There is a myth in business that managing your expenses means simply cutting costs. On today’s episode, I will dispel that myth and teach you how to create a money system for your money coming in and going out so you can continue to grow your business.
In this episode we discuss:
- How to create a plan for your money to know where it’s coming in and going out.
- Managing your expenses does not mean cutting your expenses.
- The way that you can create financial freedom through your business.
- How important it is to have an effective money managing system.
SEE THE FULL TRANSCRIPT BELOW
Allison Williams: [00:00:06] Hi, everybody. It’s Allison Williams here, your host of The Crushing Chaos with Law Firm Mentor podcast. Law Firm Mentor is a business coaching service for solo and small law firm attorneys. We help you to grow your revenues, crush chaos and business and make more money.
Allison Williams: [00:00:25] Hi, everyone, it’s Allison Williams here your Law Firm Mentor and welcome to another episode of The Crushing Chaos with Law Firm Mentor podcast, where today we are going to talk about a system for managing your money. Now, I know that money is one of these touchy topics. A lot of us have fear, resistance, and concern around money. A lot of times there’s shame and guilt associated with money, and a lot of people don’t like to talk about it publicly. So I’m going to invite you into a conversation. It might be a challenging conversation, but I promise you at the end of it, it is going to give you a level of freedom and a level of excitement about the possibility of your future, because we’re going to make money easy for you. That’s right. We’re going to talk about how to make money easy.
Allison Williams: [00:01:06] Now, the reason why I decided to have this particular conversation today is because we have a retreat coming up in Saint Louis, Missouri. Law Firm Mentor will be descending upon Saint Louis for our Thrive Tribe Tactics Retreat. This is all about people in law firms. And one of the topics that’s come up very recently in our client community about people in law firms is the money team, right? The people that touch the sales, the people that touch the collections, the people that manage the bookkeeping and the accounting work in a law firm.
Allison Williams: [00:01:37] And when you’re smaller, you might not have a full-staffed out financial team, right? You might not have a finance manager who pays the bills. You might not have a CFO who’s advising you about the strategic vision of the firm through the money metrics. Right. You might not have all of those people around you, but until you get those people around you, you are ultimately going to have to be the person who does the work, manages the work of the money, and you’re going to be the person who delegates authority even as you start to assemble that team.
Allison Williams: [00:02:08] Now, for a lot of us, that gives us a level of fear that we don’t often talk about. But I remember when I first launched the law firm, I left a law firm as an associate, and I was a very successful attorney by the time I started my own law firm. Ten years into my career, at ten years into my career, I had a statewide reputation. I’d already appeared on Katie Couric. I’d been cited in the news, and I had cases in just about every county in the state of New Jersey. So as a lawyer, I had achieved success. So I made the natural, very stupid assumption that I was going to be successful in business because, hey, you just copy and paste those skills from law over to business, and poof, you’ve got successful business.
Allison Williams: [00:02:48] Now, I know now that that was complete nonsense, but at the time it made sense to me, right? And I start off in business and I’m kind of trudging along and I’m having all these challenges. But I remember the thing that probably gave me the greatest challenge of all of the things, right? Beyond hiring people, beyond managing my time, beyond getting to all the legal work, beyond selling. The major challenge that I had was with having so much money available to me. I was terrified. I mean, I will, I will tell you very candidly, I used to have panic attacks. I would wake up. This is going to like I’m almost embarrassed to acknowledge this now. But for you guys, I do think I should share it with you that, you know, I remember $60,000 is kind of my threshold, right? If we drop down below 60,000 in the bank account, we went to 59,999. I would start to have panic attacks. Right. And I always had in my mind the number of clients that could fire me today and me still be able to functionally run the law firm.
Allison Williams: [00:03:54] Now, I know that that sounds a little absurd, right? I wasn’t getting fired by my clients, but my thought was I need to have enough money available that if they all fired me and I had to give all of their money back, I could still pay my team. And at that time, I didn’t really have a team person. I had one staff person, but I had to pay somebody, right? I had to make sure I could pay that person and to make sure I could keep the lights on and pay the rent and all the basics.
