Profit First for Lawyers

<p class="wp-block-paragraph"></p> <blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> <p class="wp-block-paragraph">&#8220;<em>When you&#8217;ve taken your profit off the top, like we talk about in Profit First for Lawyers, and you&#8217;ve only got what you&#8217;ve only got to cover expenses, it forces you to be more honest with yourself. It forces you to grow up as a business owner and make better decisions.&#8221; </em>– RJon Robins, author of <em>Profit First for Lawyers</em></p> </blockquote> <p class="wp-block-paragraph">What if the way you&#8217;ve been taught to think about profit is actually keeping your law firm stuck? This eye-opening episode will answer that question clearly. In part five of our seven-part financial literacy series, RJon breaks down the fundamental difference between traditional accounting and the Profit First approach. This is a small but powerful shift that forces your business to grow up.</p> <h3 class="wp-block-heading">Why Discipline Forces Creativity</h3> <p class="wp-block-paragraph">In the 2019 workshop, RJon walks How To Manage a Small Law Firm members through the real numbers showing what happens when expenses outgrow income. The traditional approach leaves room to tolerate unmeasured marketing, underperforming staff, and bad processes. Implementing Profit First removes that cushion and forces honest conversations and decisive action about what&#8217;s really working in your business.</p> <p class="wp-block-paragraph">As RJon writes in Chapter 8: <em>&#8220;When you put profits first, you force creativity, ingenuity, and innovation into your business.&#8221;</em> This means, instead of accepting low standards because there&#8217;s money to cover them, you&#8217;re forced to find smarter ways to get the same results more efficiently. </p> <p class="wp-block-paragraph"><strong>Take Action</strong></p> <p class="wp-block-paragraph">Look at your own law firm and ask yourself, <em>&#8220;If I protected my profit first, what would I have to stop tolerating in my business that is currently taking my profit?&#8221;</em></p> <p class="wp-block-paragraph">And that&#8217;s it. Just sit with that question. The reality is you already know the answer. So what actions will you take now that you&#8217;ve taken the time to recognize that honest truth?</p> <p class="wp-block-paragraph">Next Time: Join us for Part 6 where RJon walks through the practical application of stepping away from some of the various roles you currently hold in your law firm without tanking your income.</p> <h3 class="wp-block-heading">Mentioned:</h3> <ul class="wp-block-list"> <li>Financial Literacy Series: <ul class="wp-block-list"> <li>Part 1: <a href="https://profitfirstforlawyers.com/youre-not-bad-with-numbers/" target="_blank" rel="noreferrer noopener">You’re Not Bad With Numbers</a></li> <li>Part 2: <a href="https://profitfirstforlawyers.com/understanding-the-stages-of-a-law-firms-growth/" target="_blank" rel="noreferrer noopener">Understanding the Stages of a Law Firm’s Growth</a></li> <li>Part 3: <a href="https://profitfirstforlawyers.com/calculating-your-total-owner-benefits/" target="_blank" rel="noreferrer noopener">Calculating Your Total Owner Benefits</a></li> <li>Part 4: <a href="https://profitfirstforlawyers.com/what-is-your-normalized-salary/" target="_blank" rel="noopener nofollow" title="">What Is Your Normalized Salary?</a></li> </ul> </li> <li>Chapter 8: Why Generally Accepted Accounting Principles (GAAP) Are Not Meant for You (pages 70-71 in the <em>Profit First for Lawyers</em> book)</li> <li>Email [email protected] with subject: &#8220;Debt Ladder&#8221; for a future episode</li> </ul> <h3 class="wp-block-heading">Connect</h3> <ul class="wp-block-list"> <li><a href="https://profitfirstforlawyers.com/subscribe/" target="_blank" rel="noreferrer noopener">Subscribe</a> to the <em>Profit First for Lawyers</em> podcast</li> <li>Watch episodes on <a href="https://www.youtube.com/@RJONROBINS/podcasts?sub_confirmation=1" target="_blank" rel="noreferrer noopener">YouTube</a></li> <li>And most importantly, <a href="https://htm.live/PF4L-Book-1" target="_blank" rel="noreferrer noopener">order your copy</a> of <em>Profit First for Lawyers</em> today!</li> </ul>

