you soon in the league.