Allison Williams: [00:04:19] So I had that one number in my mind, by the way, I think that one number is very important for every business owner, especially a small business owner, to have, in fact, shout out to my finance coach, Wolfgang here at Law Firm Mentor. He and I had a very big disagreement about this when I first instituted this idea of the one number because he said, you know, we want our clients to have not just a number. We want them to understand generally when they’re going to be paying certain expenses throughout the year so they can be planning for that. And I said, yes, that is absolutely a skill that they have to learn. But until they learn it, I want them to take all the expenses that they’re going to have as of now throughout the course of a year and divide it by 12 so that they have the highest number that they would ever need in any given month available to them. And if the number of expenses, the amount of expenses are lower than that number, they have extra that can roll over. If it’s higher than that number, they will have accumulated extra from the months when it was lower. And it’s very, very, very quick and dirty accounting. Right. It’s the mental load taking away to give you that one number.
Allison Williams: [00:05:27] Eventually, I got Wolfgang on board with us. But of course, when you want to get it done the right way, you go to our finance coach. Right. So I tell people all the time, this is not the end, right? This is the beginning. This is just the snapshot. But the snapshot is really important because so many of us, myself included, start off as a business owner and all of a sudden, instead of getting a paycheck for 50,000, 75,000, 100,000, 200,000, whatever you earned as an employee, instead of having to manage that in a household, you now are having to manage all of the moving pieces of a law firm. And it is absolutely overwhelming for so many of us because for the first time, hundreds of thousands of dollars are going through our fingers. And on the one hand, it’s exciting, like, oh my God, there’s all this money. But on the other hand, it’s terrifying. It’s like, Oh my God, there’s all this money. Right? We have the terror because we don’t know if, God forbid, we spend that money and there’s not more tomorrow. Right. That lack of mindset that kind of seeps in when we feel we’re being conservative. What we’re really being is fearful about money. And that fear then guides us to either underspend and hold on to every cent that we can or fail to make what are the best appropriate expenses that are really investments in our business that are going to generate a return and hence we kind of stagnate, right?
Allison Williams: [00:06:52] We get to the point where we pay all the expenses and we have just enough and then we live within those means, which feels like the intellectually smart thing to do. We all have heard the story live within your means, right? We live within those means, but we don’t learn the flip side of it, which is producing more so that we can live more abundantly. And so today I want to give you three components of an effective money management system that I want you to think about, and then I’m going to make life around money easier. Now, again, this is not the end all, be all. This is definitely just a starting point, but it really goes to your mindset around money so that you can have a little bit of ease in dealing with money in your law firm, whether you have a very small amount of money available, or even as you start to generate a significant amount of money in your growing law firm.
Allison Williams: [00:07:42] All right. So the first thing you have to understand is that you need to create a plan for your money. Now, I’m sure you’ve all heard this before. If you’ve listened to any financial planner, if you’re a Suze Orman follower, if you are watching CNBC and you’re getting the money reports, you know that a plan for money is kind of basic. But I want you to think about it even at its most rudimentary level as an understanding of where money is coming in and where money is going out. The money coming in are the sales and collections and the money going out are the expenses aka the investments.
Allison Williams: [00:08:20] Now, understanding your sales and your collections is really important, and when I say understanding it, I don’t just mean I understand that someone calls the office, I schedule a consult and I try to sell them. I mean, understanding every nuance of your system, your sales system needs to have a process for everything. Right? A sale is not. I sit down, I have a conversation and I hope the person says yes. A sale is a very strategically orchestrated conversation where you’re asking the right questions in the right way, with the right energy, guiding a person to make the right decision for them. That is how you ultimately will effectuate a sale. And if you’re not intentional about that and intentional about the metrics around it, it’s going to be really, really hard to plan money coming in.
Allison Williams: [00:09:08] We always think about planning money going out because we can control when we spend money and how we spend money, but we don’t think about the fact that we can actually control what comes in by virtue of knowing how many people we need to speak to in order to get a certain number of clients or prospects to book a call or have a meeting with us in order to get to a certain number of those people becoming our clients at a certain price point. Hence the revenue will generate. You can actually create metrics and activity to achieve those metrics in your business, but you have to be intentional about it. Same thing with collections, right? We don’t just charge people and hope that they pay the bill. You can actually do things in terms of creating your collection system in order to help effectuate that.
Allison Williams: [00:09:52] So for those of you that have been watching this podcast for any length of time, you know that we offer a free collections training very simple to get its Law Firm Mentor dot net, which is our website forward slash collections. And when you go to that training, we actually walk you through a system for how to drive collections in your law firm. Little things like requiring credit cards to be on file and having an evergreen clause so that every time the amount on file drops down to a certain amount, you’re going to require replenishment.