<p class="wp-block-paragraph"></p> <blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> <p class="wp-block-paragraph"><em>&#8220;Someone in your office is stealing from you. They may not be stealing money and putting it into their own pocket, but they&#8217;re stealing time. They&#8217;re giving away work for free.&#8221;</em> – RJon Robins, author of <em>Profit First for Lawyers</em></p> </blockquote> <p class="wp-block-paragraph">Many law firm owners focus on generating new business, increasing billable hours, and growing revenue. But bringing business into the firm is only part of what makes a law firm profitable.</p> <h3 class="wp-block-heading">Have the Hard Conversations</h3> <p class="wp-block-paragraph">In this episode, Jose Luis Perdomo, Fractional CFO at How To Manage a Small Law Firm, discusses one of the most common threats to profitability: unpaid invoices and growing accounts receivable balances. Drawing from a Chapter 14 clip by RJon Robins from <em>Profit First for Lawyers</em>, Jose Luis explores why outstanding balances create more than a cash flow problem. They impact:</p> <ul class="wp-block-list"> <li>Attorney and staff accountability</li> <li>Client expectations</li> <li>The long-term financial health of the firm</li> </ul> <p class="wp-block-paragraph">And because collections conversations can feel uncomfortable, overdue balances are often allowed to linger while additional work continues to be performed. But every unpaid invoice that lingers as an accounts receivable balance represents labor, overhead, and resources that have already been invested. A best practice is to develop healthy collections practices long before an invoice becomes overdue. When collections become an afterthought, profitability suffers. </p> <h3 class="wp-block-heading">Creating a Healthy Sustainable Business</h3> <p class="wp-block-paragraph">Every unpaid invoice tells a story. Often, that story begins long before work begins. Clear communication, well-defined expectations, replenishment policies, and accountability systems all play a role in the final outcome. </p> <p class="wp-block-paragraph">The goal is not simply to collect money that is already owed. The goal is to build systems that make timely payment the natural outcome. That prevents &#8220;free work&#8221; from becoming a common practice in your firm and collection problems before they occur. This leads to stronger cash flow, healthier profit margins, and a more sustainable business that can help even more people. </p> <h3 class="wp-block-heading">Mentioned</h3> <ul class="wp-block-list"> <li><a href="https://howtomanageasmalllawfirm.com/diagnostic#form?utm_source=Podcast&#38;utm_medium=pf4l&#38;utm_campaign=Ep-92" target="_blank" rel="noopener" title="">Law Firm Diagnostic by How To Manage a Small Law Firm</a></li> <li><a href="https://www.ProfitFirstForLawyers.com/BusinessPlan2?utm_source=podcast&#38;utm_medium=pf4l&#38;utm_campaign=ep-92" title="">Business Plan worksheet</a></li> <li><a href="http://www.profitfirstforlawyers.com/GASCall?utm_source=Podcast&#38;utm_medium=pf4l&#38;utm_campaign=Ep-92" target="_blank" rel="noopener" title="">G.A.S. Calls resource </a></li> <li>Chapter 14: For When You Really Take Profits Seriously</li> </ul> <h3 class="wp-block-heading">Connect</h3> <ul class="wp-block-list"> <li><a href="https://profitfirstforlawyers.com/subscribe/" target="_blank" rel="noreferrer noopener">Subscribe</a> to the <em>Profit First for Lawyers</em> podcast</li> <li>Watch episodes on <a href="https://www.youtube.com/@RJONROBINS/podcasts?sub_confirmation=1" target="_blank" rel="noreferrer noopener">YouTube</a></li> <li>And most importantly, <a href="https://htm.live/PF4L-Book-1" target="_blank" rel="noreferrer noopener">order your copy</a> of <em>Profit First for Lawyers</em> today!</li> </ul> <p class="wp-block-paragraph">

<p class="wp-block-paragraph"></p> <blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> <p class="wp-block-paragraph">&#8220;One of the big problems that we see in your profit and loss statement is when your business is not paying you an appropriate normalized salary.&#8221; – RJon Robins, author of Profit First for Lawyers</p> </blockquote> <p class="wp-block-paragraph">Many law firm owners know what they pay themselves, but few have stopped to ask an important question:</p> <p class="wp-block-paragraph">What should the business be paying them?