Profit First: Helping Law Firm Owners Serve Their Clients Best

Episode Notes

Transcript

The Un-Billable Hour

Profit First Helping Law Firm Owners Serve Their Clients Best

11/25/2020

[Music]

Intro: Managing your law practice can be challenging. Marketing, time management, attracting clients, and all the things besides the cases that you need to do that are un-billable.

Welcome to this edition of “The Un-Billable Hour,” the law practice advisory podcast. This is where you’ll get the information you need from expert, guests, and hosts, Christopher Anderson, here on Legal Talk Work.

Christopher Anderson: Welcome to “The Un-Billable Hour.” I’m your host, Christopher Anderson. Today’s episode is about finances. It’s about your finances, about your law firm’s finances, about your business finances. You see, as a business owner, the primary purpose of your business, although I get a lot of feedback or I’d say of a kickback on this from lawyers is to serve you. Now, we do have a profession and we do help people. That is one of the things we get to do with our businesses, but the purpose of the business is to provide you amongst other things the means to live your life the way that you want to and that means being professionally satisfied. In other words, you built a law firm that is a profession that you chose. But, what about your firm makes you proud? Your firm should deliver you personal satisfaction. In other words, giving you back time that you want, so you can do the things you truly enjoy in life, which should include working in your business, working on the business, and then, of course, everything else that provides you joy. And what we’re going to be talking about today the financial resources to live your life the way you truly desire.

So, that’s why we’re titling the show today “Profit First Helping Law Firm Owner Serve Their Clients Best,” and I’m really excited because it’s been a while since I brought on a practicing lawyer to have my guest, Jenny Bradley. She’s the founder and owner of Triangle Smart Divorce in North Carolina, and she’s a board certified specialist in family law. But, before we get started, it’s time to do a little business.

I want to say thank you to the sponsors that make this show possible and for giving us the opportunity to spend this time together. Alert Communications, if any law firm is looking for call intake or retainer services available 24/7, 365, just call (866) 827-5568.

Scorpion is the leading provider of marketing solutions for the legal industry. With nearly 20 years of experience serving attorneys, scorpion help you grow your practice. Learn more at scorpionlegal.com.

LAWCLERK, where attorneys go to hire freelance lawyers. Visit lawclerk.legal to learn how to increase your productivity and your profits by working with talented freelance lawyers.

Lawyaw provides end-to-end document automation for solo, small, and midsize practices. Save time and avoid mistakes with documents that you draft over and over again, learn more at lawyaw.com, and that’s L-A-W-Y-A-W dot com.

And again, today’s episode of The Un-Billable Hour is Profit First Helping Law Firm Owners Serve Their Clients Best. And as I said, I’m excited to invite and have Jenny Bradley here on the show. She is a self-proclaimed jock, a nerd and a lawyer. And just so you know, she wrote that. So, I’m not calling her out. None of that is mutually exclusive either. She’s been involved in competitions during most of her life. She’s been in softball, math bowl, 80s trivia, running, sort of she loves competition games and challenges, but also the structure that those things bring to life. She says the competition is great in the proper venue, which is emphatically according to Jenny, and I wholeheartedly agree not family law. Her approach to family law focuses on resolving, fixing, healing, being reasonable, and moving on and helping her clients to move on. And I know for a fact that our approach to her law firm is also that it is a business that helps people and serves its owners. So, Jenny, welcome to “The Un-Billable Hour.”

Jenny Bradley: Thank you, Christopher. Glad to be here.

Christopher Anderson: I’m glad to have you. So, first of all, just for context, how long have you been doing the law firm thing?

Jenny Bradley: Owning my own law firm since January 2017. I’ve been a lawyer since 1998. It took me that long to finally realize, “Hey, I need to make a business of this and not just practice law.”

Christopher Anderson: Yeah. So, 19 years working for other law firms and then since January 17 with your own.

Jenny Bradley: Correct.

Christopher Anderson: Before we get into talking about Profit First and what it meant to your law firm, just what are some of the things you would do? I was going to say mistakes, but I’m just going to say the things you would do differently and starting your business that you wish you did known and would love for people who are might be listening and thinking about hanging their own shingle.

Jenny Bradley: Besides starting it a lot sooner, so I’d be further along.

Christopher Anderson: Yeah.

