How to Increase the Value of Your Law Firm: Your Biggest Asset with Darren Wurz

Happy New Year. I’m Melissa Shanahan, and this is The Law Firm Owner Podcast Episode #291.

Welcome to The Law Firm Owner Podcast, powered by Velocity Work, for owners who want to grow a firm that gives them the life they want. Get crystal clear on where you're going, take planning seriously, and honor your plan like a pro. This is the work that creates Velocity.

Melissa Shanahan: All right, we have such a treat today. Darren Wurz, thank you so much for coming on our podcast.

Darren Wurz: Yeah, I'm delighted to be here. Thanks for having me.

Melissa: Oh my gosh, I've gotten to know you a little bit this year. I'll definitely say more, but do you want to just start by telling everybody who you are and what you do?

Darren: Sure, absolutely. I'm the founder and CEO of The Lawyer Millionaire Founders Network. And we are kind of a next generation membership model of financial planning designed exclusively for law firm owners.

We built something really new and unique and different that incorporates financial planning, but also the key things that are really critical for law firm owners, namely business planning — how do I grow my business and plan for the future of that business? And also peer networking, because all of our clients are similar, they have similar dreams and goals. We give them an opportunity to connect with each other, and we find that that's really powerful.

We also have a podcast ourselves called The Lawyer Millionaire. So you can check that out. But yeah, that's a little bit about us.

Melissa: Yeah, you have your CFP; it's in your blood, financial planning, I think. Correct?

Darren: Yeah.

Melissa: So for all of you listening, we'll link up to Darren. You should go learn more about him. He's written a book that was published by the ABA. I just got my copy. It lives in our workspace now, which is super cool. So you just put up so much useful stuff, it seems, for law firm owners.

And there's a lot out there for law firm owners. But you can always sort of sniff right away when you meet someone who's doing something super useful for people. It's not just a run of the mill thing. And that's not to put down other professionals doing things for law firm owners. But if you've been in the game long enough, you can really just get a sense for who law firm owners should be drawn to.

And I really think you're one of those people. So I appreciate your time coming on and talking to everybody.

Darren: Thank you so much, Melissa. Yeah, I do think we bring something very unique coming from the financial planners perspective, and bringing that into the whole idea of growing your business. So it's a lot of fun.

Melissa: For everyone listening, we hosted an event for our Syndicate Members. It's a private group that once you've been in Mastery Group long enough, and your business has grown enough, then you can decide to join should it feel right for you; this small group of law firm owners that are working on the next level of things.

And Darren came and spoke at that event, we just had it less than a month ago, and it was so well received. And there were some specific points that were exceptionally well received that people talked about. You were there on the first day of the event, and for the next two days people were still talking about some of the things that you presented on. And I loved that.

So I thought what an opportunity to have you on here to talk through today one of the concepts that you shared, that really struck a chord with everyone in the room. And I loved the language that you put to it.

So what we were talking about was the four C's of intangible value. Because there was a section of the presentation, or section of the day, we talked about valuations for your business and really understanding how to determine what the value of your business is and how to increase the value.

And I know that people have hunches on how to do that. I don't think enough people think about this now, like they think about it too late. Not there's ever “too late”; you could have started earlier. So I think this conversation, I hope does two things. One, wakes law firm owners up to think in these ways, so that it tees them up to have an easier time whenever they want to exit.

There will be a day that you need to exit. And you may think that's 30 years from now, but you don't know that. And even if it is 30 years from now, you want options. I think this conversation is super important. And the four C's were intangible ways to increase value.

So I'm just going to let you start talking on this, and then I'll ask questions or point is in different directions from there.

Darren: You're so right, you will exit your law firm. Either by your own choosing or not. That's the reality. Thinking about growing the value of your practice as an asset. And that's part of the conversation that we bring to the table.

As financial planners, there's a lot of conversation about growing profit, growing revenue. And that's all critical, but we also want to think long term in terms of building the value of your business as an asset, and how that can be a dramatic game changer for you in terms of your wealth. Not a lot of law firm owners, I think, are necessarily thinking that way automatically.