Allison Williams: [00:10:21] Now, this doesn’t apply if you are a collections, if you are a contingency lawyer, right? If you’re a personal injury attorney or a Social Security attorney, it’s not going to have the same impact on you because your collections component will be ultimately upon the time of settlement. But it does help those of you that have flat fee, hourly, and subscription practices to be able to collect more money and planning that planning the number of conversations you need to have at the rate at which you’re going to collect over a certain period of time. All of that needs to be dialed out into a system.
Allison Williams: [00:10:56] The expense side is the side that most people focus on, right? How am I spending money going out? And yes, you need to have a system around spending money going out. Which leads me to component number two of your effective money management system, which is that your expenses must be managed. Managing your expenses doesn’t mean cutting your expenses. Let me say that again. Managing your expenses does not mean cutting your expenses.
Allison Williams: [00:11:21] Now, I am not a proponent of unfettered, unchecked spending. My saying that you should not be cutting your expenses does not mean that there are not times where you need to look into the well and say, Hey, am I paying for software that’s duplicative of other software? You know, am I overspending on supplies that I could get less expensively somewhere else? Right. There are absolutely ways and requirements around being an effective steward over money so that you are not spending without a plan, without having some, some baseline understanding of getting the best return on your investment of the money that you’re spending. But what I see far too often is that law firm owners think that the way to manage expenses is to spend as little as possible so that I can keep as much as possible. And I’m sure you’ve heard me say this before it’s not new. It’s certainly not my own catchphrase. But you can’t save your way to financial freedom. You can save your way to having some money in the bank. You cannot save your way to financial freedom.
Allison Williams: [00:12:25] The way that we create financial freedom through a business, through a law firm, is we create more money. And more importantly, we create an understanding of money in a way that we can produce it when we need it, as we need it. Instead of, I’m going to live like a pauper today so that eventually I will have enough to stop working, right? That’s kind of the middle-class mindset that says save for a rainy day and save for retirement, and then one day you’ll be able to stop working.
Allison Williams: [00:12:54] Well, here’s the thing. I don’t want to have a poultry existence today so that I can have a somewhat less poultry existence tomorrow. Right. I don’t want to save up all my money today so that when I’m 60, 70, 80 years old, I have money to die with. Right. That shouldn’t be the aspiration. Your goal should be to enjoy life today and to enjoy life in the future. So how do you do that? Well, you have to create financial abundance and you can’t create that by cutting your expenses. Right. I think this, this conversation has kind of boiled over and there’s been a lot that I’ve seen in social media on capitalism versus socialism and kind of the richest 1% versus the poorest in our society and the wealth gap. Right. And this is not a podcast about that. Right. I’m sure that we have divergent thought as a community because I know that I have a lot of conservative lawyers, I have a lot of liberal lawyers that follow me. So this is not that conversation, just to be clear.
Allison Williams: [00:13:52] But I do think it is important to kind of talk about that framework that says you can cut out your Starbucks latte and your avocado toast and arrive at a much more significant financial experience. And there are stories like I’ve read several of them in Newsweek and The Wall Street Journal of Couples or even individuals that graduate from college and live in their grandma’s basement and, and only eat ramen noodles for a few years while they pay off those student loans and then they buy their first car. And until then, they’re walking everywhere. Right? That existence does happen.
Allison Williams: [00:14:29] There are people, the rare exception to the rule that can create a financially freer life through that existence. But the reality is most human beings are not going to be able to reduce themselves down to a paltry existence that is miserable and untenable and unexciting and devalued for an extended period of time. In order to get to a place where they have a little bit more freedom with their money. And I say that recognizing that the audience that I’m talking to lawyers, that we are very unique in this regard because we not only have a desire like all human beings for more, but we have an expectation placed upon us from society to have more.
Allison Williams: [00:15:13] Most people assume wrongly, but they assume that lawyers are rich, right? Who wants a broke, poor lawyer? You know, there are even memes going around social media about the lawyer who shows up in a suit in court and you kind of see the bottom of his pants and kind of the run-over shoes and the scuffed-up him. And the, the meme goes something like, you know, if your lawyer looks like this, you’re going to jail. Right? And the whole idea of it is, we assume that the poorer lawyer, the lawyer who doesn’t have is somehow less capable than the lawyer who’s rich and successful. Because the, the presupposition is that the rich and successful lawyer has a lot of clients and they only got a lot of clients because they’re good at what they do.
