Our Practice Growth Team has noticed that far too often, attorneys don't realize they're actually running a business (really!).
When you think about every other business in the world, it's an interesting thing. They have to know a lot about running a business. Sadly, we can start a law practice without knowing much, or anything about running a business.
I say sadly, because it hurts us. It impairs our success.
Let's let's compare and contrast a law firm from a restaurant. On the surface, it sounds like an unlikely comparison.
A law firm could follow a similar path to the one I chose. At the point I decided to hang a shingle, I was just starting out and didn't have any revenue coming in. I worked out of my one bedroom apartment got to PO box to use as a street address. My sole capital expense was a used laptop. The whole thing was extremely inexpensive.
This is possible because, as lawyers, we're selling intellectual capital. This means that the cost of goods sold (as they would say in the finance world) are close to zero. That can be a wonderful thing. It allows us to start a business with no need to invest much in it from a financial perspective.
Let's contrast that with the restaurant.
The restaurant has to get a physical space. Then they have to fill it with tables, chairs, and kitchen equipment. This is an infrastructure investment. Likewise, when my law firm got to the right point, I had to get an office, tables, chairs, etc.
But the restaurant owner has to do something we don't - they need to buy perishable goods. They need inventory of however much Chicken Parmesan ingredients they plan on delivering. They also have to sell it quickly or it'll spoil.
The restaurant makes an expenditure before earning the revenue. If they guess wrong, they could lose their entire inventory.
Necessity Of Investment
As law practices, we have this deceptive notion that investment isn't something we need to do. When practices hit a ceiling and can't grow beyond it, they don't realize it's because they haven't invested.
Some practices get it. They'll call us for help with their marketing because they understand they need to invest there. Other practice areas just don't think marketing is a necessity.
In today's culture, though, marketing is essential to growing your practice, regardless of practice area. To get from Point A to Point B, you have to invest in your business.
The practices we see that are growing by leaps and bounds are making investments. They’re investing in their knowledge and in their business. They're investing in their intellectual capital - into obtaining knowledge of how to create a business model that works. And, they're investing in their marketing - they understand that investment leads to return.
Necessity Of Risk
Some attorneys may understand that their practice needs investment, but the problem is elsewhere - it lies in their risk-aversion. That's natural because, as lawyers, we're paid to be risk averse. We're paid to spot problems for our clients before they happen.
Unfortunately, we tend to transfer our lawyer mindset into the entrepreneurial mindset. It infects us with something that makes little sense because, in all businesses, profits come from risk.
While there’s never a 100 percent chance of anything working out, taking an intelligent, calculated risk is where you’ll get the leap in your practice. Not all investments pay out, but you only need a few of them to take you to the next level. Lawyers that don't make that mental jump are the ones that hit a ceiling. The lawyers that understand it are the ones who take their practice to the next level.
So, think about your business like a real business.
Investing may equal risk, but risk leads to returns. If you don't take a risk you're not going to earn profits. In a law practice, you're not going to grow.
That doesn't mean you have to take dumb risks - your risks must be intelligent - but as a business owner, that's what you're doing. You took a risk hanging your shingle in the first place. But now, it's time to realize that you have to take additional risks to go somewhere further. Otherwise, you're essentially going to head nowhere with your practice.
We see it again and again.
I've never seen a practice make zero investments and end up where they wanted to go. Think about what smart investments you need to make.
If you need help thinking through this, visit practicealchemy.com/freedom to schedule a quick conversation with our Practice Growth Team. You can tell us where you are and where you want to go.
What have you thought about investing in?
What makes sense for you?
For a lot of people, investing in our programs doesn’t make sense, but we're happy to point them in a direction that does. Schedule ten minutes to talk with us at practicealchemy.com/freedom and we'll tell you if and how we can help you.