I think a lot of that is just because of the nature of the business, being a professional. Financial advisors are the same way, right? It's your profession, it's your job. And maybe you started a law firm just because that was what you wanted to do. It was a job for yourself. You weren't really thinking about starting a business, you were just thinking about getting clients and getting to work.

So really, this conversation is embedded in a conversation about retirement planning. But retirement planning for law firm owners is varied and unique, because not a lot are necessarily thinking I want to retire at a specific age. But still, we need to be thinking about having enough capital to get to that place, even if that's maybe farther out in the future.

In terms of maximizing the value of your practice, there's a lot of pushback about, does my practice actually have value in the first place? Is it something that actually could be sellable? So that's where we start. I learned a lot of this from my training with the Certified Exit Planning with the Exit Planning Institute. I'm a Certified Exit Planning Advisor.

And when I went through their training, I got this language, and I got this understanding of how you value a business, and how you think about business value and what really drives business value. Okay? And what I found out, Melissa, is that we're talking about businesses in general, and learning about how you value businesses in general, all kinds of different types of businesses.

What I learned is that the issues and problems that law firm owners have with selling their law firm, thinking about the value of their law firm, are the same across the board. So I'm like, how cool is that? You're not alone in thinking that your business might not have value. You're not alone in that. Because all businesses struggle with that concept, with that idea, will somebody really want to buy my business?

Melissa: You also see the flip side. I think we talked about this, but I see this in the business world in general. I do see it with some law firm owners, that they actually think their business is worth more than what it is. So there are almost two ends of the spectrum people live on.

Darren: Yeah, that's a unique area too, right? Maybe there's some hubris that comes into play there, in thinking that it's worth potentially more than it is.

Melissa: Because they know the blood, sweat, and tears that they've put in. Even if it's not technically as valuable as what you think it is, you feel like it is because you've worked your ass off for it. So yeah, my business is worth a lot. But to someone who's purchasing it, it's not. It's worth a lot to you in the moment. But it's not objectively as high as value is what you think it is, or what you could be get.

Darren: Right. So we have to have some understanding about, what exactly is the value? How do you value it? Because there is a marketplace. There is a marketplace of businesses being bought and sold, professional services, businesses, and law firms. And we can go to that marketplace. We can use a very simple mathematic formula to ascertain or estimate the value of a business.

Melissa: Okay, so what is that? How do we start? Because two questions are going to pop up: What is this marketplace? What do you mean by that? And the second one is, is there really just a formula? Is that what they use? So will you say more about those?

Darren: There's a number of ways to determine really determine value. There are very complex ways to determine value, right? You could hire an accounting firm to give you a very detailed analysis. There's the asset value, which is like, what assets do you actually own? And what are those assets worth? Now, your asset value is going to be very small.

Because here's the truth, 85% of the business of your law firm is intangible; 85% of its value is intangible. And this is true across the board. So this was a big, huge, mind opening thing for me, when I heard this. Because for those law firm owners that think their business isn't worth a lot, they're right. It's not worth a lot in terms of tangible value, like physical assets to sell.

But when you actually think about it, let's think about… Okay, law firms are small businesses. Let's think about big businesses. And how are big businesses valued? The stock market is the easiest place to go to think about valuation, right? And stocks are worth a lot more … many stocks, not all stocks ... Let's look at the big tech names, like Apple for instance.

Apple is a $3 trillion company now? Something like that. I don't know. It passed a trillion, and then it passed 2 trillion, and I don't know who's keeping track. But anyway, why is it worth $3 trillion? Is it because they have $3 trillion worth of iPhones and plants and equipment and real estate? No, it's worth $3 trillion… The vast majority of that valuation is the intangible capital. It's the brand power, and it's the goodwill. It's the name that they've built for themselves.

So when we think about stocks, there's a common way that investors value businesses. It's called “the price to earnings ratio”. The price to earnings ratio determines value. So there's two components of this. There's the earnings component, which is the profit, the after-expense profit, the net profit. In market terms, we call this EBITDA, Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s your net profit. That's a big piece of it.