Jenny Bradley: And you can call it mistakes. It’s okay. I’m not afraid to admit I made a mistake despite how competitive I am because, you know, I never hit every softball that came my way and I didn’t catch them all either. But, we still did all right at the end of the day in college. So, it was good.

(00:05:00)

We learned something. I definitely would have started with someone taming my calendar earlier. I did a good job outsourcing the phone, taming the telephone, having somebody answering the phones. I wasn’t answering every phone call that came in the law firm, but it did not have anyone in charge of my calendar and it was just running amok.

Christopher Anderson: Because you are probably the least protective of yourself that anybody could be.

Jenny Bradley: Absolutely. Somebody call and, you know, wanted to do coffee. Yeah, I’ll do that. This could be a good opportunity. Client call wanted a meeting. Sure, I’ll squeeze you in right here. You know, absolutely positively I had the least amount of boundaries with myself.

Christopher Anderson: Yeah. And then, what about financially? Now, we’re going to be talking about Profit First, which is a methodology written about in a book called “Profit First” by Mike Michalowicz. But, did you implement that like right away when you started your business?

Jenny Bradley: No, I didn’t even know who Mike Michalowicz was when I started my business, which is something else I would have done better about read more business-oriented books before just jumping them with two feet and figuring it out as you go and building your airplane while you’re in the air.

Christopher Anderson: Yeah. I think that’s actually really a key like when did you really get into reading more about business as a law firm owner and what have been some of the key books that you’ve come across?

Jenny Bradley: Yeah, I’ll say for all of 2017. I frankly felt like I was drinking from the fire hose and treading water at the same time. I don’t know how that’s possible, but that’s what it felt like. It was everything I could do to work on the business, service the clients, attempt to hire folks that were good fits for the firm and good fits for our clients, while also trying to hustle market sell.

Christopher Anderson: Right.

Jenny Bradley: And I didn’t read a lot in 2017, and I certainly didn’t spend a lot on growth mindset or anything else. I come from a blue-collar world to parents who didn’t go to college. Scarcity was preached hard in our household. You know, you don’t have the money for that. You can’t afford this. You shouldn’t do that. We don’t have things like that, et cetera, et cetera. And so, I should have done some work earlier helping to overcome some of that mentality, and I certainly should have started reading business books earlier. But I will say, I thought the E-Myth was great because that was totally what I was living. I was doing every job and doing none of them well.

Christopher Anderson: Yeah. That’s the E-Myth Revisited by Michael Gerber.

Jenny Bradley: That’s correct.

Christopher Anderson: Yeah.

Jenny Bradley: I believe I read Toilet Paper Entrepreneur early and that’s how I got a first taste, I guess if you will, of Mike Michalowicz.

Christopher Anderson: Excellent. Yeah, the Toilet Paper Entrepreneur and I think the Pumpkin Plan are a couple of his early books. He, himself, in his latest book has disavowed surge. It sounds like. So, I won’t mention that. Oh, I did. Darn it. But, many of his books are really useful. So, you say then within 2018 is that when you sort of picked up learning more about how to run a business?

Jenny Bradley: Definitely in 2018 because then, we had gotten to the growth point where I had two paralegals and a full-time receptionist and another lawyer helping cover court and clients and taking things off my plate, and we needed to get more focused on growing a business rather than just letting the business run my life.

Christopher Anderson: What about Profit First? Like, how did Profit First come to your attention and why did you see it as something that was going to be important for you?

Jenny Bradley: Profit First came to my attention first from a coaching group I was in where folks were reading it, talking about it, venting it about on the Facebook page among other places, and it intrigued me at some levels because, as you mentioned in myself written by which yes, I will claim that I am a jock, a nerd and a lawyer all-in-one. I like structure. And so, it felt like in the law firm much like at different points in my life. My family household was run as well as the household I grew up in that money came in and money went out, money came in and money went out, money came in and money went out. Oh, look. Less money came in than the money that went out. Oh-oh, we’re in debt now.

Christopher Anderson: Right.

Jenny Bradley: And in 2017, the first year of my law firm, I grossed more money and netted more money than I ever had before practicing law with anyone else, and I had a big fat tax bill in the Spring of 2018.

Christopher Anderson: I was going to say that must have felt good for a minute.