</p> <p>In part four of our seven-part financial literacy series, RJon takes a deeper look at normalized salary. This is one of the key components of Total Owner Benefit discussed in the previous episode, <em><a href="https://profitfirstforlawyers.com/calculating-your-total-owner-benefits/" target="_blank" rel="noopener" title="">Calculating Your Total Owner Benefits</a></em>. Drawing from a 2019 Profit First for Lawyers workshop, he challenges a common assumption about an owner&#8217;s compensation:</p> <p class="has-text-align-center has-medium-font-size wp-block-paragraph"><strong>A law firm owner&#8217;s salary should be based on the work they actually perform inside the business, not their title, credentials, or ownership stake. </strong></p> <h3 class="wp-block-heading">What Is a Normalized Salary?</h3> <p class="wp-block-paragraph">A normalized salary is the amount a law firm would reasonably pay someone else to perform the same work you currently do inside the business.</p> <p class="wp-block-paragraph">Whether you are acting as a senior associate, marketer, salesperson, tech support, or even the occasional janitor, each role has a market value. Understanding how much time you spend performing each role helps create a more accurate picture of what your labor is worth to the firm.</p> <h3 class="wp-block-heading">Why It Matters</h3> <p class="wp-block-paragraph">Many law firm owners unintentionally blur the line between compensation for labor and compensation for ownership. When that happens, financial reports become harder to interpret and profitability becomes more difficult to measure accurately. But calculating a normalized salary creates greater clarity around both. </p> <h3 class="wp-block-heading">Key Takeaways</h3> <ul class="wp-block-list"> <li>Normalized salary is based on the work you perform, not your title</li> <li>Every role inside your firm has a market value</li> <li>Understanding how you spend your time creates greater financial clarity</li> <li>Compensation for labor and compensation for ownership are not the same thing</li> <li>Financial literacy requires objective thinking, not emotional thinking</li> </ul> <p class="wp-block-paragraph">Normalized salary is not about assigning a value to yourself as a person. It is about creating a more objective understanding of the work you perform inside your business. </p> <p class="wp-block-paragraph"><strong>Action Steps</strong></p> <ol class="wp-block-list"> <li>Make a list of every role you currently perform inside your firm.</li> <li>Estimate what it would cost to hire someone competent to perform each role.</li> <li>Determine the approximate percentage of time you spend in each role.</li> <li>Calculate a rough normalized salary based on those percentages.</li> <li>Compare your current compensation to the value of the work you are actually performing.</li> </ol> <p class="wp-block-paragraph">While this exercise may feel uncomfortable at first, it can provide valuable insight into how your time is being spent and whether your firm&#8217;s resources are aligned with its highest priorities. The clearer you become about how your time is spent and what that work is worth in the marketplace, the easier it becomes to make informed decisions about compensation, profitability, and growth.</p> <h3 class="wp-block-heading">Mentioned</h3> <ul class="wp-block-list"> <li>Part 1: <a href="https://profitfirstforlawyers.com/youre-not-bad-with-numbers/" target="_blank" rel="noopener nofollow" title="">You&#8217;re Not Bad With Numbers</a></li> <li>Part 2: <a href="https://profitfirstforlawyers.com/understanding-the-stages-of-a-law-firms-growth/" target="_blank" rel="noopener nofollow" title="">Understanding the Stages of a Law Firm&#8217;s Growth</a></li> <li>Part 3: <a href="https://profitfirstforlawyers.com/calculating-your-total-owner-benefits/" target="_blank" rel="noopener nofollow" title="">Calculating Your Total Owner Benefits</a></li> <li>Chapter 9 of <em>Profit First for Lawyers</em></li> </ul> <h3 class="wp-block-heading">Connect</h3> <ul class="wp-block-list"> <li><a href="https://profitfirstforlawyers.com/subscribe/" target="_blank" rel="noreferrer noopener">Subscribe</a> to the <em>Profit First for Lawyers</em> podcast</li> <li>Watch episodes on <a href="https://www.youtube.com/@RJONROBINS/podcasts?sub_confirmation=1" target="_blank" rel="noreferrer noopener">YouTube</a></li> <li>And most importantly, <a href="https://htm.live/PF4L-Book-1" target="_blank" rel="noreferrer noopener">order your copy</a> of <em>Profit First for Lawyers</em> today!</li> </ul>