And then the other piece of it, how you go from earnings to value is a multiple of that profit. So when we look at stocks, a stock might be trading at a certain stock price, a price per share. There are a certain number of shares, it might be 5 million, 10 million. However many shares there are, we can determine the overall value of a company trading in the stock market based on the share price, and how many shares there are.

Then we look at the actual profit. And we can see how does the price relate to the profit. How does the value that the stock market has assigned to this related to its actual profit? And that's called “a multiple”. So there's a multiple that the market assigns to a stock. Okay, so a company that is trading a very high multiple… Amazon's a great example of this. Let's think about Amazon. Amazon's multiple is somewhere in the 80s, I think, okay? It might be higher now.

Melissa: So 80x on EBITDA.

Darren: Eighty x on earnings, right? It's trading at 80 times earnings. So this gives us a very simple way to compare companies. Because we can compare companies to each other. So this is why stock market analysts came up with the price-to-earnings ratio, or the PDE multiple. Because it gave them a very simple apples-to-apples way to look at companies very quickly and determine, are they overvalued or are they undervalued?

Now, Amazon, you could make arguments about whether or not you think that's over too much or too little. By comparison, Microsoft is trading around 40 earnings, I think. Generally, stocks in the S&P 500 trade somewhere around 25, 20-25 historically, 20-25 earnings.

And we can look… Another really cool sidebar here, a cool way to look at the market in general, and see if the market is overvalued or the market is undervalued. We can look at the average price-to-earnings multiple across the whole market. And we can see, historically, are average PDEs too high? Are they too low? So that can play into it.

Melissa: That’s super cool. Oh, my gosh, I love this. This is putting new connections in my brain as you're talking. Okay, so we're talking about the multiple. So you have your net profit. For law firm owners that's how they should think about it, their net profit. And they don't necessarily have to think of the term EBITDA, correct?

Darren: Not necessarily.

Melissa: Okay, so they have net profit. And when they think about a multiple, like if their business is worth, technically, a multiple of their net profit, what is the multiple? What's the range that you typically see for law firms?

Darren: So you're right, the formula, just to clarify real simply for our listeners, is earnings x a multiple = your value. Simple, okay? Now, you're right, you control the earnings. You control some of the multiple. So the multiple is determined by the private capital markets. It's determined by the actual buyers and sellers. Who's actually buying and selling law firms, and what are they paying?

We can do market research, and we can determine what the current range of multiples is. For professional services firms — law firms, accounting firms, financial advisory firms ¬— the multiple could be anywhere from 2-9. Nine is way out there; it might be like an outlier, right? Nine would be what we call “Best In Class”. You are top of the market; everybody wants your business.

Now, how do you know where you're in the range? So you don't determine what the range is, the market determines what the range is. But you can control, number one, your profits. You can drive your value higher by driving your profit higher, or driving your multiple higher within the range.

Melissa: And you can drive your multiple higher through intangible stuff; those four C’s that we’ll cover. I was just thinking, if a law firm has $250,000 in profit … just to help people wrap their heads around this … then if they were a 3x … And who is this? I'm saying, if that's where the man behind the curtain says, “You are 3x multiple,” who is the man behind the curtain? Is this just someone who values businesses or performs valuations on businesses? Who are those people?

Darren: There are accounting firms that can give you a detailed valuation. The truth is though… We can do a strategic valuation, which wouldn't be the valuation you're going to use to take to market. But the truth is, we don't know necessarily until you actually go to market.

Melissa: Because then you'll figure out what someone's willing to pay.

Darren: Exactly. But we can assess your business to help us understand. We have a very lengthy assessment we can go through, and we can assess the strength of your intangible capitals, the four C's. We can assess how independent your business is from the ownership.

How well is it structured? Do you have repeat customers that are locked into contracts? There are factors that we can look at to help us determine where you are in that range of multiples. And then that assessment also helps us determine, where can we make improvements to drive the multiple higher?