Jenny Bradley: Right. It felt good for a minute. And then, you know, I have one of those moments that everybody talks about that you’re like, no that doesn’t really happen. No, it happens. You get your tax bill from your accountant. Then, you’re like, “What? I didn’t make that much money. I didn’t see that much money. Where’d that money go? How can I possibly owe this much in taxes?” And I had to cobble together a bunch of credit cards to pay my taxes. I don’t know why that I didn’t think about the fact I could have went on an installment plan at least with the Feds like that never crossed my mind. Again, probably the blue-collar mindset if you have a bill, you have to pay it.

Christopher Anderson: Right.

Jenny Bradley: So, that’s what I did and put it on 18% credit cards and whatever else. So, Profit First was mentioned to me and I was like, —

(00:10:02)

“Well, that’s an interesting way to look at things. You know, I’m pretty good at Math and you’re right. A minus B equals C, you can just move the variables around, and A minus C also equals B. Are you complaining on Profit First letters to make it make more sense that folks are listening?

Christopher Anderson: Yeah, I was going to do that. So, I’ll ask you to do it. So, like the traditional way, the way like you said, you grew up in a blue-collar household, you ran your household finances, money in and money out, most business owners the way that it’s described in the book see what’s you A minus B equals C for most business owners?

Jenny Bradley: Oh, Revenue minus Expenses equals Profit.

Christopher Anderson: Right, yeah. So, they see the revenue collect. You said the money comes in and the money goes out, and then profit — it’s funny. I mean, we even call it the bottom line, right?

Jenny Bradley: Right.

Christopher Anderson: Profit is the bottom line. It’s the last thing, and one thing we know about the last things is it’s the last thing we pay attention to. But, what I’m interested in though, as you said a lot of people that get into Profit First that I’ve talked to talking about the fact that their revenues went up and their net. Their take-home did not, but it seems like the first pain point you hit was actually the tax pain point.

Jenny Bradley: Right. I never had to set aside taxes before in my life because I worked in either as a W-2 employee or, for a while, as a partner with a K-1, and our bookkeeper at that law firm essentially was doing Profit First for us, though I didn’t know it, like she would withhold 40% of every distribution we took.

Christopher Anderson: And then, you did give that to make that available for tax payments.

Jenny Bradley: Right.

Christopher Anderson: Fantastic! So, you read the book. You feel this tax point pain. When did you decide to start implementing the Profit First system at your law firm?

Jenny Bradley: It was either a Summer or Fall of 2018. I went scrambling after the April taxes and started, you know, (A) Found a new accountant and; (B) Started figuring out how we could solve this problem and honestly, you know, it was just out there in my universe at the time. Like I said, it was on a Facebook group, and I don’t remember whether it was the Summer or the Fall when I implemented it. I definitely remember it was the Summer when I read the book.

Christopher Anderson: Yeah, it’s one of those things where the student is ready. The teacher appears, right?

Jenny Bradley: Right.

Christopher Anderson: It came to you when you needed it. All right. So, what I want to do is ask you about — so, you started implementing it then and after feeling this pain point. So, when we come back from this break, I’m going to ask you about what the experience of starting to use any law firm was like and, you know, the challenges you face. But, before we do that, we’ll take a moment and hear a word from our sponsors.

[Music]

LAWCLERK is where attorneys go to hire freelance lawyers. Whether you need a research memo or a complicated appellate brief, our network of freelance lawyers have every level of experience and expertise. Sign up is free, and there are no monthly fees. Only pay the flat fee price you set. Use rebate code “Un-Billable” to get a $100 Amazon gift card when you complete your next project. Learn more at lawclerk.legal.

Now more than ever, an effective marketing strategy is one of the most important things for your firm. Scorpion can help. With nearly 20 years of experience serving the legal industry, Scorpion has proven methods to help you get the high-value cases you deserve. Join thousands of attorneys across the country who have turned to Scorpion for effective marketing and technology solutions. For a better way to grow your practice, visit scorpionlegal.com.

Christopher Anderson: And welcome back, we’re talking with Jenny Bradley about implementing Profit First in her law firm. We learned from Jenny just a second ago that, you know, one of the pain points she hit is not the same as everybody that decides to implement Profit First. A lot of people lament the fact that they’re not seeing any net profit from their business, and Profit First really does help with that. But, Jenny was feeling the pain point of putting her tax payments on credit cards even if she done the installment plan, it still would have incurred a debt to pay taxes and that felt pretty awful. So, we’re going coming out of the break, Jenny. I wanted to talk to you about the actual experience of implementing Profit First in your law firm. How did you get started?

Jenny Bradley: Well, like everyone gets started, Christopher. You just start.