Allison Williams: [00:15:58] Now, we all know that that’s not true. Right. There is a whole lot of really flashy, really exciting, really great marketing, great salespeople, lawyers who are mediocre or even below average, but get a lot of clients because they know how to sell and they know how to market themselves. And there are also some shabby, shitty-looking lawyers who don’t impress in the physical appearance department or in what they show of their car, of their house, or whatever but they are sharp, they are capable, and they’re skilled. But perception is reality in the eyes of the beholder. So when you are selling yourself to the public, they’re going to get a certain, a certain experience of you and they’re going to develop a certain thought around you based on how you present yourself.
Allison Williams: [00:16:45] Now, tying this back to expenses, that does mean typically that lawyers are going to spend on things like nice office space. If they’re meeting clients in an office, they’re going to spend on things like a nice vehicle, not just to transport themselves, but to present a certain air to the world. And however you feel about consumerism or materialism, marketing is about putting out a message to the world and a lot of us will spend on things in our business in order to achieve that.
Allison Williams: [00:17:12] So to the extent that you cut, cut, cut, cut, cut, yes, you might be cutting things that you don’t need, but how is that going to affect the way that you present yourself and the way that you feel about yourself as you do so to the world? Right. At some point, it becomes a cutting that triggers the law of diminishing returns that you’re not going to get the most by giving yourself the least.
Allison Williams: [00:17:34] There’s also something to be said about the stress that is inherent in the practice of law. Right. Now, I talk a lot about having a stress-free law firm. My law firm does not cause me any stress whatsoever. But candidly, I’m not practicing law right now. I own my business and there is some degree of legal consulting I do because as the leader of the company, I like to be overseeing our legal team. However, I’m not day to day in the trenches in the courtroom sending my clients the emails the way that I once was. And because of that, I have a certain level of freedom from that stress. But even when I was at the tail end of a very aggressive litigation practice, you know, like I said, we’d be in 15, 16 counties at a time. I used to run this to the streets of New Jersey and then don’t tell my mom I was running the streets.
Allison Williams: [00:18:22] But, you know, I used to be out, out about in the various different courthouses with my clients fighting the state of New Jersey for keeping children out of foster care and it was a very draining practice. It was also one of the best things I ever did in my life, and I consider it to be God’s work. But it was very stressful work. And in that stress, I learned how to manage that stress through managing my thoughts and managing my time. But as I did that, one of the things that I came to realize was that the more I thought of myself and the more I spent on myself, and the more that I gave to myself, the more people were attracted to me.
Allison Williams: [00:18:59] So the expense of me and my law practice and my employees and my team, all that I was creating, was creating more, right? So I was creating expenses, but those expenses were investments that gave me a great return multiple times over. That’s how I was able to grow from $0 into a multimillion-dollar law firm in only three and a half years. That’s how I got there. Right. Spending more actually produced more. It didn’t eat up what there was. It actually helped me to create more of what there was.
Allison Williams: [00:19:31] And that’s the part that I think people miss when we talk about expenses. They think, if I just poured a little bit more, I will have more for myself. But the reality is, if you’re hoarding from a place of lack and you don’t believe that more will come, the stress that comes from not spending is almost worse than the stress that comes from spending because you’re both having the paltry existence. You’re not even enjoying what you’ve created in terms of money, and you’re also not creating more because you don’t believe that more will come.
Allison Williams: [00:19:58] Third component of an effective money management system. Now, this is really that you have to recognize that financial success comes from making more, not spending less. My very first webinar as the owner of Law Firm Mentor was called More Money, More Free Time, and I used an example in that webinar of a larger person. And that larger person had the tape measure around their midsection. And what you saw is pockets of squish. We’re going to call it Squish. We’re not going to call it fat or rolls or whatever, because that’s less fun than Squish. There was Squish kind of oozing out of the tape measure around the midsection. And I said in response to that image, I put that image up on the screen and I said, you know, it’s a lot easier to add more than it is to take away. And anyone that’s ever tried to lose weight knows that a hell of a lot easier to eat more pizza and pies and cakes than it is to eat fewer of those things and restrict your caloric intake and exercise so that you can restrict and reduce the number of calories that you retain of what you’ve consumed. Right. Doing more is easier than doing less, in the sense of production.