<p class="wp-block-paragraph"></p> <blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> <p class="wp-block-paragraph"><em>&#8220;Happiness is not accounted for in Generally Accepted Accounting Principles. Neither is peace of mind, propensity for burnout, or the quality of your life.&#8221; </em>– RJon Robins, author of Profit First for Lawyers</p> </blockquote> <p class="wp-block-paragraph">Before you can build a roadmap for the future, you need to know where you are today. Evelyn Aucoin, Financial Literacy &#38; Strategy Expert from <a href="https://howtomanageasmalllawfirm.com/?utm_source=pf4l&#38;utm_medium=podcast&#38;utm_campaign=shownotes" target="_blank" rel="noopener" title="">How To Manage a Small Law Firm</a>, joins us to discuss understanding your starting point. Whether your goal is greater profitability, more time with family, or long-term financial security, meaningful progress begins with an honest assessment of your current reality.</p> <p class="wp-block-paragraph">Drawing from core financial literacy concepts found in <em>Profit First for Lawyers</em>, Evelyn explains why financial reports are not simply accounting documents. She introduces the seven key financial reports and explains how they help law firm owners understand where they are today so they can make better decisions about where they want to go.</p> <h3 class="wp-block-heading">Defining Success on Your Own Terms</h3> <p class="wp-block-paragraph">One of the central themes of this episode is that success is personal. For some law firm owners, success may mean growing a multi-million-dollar firm. For others, it may mean working fewer hours, spending more time with family, or creating greater flexibility in their lives. Before measuring progress, law firm owners must first define what success looks like for them. </p> <p class="wp-block-paragraph">Once that destination is clear, financial reports can help answer an important question:</p> <p class="wp-block-paragraph">Are you currently on the path that will get you there?</p> <h3 class="wp-block-heading">Key Takeaways</h3> <ul class="wp-block-list"> <li>Financial reports provide visibility into the health of your business</li> <li>Success should be defined by your goals, not someone else&#8217;s expectations</li> <li>Total Owner Benefit offers a more complete picture of financial success</li> <li>Financial literacy creates confidence and clarity in decision-making</li> <li>Knowing where you are today is the first step toward reaching your goals</li> </ul> <p class="wp-block-paragraph">Financial literacy is not an end goal. It is a tool that helps law firm owners make better decisions. If you are ready to take action on the concepts discussed in this episode, start here:</p> <h3 class="wp-block-heading">Action Steps</h3> <ol class="wp-block-list"> <li>Define what success looks like for you and your family.</li> <li>Review your current financial reports to understand where you are today.</li> <li>Identify the destination you are trying to reach.</li> <li>Determine which financial metrics will help you track progress toward your goals.</li> <li>Commit to building a regular habit of reviewing your numbers.</li> </ol> <p class="wp-block-paragraph">This is not a one-time set-it-and-forget-it exercise. The destination you choose today may need to change as your business and personal goals evolve. That&#8217;s why it is important to keep your hands on the steering wheel. While this may seem challenging at first, regular monitoring keeps you in tune with the direction your business is headed, allowing you to adjust for road hazards and stay on course. </p> <h3 class="wp-block-heading">Mentioned</h3> <ul class="wp-block-list"> <li><a href="https://profitfirstforlawyers.com/profitleak/?utm_source=pf4l&#38;utm_medium=podcast&#38;utm_campaign=ep90shownotes" target="_blank" rel="noopener" title="">Profit Leak Assessment</a></li> <li><a href="https://profitfirstforlawyers.com/calculating-your-total-owner-benefits/" target="_blank" rel="noopener" title="">Calculating Your Total Owner Benefits</a> episode</li> <li>Seven Key Financial Reports (Chapters 13-15 of <em>Profit First for Lawyers)</em></li> <li><a href="https://bookkeepingthatdoesnotsuck.com/?utm_source=pf4l&#38;utm_medium=shownotes" target="_blank" rel="noopener" title="">Bookkeeping That Does Not Suck</a></li> </ul> <h3 class="wp-block-heading">Connect</h3> <ul class="wp-block-list"> <li><a href="https://profitfirstforlawyers.com/subscribe/" target="_blank" rel="noreferrer noopener">Subscribe</a> to the <em>Profit First for Lawyers</em> podcast</li> <li>Watch episodes on <a href="https://www.youtube.com/@RJONROBINS/podcasts?sub_confirmation=1" target="_blank" rel="noreferrer noopener">YouTube</a></li> <li>And most importantly, <a href="https://htm.live/PF4L-Book-1" target="_blank" rel="noreferrer noopener">order your copy</a> of <em>Profit First for Lawyers</em> today!</li> </ul>