Christopher Anderson: Yeah.

Jenny Bradley: But, you know, that’s so simple to say that. There was never any pushback from my current bookkeeper. I gave her an extra copy of the book. I gave her the book. She said, “This is great. I love this.” I need to start using this with some of my clients, talk to the new CPA I hired. He said, “I’ve been exposed to this.” I don’t have any clients currently doing it, but this makes complete sense and this will save you from the pickle you found yourself in April of next year. The hardest part was finding a bank willing to work with me to begin with.

Christopher Anderson: So, let’s talk about that because I want to kind of set that up a little bit. So, before we talk about that, when you said it was not that hard, we just talked about earlier that the normal business owner’s way of thinking is that you get the revenue in, —

(00:15:00)

Then you have all your expenses and payroll and overhead and all the other expenses of a law firm or business, and then what drops out of the bottom is profit. What did you learn in how to manage your firm’s finances differently? How did that equation change?

Jenny Bradley: So, simply pull it like you said what we save for last usually gets the smallest share or forgotten kind of like when you go through the buffet not that anybody’s doing that now, I guess in COVID, but some people may be going through a buffet somewhere. At least, we remember what it was and you start filling up your plate, you fill up your plate, you get to the end, and there’s like four vegetables and there’s no more room on your plate. And so much like your personal trainer would tell you, eat your vegetables first. That’s kind of the methodology of Profit First. Set aside a percentage for a profit. Set aside a percentage for tax. Set aside a percentage to pay the owner for the work the owner does in the business. The profits for the risk you take being the owner, but set aside a percentage to pay you for the work you do in the business, and then the rest goes to operating and figure out how to run your firm on those percentages. And don’t go in with both feet, you know, head first first time. That’s not what you’re doing here, like you can’t go from I’ve never set money aside and I’m running my business on a 110% of my revenue —

Christopher Anderson: Right.

Jenny Bradley: To suddenly say like, I’m going to set aside 10% for profit. It doesn’t work that way. I mean, you got to make small gradual changes. I know you’re a marathon runner. When you haven’t been running that distance, you’re not going to go out and run 26 miles. You’re going to train for it, and you have to do the same thing with Profit First. Start small and incrementally adjust your percentages as you go along.

Christopher Anderson: Yeah, yeah. That makes total sense. So, you said your bookkeeper got on board with that.

Jenny Bradley: Yup.

Christopher Anderson: And do you remember like what you started to set aside in the beginning?

Jenny Bradley: Because we had not done this before and there had been months where expenses had exceeded our expenses, she said let’s start with 1%. One percent is a good place to start. It’s better than zero, which is what we’ve been doing. Let’s start there. Let’s look at it for a quarter and see how it goes. So, we did 1% for tax. That made me anxious because I met with the new CPA, and he had sort of told me based upon the W-2 income I paid myself on what we were withholding there what I could project my tax percentage would be on any profit in the business. And so, I knew it was more than 1%.

But, again, you got to start small and you got to start somewhere, and we did the same for profit. And we didn’t set aside anything for any sort of savings or capital investments or anything along those lines at the beginning. We just did those two things and because we were having problems with the current bank, we did it in a way that Mike Michalowicz would frown upon me a little bit, though he would be proud of me for doing it. We tracked it on a spreadsheet.

Christopher Anderson: Yeah. So, let’s talk about the bank thing because I think that’s really important. So, you’ve mentioned now that you started setting aside money for profit, the setting aside and putting it 1%. Even if it’s just 1%, you set that aside. You set aside money for taxes 1%, but you set it aside. The other one that Mike recommends you do is setting aside the workers, the pay for the owner’s compensation, and then of course you mentioned that you the rest would go to operating expenses.

And so, that’s four different places we’ve already talked about; one account for profits, one for tax, one for owner’s comp, one for operating expenses, and then the fifth account that Mike recommends is the income account where, you know, when you get money in from these or wherever you get them that goes into this income account that then gets distributed to all these other forecasts. That’s five total to start with. Is that where your bank was giving you some trouble?

Jenny Bradley: Right because, you know, being again the blue color scarcity mentality I was coming to the table with some what, we wanted to try to do is loafy as possible, and I don’t really care if some of these were interest-bearing accounts honestly.

Christopher Anderson: Right.