Melissa: Yeah. To go back to the math, if your business profits $250,000, some of you were like, “Mine does more than that.” And some of you think, “Oh, my God, how am I ever going to get there?” But I'm just trying to form a reference here. So $250,000, let's say it's a 3x multiple. By analysis that's what we think is possible. You'll see when you go to market. But then that would mean that $750,000 is what your business is technically worth. Is that correct?

Darren: And it's a huge range, right? You can easily see how you can have a dramatic impact on your wealth. If you're at a 1x multiple, because you have poor systems, and so forth. Let's say you have a million dollars in profit, and you're 1x; you have a million-dollar potential valuation.

But if you could just improve that to three, you could multiply your value by three, right? That's exponential. By focusing on value, you can really drive potential wealth a lot higher.

Melissa: I love this conversation so much. I think this is why it matters. People are just running hard. They're so busy. They have a lot of clients. Or they're trying to get clients, so there's a hustle there. Any business you lift off the ground, I don't care who you are, what you're doing, there's a bit of a grind and hustle to lifting it off the ground.

And some people really never find their groove into feeling really organized, how to grow this business sustainably, and how to get more freedom. So you hear a lot of conversation in the law firm owner space about, more freedom, more time, more money. And that's all true.

And the things that you have to focus on, in order to get those things, are the very things that will increase the value of your business. It's not about you. It is about you, but I think there's a lot of short game conversation that happens in the law firm owner space. And though it's not untrue that those things are smart to focus on, I think the conversation should exist more often about the long game.

Maybe it's because people feel like they're struggling so hard that the only thing they can hear is that they need more space and freedom from their business and money, and that's what lands. But the truth is, if you don't do these things, you will wish that you did at some point down the road.

So I just think this conversation is so important and so needed. And I'll say one more thing ... Which you saw this … I would say, the majority of people that work with Velocity Work are between the ages of 35 and 55. And that's the time where…

Darren: That's the sweet spot.

Melissa: It's the sweet spot. And this is where people start to… They really should focus on this. So I just love that we're putting language to the things that matter. Not just for your own freedom and time and increased margin of money and all that, but you're setting yourself up to create real wealth down the line.

Darren: Yeah. And the ironic thing is that by focusing on driving value in your business, you get all of those things.

Melissa: Yes, exactly.

Darren: You get profit. You get more time. And you get it more sustainably. When you're focused so hard on profit, or focus so hard on revenue… Which revenue is the wrong place to focus because you can drive more revenue and actually have less profit.

Melissa: Your expenses will just, yeah, go up.

Darren: That can happen. When you focus on value, you're focused on making the profit sustainable, right? You're focused on building the machine. When you're focused so hard on revenue and profit, you're just focused on working harder. How much harder do I have to work? How many more hours do I need to put in? What new marketing systems do I need to spend money on?

When you're focused on value, you're focused on building a machine that's going to generate profit long term, right? So I can step out and have more freedom.

Melissa: I think too, I'm thinking of people who think, “I just need more space for my business. I'm working 80 hours a week and I need more space. I need to take home more money.” The question in your brain is, how do I get more space? How do I get more money out of this business that I'm building? It's the wrong question.

The right question is, how do I make this business more valuable? Because when you do that, you get all of the above. Just like you're saying. Changing the question.

Darren: It's the classic difference of working in your business versus working on your business. But when we put it in these terms, it just has so much more power to it. Let me just give you an example. Let's say you have new clients go through a process. You bring on a new client, and you have a series of meetings with those clients. But let's say you haven't really refined that process, and it's a hot mess.

If you sit down, think through that process, you standardize that process, you create a template for that process and save that in your Google Drive, or wherever you keep your SOPs, and you communicate that to your team, train your team on that, you have just improved the value of your business.

You're going to be more profitable because you're going to be more efficient. You've created a document, you've created a thing, a piece of intellectual property now that exists in your business. And that's going to help you drive value and drive profit more sustainably over time. So it's things like that, and it really is the four C's. We can break those down if you'd like.

Melissa: Yeah, I totally want to. I will also tell you a lesson I learned that lines up really well with this. I was having a conversation. This is a chat with someone I really look up to it from a business perspective. I don't know their net worth, but I'm sure it's $100 million+. I have no idea. We were chatting back and forth. I was really burned out. About a little over a year ago, I was so burnt. I had been working hard on systems and all that.