<p class="wp-block-paragraph"></p> <blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> <p class="wp-block-paragraph"><em>&#8220;There are three ways you&#8217;re going to get compensated from your business. One is W-2 Salary. Two is K-1 distributions. Three is other benefits.&#8221; – RJon Robins, author of Profit First for Lawyers</em></p> </blockquote> <p class="wp-block-paragraph">How profitable is your law firm? The answer might be more complicated than what shows up on your P&#38;L statement. In this third part of our seven-part financial literacy series, we revisit a topic from season one: Total Owner Benefits. A topic of such importance that it has an entire chapter devoted to it. Listen in as RJon takes a law firm owner through an exercise to calculate the true value they are receiving from their firm. </p> <h3 class="wp-block-heading">Beyond the Bottom Line</h3> <p class="wp-block-paragraph">RJon poses a powerful question: Would you rather own Firm A (making $1M but working 70-hour weeks doing work you hate with no vacations) or Firm B (making $500K working 50 hours doing meaningful work with real time off?) Your banker might say Firm A is more profitable, but which would contribute to your family&#8217;s happiness more?</p> <h3 class="wp-block-heading">The Real Math</h3> <p class="wp-block-paragraph">In the 2019 workshop, RJon shows how a business that appears to have a 20% profit margin actually delivers 38% in Total Owner Benefits when you account for all three components (W-2 Salary + K-1 distributions + Other benefits). The difference is dramatic and changes everything about how you evaluate your firm&#8217;s true profitability. Understanding Total Owner Benefits reveals the value your business is actually providing you with.</p> <p class="wp-block-paragraph"><strong>Action Steps</strong></p> <ol class="wp-block-list"> <li>Follow along with your numbers during the exercise to discover your Total Owner Benefits</li> <li>Then ask yourself: What is my law firm actually giving back to my life?</li> <li>If you don&#8217;t like the answer, pick one small thing to change</li> </ol> <p class="wp-block-paragraph">Next Time: Join us for Part 4 where RJon walks law firm owners through normalized salary calculations. This is an eye-opening episode you won&#8217;t want to miss. So be sure to subscribe to the Profit First for Lawyers podcast. </p> <h3 class="wp-block-heading">Resources Mentioned</h3> <ul class="wp-block-list"> <li>Financial Literacy Series: <ul class="wp-block-list"> <li>Part 1 &#8211;<a href="https://profitfirstforlawyers.com/youre-not-bad-with-numbers/" target="_blank" rel="noopener nofollow" title=""> You&#8217;re Not Bad with Numbers</a></li> <li>Part 2: <a href="https://profitfirstforlawyers.com/understanding-the-stages-of-a-law-firms-growth/" target="_blank" rel="noopener nofollow" title="">Understanding the Stages of a Law Firm&#8217;s Growth</a></li> </ul> </li> <li>Chapter 9: Total Owner Benefits (pages 73-87 in the <em>Profit First for Lawyers</em> book)</li> <li>Season 1: <a href="https://profitfirstforlawyers.com/total-owner-benefits/" target="_blank" rel="noopener nofollow" title="">Total Owner Benefits episode</a></li> </ul> <h3 class="wp-block-heading">Connect</h3> <ul class="wp-block-list"> <li><a href="https://profitfirstforlawyers.com/subscribe/" target="_blank" rel="noreferrer noopener">Subscribe</a> to the <em>Profit First for Lawyers</em> podcast</li> <li>Watch episodes on <a href="https://www.youtube.com/@RJONROBINS/podcasts?sub_confirmation=1" target="_blank" rel="noreferrer noopener">YouTube</a></li> <li>And most importantly, <a href="https://htm.live/PF4L-Book-1" target="_blank" rel="noreferrer noopener">order your copy</a> of <em>Profit First for Lawyers</em> today!</li> </ul>