Jenny Bradley: Because some of them are going to come right in. The income account money was going to come in from the credit card machine when the client paid us, and it was going to get transferred within 10 to 15 days of it coming in into the main account if you will. So, it didn’t make sense to be paying like $30 and $40 fees and then them say, “Oh, this account won’t have many transactions in it.”

Christopher Anderson: Right.

Jenny Bradley: And so, there’s a fee for having so few transactions and all these other things and, you know, it was crazy. So, actually, I reached out to a fellow in the area who is a CPA primarily works with realtors, who was a Profit First coach, and I said, “Who do you recommend?” and he said, “Oh, you need to go with a local bank.” And I said, “Well, I already have a local bank” and he said, “Oh, well, I don’t know what they’re doing. Apparently, they don’t want your business. You need to go with a different local bank, and I’ll give you the name of the one I’ve been using because this local bank understands the more money that you’re trying to keep with them, i.e. holding money in a tax account, holding money in a profit account. The more money they have in their banking accounts to be able to loan from and that’s really where they make the money.”

(00:20:09)

Christopher Anderson: Right. They want the deposits. So, basically, you found a bank that was friendlier to the concept and moved over?

Jenny Bradley: That’s what we did. And then and through Mike fashion, we open two more accounts, so we could really at a different bank, so we could really put the profit and the tax money out of reach.

Christopher Anderson: Yeah. I want to talk about that real quick because that is key to the way Mike suggests that you do things in his book. Tell me about like what are these two accounts and why do you put them far away and what has been your experience doing that?

Jenny Bradley: So, like the way that Mike teaches is that every quarter you’re going to go to your profit account and you’re going to take half of the money out of your profit account. You’re going to leave half behind for the proverbial rainy day or oh my God a complete catastrophe or whatever. The other half if you’re carrying debt, you’re going to pay I believe he suggests 98%, might be 99% to go towards that debt pay down.

Christopher Anderson: Right.

Jenny Bradley: The remaining 1%, 2%, whichever it is he recommends, you know, reward yourself with something whether it’s an ice cream cone if it’s all the money that’s left over.

Christopher Anderson: Right.

Jenny Bradley: That something that is rewarding to you. So, that all this work you’re doing and growing your business that you are getting some reward for it and you see something that is not just — oh, my God. I’m still digging myself out of debt, and I can’t believe we’re not doing anything and those types of things. It’s a behavioral reward. I mean, let’s just be honest. His system is very much about just understanding human behavior and working within it.

Christopher Anderson: Right. Because quite honestly, it’s the sweetest taste in ice cream cone you’ll ever have. I mean, because it came from profit. You know that it came from profit. But so then, the rest you take half and you do these things with it, and then the rest goes but before you distribute it to yourself, it goes far away. It goes to a bank. The profit amounts and then the tax amounts go to a faraway bank where you can’t touch it during the quarter before you distribute it?

Jenny Bradley: That’s the way he teaches it. He sets it up as no temptation accounts, —

Christopher Anderson: Yeah.

Jenny Bradley: Like, you know, his example is — this is not his example. Actually, this is my example. When I talk about Profit First because this is what is dangerous to me, if I shouldn’t be eating Doritos because I’m trying to lose weight, then I don’t bring to Doritos in my house.

Christopher Anderson: Right.

Jenny Bradley: You remove the temptation from you. So, if you shouldn’t be “borrowing” from your tax account to keep your business afloat and, instead, you should get creative and innovative and more efficient in your business, then put it far away, so it’s not just sitting there where you like, “Oh, I’ll take a $100 today and I’ll pay it back tomorrow” because you won’t.

Christopher Anderson: Right, right, because there always be another need coming up. So, that explains kind of how you’ve done it. It sounds like it has gone — the administration has gone relatively well for you. What have been the biggest challenges you faced in trying to get this set up?

Jenny Bradley: Other than finding initially a bank that will work with us, we didn’t have a lot of challenges of getting that set up and maybe I should give good Kudos and be grateful for having a good bookkeeper who gets it and understands it and does this for us as far as the transfers go and, you know, you got this much came into your income amount this month now. X percentage is going here and Y percentage is going there, and Z percentage is going there and does all of that transferring.

Christopher Anderson: So, in a sense, you’ve got it not automated because it’s not a computer, but it’s out of your hands. You’re not having to every quarter or every month rather or twice a month make that decision like, “Oh, can I afford to put in a profit account?” Like you’ve told your bookkeeper just had sort of blanket instructions. This is what you do.