Allison Williams: [00:21:18] So when you were talking about money, the thing that you always have to understand is that when you want to create more in your business, there is no way to do that other than to ding, ding, ding. Create more in your business. I know that sounds like I am talking down to you. I’m not. I’m saying the very thing that I needed to hear in order for me to start to get it so I could start to create more and to create more easily. And the way that I ultimately did that was by recognizing that any time that I wanted something in my business. Right, whether it was that I wanted it for me personally, I wanted a new handbag, I wanted to go on vacation. Or if I just wanted something for the business, I wanted to be able to give bigger raises to my team. I wanted to be able to have a nicer front reception area. I wanted to be able to upgrade our phone system.
Allison Williams: [00:22:06] Every time I wanted something more in the business, there was no ability for me to scrimp and save my way to be able to afford more. The horse trading of cutting out this expense in order to give it to something else still left me feeling like I was going to be squeezed in terms of affording the new thing. The only way that we got out of the squeeze and the only way it became easy is that I learned how to produce more. Producing more is not just about creating a larger business. Right? Because I know there’s a lot of you that follow this podcast that have somehow got in your mind, I don’t want a larger business. I don’t want more people to manage. I don’t want the stress of that. Right? There’s a movement in the legal industry to be lean and tight with your law firm. And I don’t want to denigrate that movement, even though I disagree with it, I disagree that you will create a better life for yourself by having as little around your business as possible. But I do recognize that some people get their joy in their value in life. Other places, right? You want to have an efficiently run law firm because you want to pay and play and create money and financial freedom somewhere else. Everyone has their right to choose how they want to live.
Allison Williams: [00:23:14] But if you are running a business and you want to ultimately create a business that runs without you, you want time, freedom, and you want financial freedom through your law firm. Then you have to learn how to produce more money. And producing more money is not printing more money, right? That’s illegal. We’re not talking about counterfeiting. We’re talking about generating more value and ultimately offering that value for a price to the marketplace and being able to do that at scale so that you can create more revenue and ultimately more profit in your business. And the ways that we help people do that here at Law Firm Mentor involve a multitude of different things. But all it always starts with how we think about what we’re doing, including how we think about money.
Allison Williams: [00:23:56] All right, everyone, I’m Allison Williams, your Law Firm Mentor. You’ve been watching The Crushing Chaos with Law Firm Mentor podcast, where we have been talking about the money system that will get you to the point of success in your law firm. I will see you on our next episode.
Allison Williams: [00:24:15] Thank you for tuning in to the Crushing Chaos with Law Firm Mentor podcast. To learn more about today’s show and take advantage of the resources mentioned. Check out our show notes. And if you enjoy today’s episode, take a moment to follow the podcast wherever you get your podcast and leave us a rating and review. This helps us to reach even more law firm owners from around the country who want to crush chaos in business and make more money. I’m Allison Williams, your Law Firm Mentor everyone. Have a great day.
Allison C. Williams, Esq., is the Founder and Owner of the Williams Law Group, LLC, with offices in Short Hills and Freehold, New Jersey. She is a Fellow of the American Academy of Matrimonial Lawyers, is Certified by the Supreme Court of New Jersey as a Matrimonial Law Attorney, and is the first attorney in New Jersey to become Board-Certified by the National Board of Trial Advocacy in the field of Family Law.
Ms. Williams is an accomplished businesswoman. In 2017, the Williams Law Group won the LawFirm500 award, ranking 14th of the fastest-growing law firms in the nation, as Ms. Williams grew the firm by 581% in three years. Ms. Williams won the Silver Stevie Award for Female Entrepreneur of the Year in 2017. In 2018, Ms. Williams was voted as NJBIZ’s Top 50 Women in Business and was designated one of the Top 25 Leading Women Entrepreneurs and Business Owners. In 2019, Ms. Williams won the Seminole 100 Award for founding one of the fastest-growing companies among graduates of Florida State University.
In 2018, Ms. Williams created Law Firm Mentor, a business coaching service for lawyers. She helps solo and small law firm attorneys grow their business revenues, crush chaos in business and make more money. Through multi-day intensive business retreats, group and one-to-one coaching, and strategic planning sessions, Ms. Williams advises lawyers on all aspects of creating, sustaining, and scaling a law firm business – and specifically, she teaches them the core foundational principles of marketing, sales, personnel management, communications, and money management in law firms.