Jenny Bradley: That’s right. This is what you do. And if I ask you to do something differently, you better make me put it in writing and sign it twice.

Christopher Anderson: Nice. This is twice. One is on the front and one is on the back.

Jenny Bradley: That’s right.

Christopher Anderson: But yeah, because you’re showing your bookkeeper that you’re taking it seriously. I guess, it’s sort of in turn that gets reflected back on you that you now have kind of held yourself accountable through those instructions.

Jenny Bradley: Right. I mean, it’s another financial control in her mind.

Christopher Anderson: Yeah, perfect. All right. So, what I want to do now is, at first, we talk sort of about the problem. Then, we’ve been talking about kind of how you got it done. When we come back from the next break, I want to talk to you about what it’s actually done for you. What are the effects been because I think kind of everybody’s listening waiting for that, like why did you go through this? You mentioned the pain, but why hasn’t worked for you or you’re about to quit, all that kind of stuff. But, first, one more word from the folks who make this show possible and then we’ll be right back.

[Music]

No one sights routine drafting as the reason they chose to become a lawyer, but that’s where a lot of time goes for solo practitioners and small firms. Lawyaw can help you transform your existing Word documents into reusable templates with no coding required. Save time and avoid errors with intuitive features like conditional logic. Use a tool that empowers your experience and expertise.

(00:25:00)

Learn more at lawyay.com. And that’s L-A-W-Y-A-W.com.

As the largest legal only call center in the U.S., Alert Communications helps law firms and legal marketing agencies with new client intake. Alert captures and response to all Leads 24/7, 365 as an extension of your firm in both English and Spanish. Alert uses proven intake methods, customizing responses as needed, which earns the trust of clients, and improves client retention. To find out how Alert can help your law office, call (866) 827-5568 or visit alertcommunications.com/ltn.

Christopher Anderson: And welcome back. We are talking with Jenny Bradley about putting profit first in her law firm business, and we’ve been talking during the show so far about the fact that after her first year, which she made more gross revenues and took home more money than she had practicing law for someone else, but then got the dreaded conversation with her accountant and didn’t realize she had to go cobble together money to pay taxes and that led her on a path to where she learned about and then started implement Profit First to her business. We learned about some of the challenges and successes of that and I wanted to do there in this last part of the show, Jenny, is ask you about what it’s done. It’s been, first of all, you glad you did it?

Jenny Bradley: I’m totally glad I did it.

Christopher Anderson: So, first of all, like what have you noticed — how has it changed the way things work in your business?

Jenny Bradley: The most clear example of how it has worked well in my business is simply the bookkeeper has the money there to do the things that she needs to do, i.e. make payroll, pay this insurance check, do this, do that, do whatever, and we’re on a rhythm now where we do our transfers from our income account on the 10th and the 25th, which coincide with our billing cycle to our clients. All of this is happening, and she’s doing this twice a month now as opposed to every day it seemed before we were on Profit First. She was writing the check or she was calling me to ask if she could move money. She was calling to ask me if I could put money on the credit line for a period of time to float payroll until we ran the bills at the end of the month.

Christopher Anderson: Right. Basically, it gave you a structure of — and you said you like structure. This gave you a structure and a rhythm for these things to happen?

Jenny Bradley: Yes, definitely a structure and a rhythm, and then gave her somewhat of the autonomy to be able to be like, “Okay. This is clipping along” and this is clipping along well. And now, I know that if we get a big bill for something that’s unexpected — I don’t want to say it was unexpected. We planned, but we didn’t plan to move when we moved. Our landlord came to us and asked us to move, and we had some upset cost for cabling and other wiring and other things I wanted to do here at the firm, and it was an $8,000 bill. She knew for with that kind of bill, she could put it on the credit line and the next month, we take care of it.

Christopher Anderson: Right. Also, I think what I’m hearing you say, but I think it’s really important bears emphasizing is it sounds like it reduced the number of decision points for you, like you were having to make decisions every day that now fit into this structure and rhythm, so that, you know, because like you said unusual things happen. But with the rhythm, you didn’t have to answer these types of questions or make these decisions every day.

Jenny Bradley: That’s correct and believe this one or not and nobody believes this when I say it, but I’m going to say it anyway. Our bookkeeping bill actually went down even though we ended up with more accounts for her to deal with because the transactions were much less, and she had much less interaction with me.

Christopher Anderson: So, the number of hours she was spending dealing with your firm decreased.

Jenny Bradley: Correct?

Christopher Anderson: I didn’t prepare you for this question, but I just wanted — I think it’s a curious one. How would you rate this like bookkeeper, sometimes in a particular law firm bookkeepers seem to exhibit a lot of symptoms of stress. How would you say her stress level in working on your business has changed if at all?

Jenny Bradley: I can’t say that I’m exactly certain where it was before.

Christopher Anderson: Yeah.

Jenny Bradley: But, I can tell you it’s definitely less now, and I have referred to other law firm owners; one in Maine and one in Cary North Carolina where I practice to her and she’s like, I love clients that are using Profit First, like they get it. They understand it. They keep their eye on the ball. They don’t get distracted by extraneous details and, you know, the decisions we have to make are really big ones when they have to make them sometimes, but they’re not just little bitty things. Like, now I know that — okay, this bill always gets paid, and I have authority to pay this bill, and the money’s going to be there and, if the money’s not there, we got a bigger problem and that’s when the owner has to get involved.

Christopher Anderson: Cool. And now, we started talking about this. You said that you started because it was better than nothing. It was better than zero. You started 1% for profit and 1% for your tax set aside. How often do you take another look at that and change those?

Jenny Bradley: Initially, I didn’t change them for about six to nine months. And then, we went to quarterly review of them and changing them. This year, we’ve actually increased the tax piece anticipating that some of the PPP money while not “taxable” will end up being taxable to us if we can’t write off the expenses that we use the money on.

(00:30:12)

Christopher Anderson: Right.

Jenny Bradley: And we decreased our profit percentage right now because we did get impacted somewhat by COVID, and we invested a lot of money into some marketing and some other avenues to try to increase our sales. And, ultimately, that will come back to us and we know that, but we chose to just keep it in the business and run it as an operating expense rather than put it aside in the profit account and then reinvest the profits back in the business. I mean, it was kind of like, at that point, that’s another one of the ways Mike might not exactly approve our running profit first, but works for us. So, we did it.

Christopher Anderson: Yeah. Actually, I think he would. I just read another one of his books recently and in it, he says that when you set profit aside and then “reinvest” it in the business. That’s just a fancy way of saying it was never profits and should not have been set aside because, you know, if it goes back in the business, it’s just never was a profit. It just was set over there for a while. So, I think the fact that you did it consciously would be very much in keeping with the way he teaches it.

As we roll towards the end, I’ve been saving sort of the best for last. We talked about how Profit First has affected your business and how it’s made things were more smoothly and you’ve got this rhythm and your bookkeeper is less stressed. The money is there when you need it. What’s been the effect on your personal life?

Jenny Bradley: Oh, my goodness. Not profit for standing alone, but in big part due to Profit First. It’s allowed me to gain some of the financial freedom where I can make decisions now based upon what I want, not what I think I can afford, or what I feel like is comfortable getting. But, actually, what I want and while COVID took this away from us, we had a two-week vacation plan to take a Disney cruise with our son that was graduating this year that was going to be his big gift. And yes, I put it on credit card because I like getting airline points, but then I turned around and wrote a check and pay it off.

Christopher Anderson: Right.

Jenny Bradley: So, being able to do those kinds of things. My wife wanted to be able to ride bikes with me and not being cocky or arrogant. Just she has asthma and has a hard time keeping up with me. And I said, “Well, let’s go investigate e-bikes.”

Christopher Anderson: Yeah.

Jenny Bradley: We walked into the store, and they were pushing us down on the low-end model, and I was like, “Take all the price tags off. I want her to pick out what she wants, and then go test ride as many of them as she wants.” And as usual, she comes back with the most expensive one. That’s my wife, and it wasn’t a big deal. Again, got the airline points and transfer the money the next day to cover the credit card. So, you know, just being able to make decisions that are based upon our values now and not based upon some other BS in my head about you don’t need anything more or you can’t afford more. That doesn’t make sense to do that or whatever. You know, it’s there and I can make those choices.

Christopher Anderson: Yeah, come around full circle. What’s been like with the tax made and the tax bills? Has it made that experience more or less stressful for you?

Jenny Bradley: So much less stressful. Now, again, we have an accountant who also meets with us quarterly. So, that helps as well because then we’re tracking things quarterly as we’re looking at what’s in the tax account, so we can make adjustments there. But, you know, in 2018 — for tax year 2018 and for tax year 2019, we had sufficient funds in our tax account to cover all of our taxes as well as reimburse ourselves are withholding state and federal. I don’t know for sure whether 2020 will shake out that way because like I said, we have this blip about what to do about the PPP funds and money you spend on those, and we’re throwing extra money now that that wrinkle became a possibility into the tax account, and it could be debated on what Congress does. We have quite a windfall in our tax account that then we can say, “Hey, this is really profit.”

Christopher Anderson: Yeah, yeah.

Jenny Bradley: Or, you know, we —

Christopher Anderson: For next year’s taxes.

Jenny Bradley: Or its next year’s taxes, and we roll it forward because we choose not to do anything with the PPP this year and wait until 2021 for forgiveness and see where it falls out, but never worried again about getting that phone call in April and what the number is going to be: (A) Because we’re prepared. Like I said, with the quarterly meetings with the accountant but; (B) Because we have been religiously setting that money aside every single month, twice a month actually.

Christopher Anderson: Yeah, right.

Jenny Bradley: And knowing it’s there. It’s like, “Okay, Tom. Tell me the bad news.” He goes, “Well, the bad news is, you know, there’s much in taxes. The good news is you made this much more money.” “Okay. Great!”

Christopher Anderson: Yeah. And then, the real good news is that tax is sitting right there. That’s actually serve account. So, here’s a check.

Jenny Bradley: That’s right. And then, we’re done.

Christopher Anderson: Beautiful. Any plans for Profit First going forward? Any changes or improvements you see making?

Jenny Bradley: I think that this year has taught us while we knew that nothing was certain and nothing was guaranteed in life —

(00:35:05)

That perhaps we need to have a little bit more cushion in our operating account than we currently have had. And so, we will set up another account and Mike will call it a vault account where we put money aside for that. We have some new hires that we need to make in the next quarter, the two quarters. And so, we’ll likely start a new hire account as well and start putting some money over there, so that when their first paycheck is due and we haven’t yet collected on the income the lawyer has built that, at least, the money will be there to kind of float that first paycheck. And, otherwise, my big thing is I want to take Profit First and spent it on its head and make it for personal households —

Christopher Anderson: Oh, yeah.

Jenny Bradley: And really package that and put that out there, not only for my clients, but for folks who are not my clients and, maybe, I can keep them from ever becoming my clients and that sounds weird for a divorce lawyer. I know to say, but the world would be a lot better on some levels if everyone had better financial acuity.

Christopher Anderson: Yeah, because it’s a source of stress.

Jenny Bradley: A lot less divorces over finances if people had some Acumen. And so, that’s part of what I want to do.

Christopher Anderson: Great! Jenny, I think that there may be some listeners who want to know more or ask the questions I forgot to ask or if anybody wants to contact you, what would be the best way for them to do that?

Jenny Bradley: One of two ways, you can go to our website, which is trianglesmartdivorce.com, and hit the button there for emailing the law firm. Type in whatever you have and I’ll get back to them as I can, as soon as I can. And then, the other way is the firm is on all kinds of social media.

Christopher Anderson: Yeah.

Jenny Bradley: LinkedIn, Instagram, Facebook. I used to be on Twitter and Reddit. I wouldn’t say that that’s going to reliably be checked. So, we should just stick with Facebook and LinkedIn and Instagram most likely.

Christopher Anderson: I think those that had three. That’s more than enough. All right. Well, thank you. This wraps up this edition of the on billable hour. I thank all of you for listening and our guest today has been Jenny Bradley. She’s the founder and owner of Triangle Smart Divorce. Jenny, thanks so much for being on the show.

Jenny Bradley: Thanks Chris for appreciate you having me.

Christopher Anderson: My pleasure. Of course, this is Christopher Anderson. I look forward to seeing you next month with another great guest. As we learned more about topics that help us build the law firm business that works for you. Remember, you can subscribe all the additions of this podcast at legaltalknetwork.com or on iTunes. Thanks for joining us and we’ll speak again soon.

[Music]

Male: The views expressed by the participants of this program by their own and do not represent the views of nor they endorse by Legal Talk Network its officers, directors, employees, agents, representatives, shareholders, and subsidiaries. None of the content should be considered legal advice. As always, consult a lawyer. Thanks for listening to “The Un-Billable Hour,” the law of practice advisory podcast. Join us again for the next edition right here with Legal Talk Network.

[Music]

(00:38:16)