But as you get to this next level where you have to, again, refine and figure out how to get the intangibles good... I was just in a in a stressful state. I realized I felt trapped. “This is my life. From now on, I'm going to go through these cycles. And what if I just want to opt out at some point?” It's not that I want to, but I just was afraid that I didn't have the option to; I didn't see my path.

And I hadn't been thinking about the value of the business. I had been thinking about my space, my freedom. I know systems are required for that. And so I said, at the time … and just for everybody listening, I'm not here now. If I was here now, I would not be sharing this. This is a scar, not a scab. I guess that's one way to say it ... I said, “I want to sell my business. I don't know how long that's going to take to get it ready. But that's what I want to focus on.”

He said, “I have to tell you, you can do that. You can absolutely do that. I can help, offer up some guidance. But a good business to sell is a great business to run.” And it made me realize, if you can get the business that you own to a place that it really is ready to sell — you're making sure that you're doing a really good job in terms of increasing your multiple as much as you can, and increasing your bottom line as much as you can. Everything is in line — that's no big deal to run.

Not that there's no work involved. I was like, “Oh, you're so right.” It totally shifted me into thinking less about the short term and more about the long term at this stage. Not because I want to sell, or see that… I don't know what I'll want to do at some point down the road. That's not the goal I have my eyes set on. But I want options. And if I don't think in that way, I have zero options when and if I should need to exit.

And that's the whole point of what you're saying. It took a weird route for me to actually shift my perspective, and it was that conversation.

Darren: Yeah, I love this. You used some really great words. The first word you used was “trapped”. And I hear that from so many law firm owners; they feel trapped in their business. They've never been able to step out of that, doing 80 hours of work a week and doing the majority of the billable work themselves.

And they find themselves at 70 years old without a business that they can sell at all, without having built up the capital that they need to be able to retire. They have a great stream of income, but in order to keep that income going they've got to keep working.

So yes, the second word you used was “options”. One hundred percent, it's about having options. You may never sell your business. But if you have thought about building value in your business, you will generate that freedom for yourself. Transition ready law firms are the most profitable and the most valuable.

If you can get your firm to a place where it's transition ready, you have options. You could sell it if you wanted to. And the great thing about that is… Let's say you're getting older and something happens to you medically, where you can't continue to work as hard as you could. You have the option…

Melissa: We’re going to be younger when that happens. Okay, so we have these intangible things we can focus on to improve the value of our business, or increase the value of the business. What's the first C? There are four C's, what's the first one?

Darren: Yeah, so let's start with Structural Capital. So we hear about this; This is one you've mentioned. It’s something we've mentioned here a couple of times. Your structural capital are your systems, your workflows, your processes and procedures. It's the infrastructure that supports everything you do, that enables you to function. You've got to have those things documented. And that's step one to making your business less dependent on you having everything written down and documented.

Now, maybe you're a law firm owner and you're thinking, “You mean I’ve got to sit down and I’ve got to create all these documents and…?” The next time you do a task, record yourself doing the task and then you'll have it. And then just create a very simple outline of what the steps are. Then someone can watch that video and can get trained on that task.

Melissa: Loom is a great tool, everybody, for this.

Darren: Yeah, Loom is fantastic. Or maybe even have someone else do it for you. Have someone in within your team create your processes. That's even better.

Melissa: Yeah, absolutely. Okay, I have a feeling we're going to come back to some of these for sure. But what's the next C?

Darren: Yeah, and these are ever evolving. After you've documented, then you're thinking about, how do we make things even more efficient? That's how you really build the structural capital.

Melissa: I was writing down what you were saying — structural capital, systems, processes, procedures, workflows. I was thinking, getting all that out of your head is so smart. It's the right thing to do. But then you could figure out automations. Like, how can you, just to your point, what's the next level of improving efficiency and quality of those?

Darren: Yes. And in templates; for everything that you do, every email you send, instead of reinventing the wheel every time. You see how you get your time back by doing that.

Melissa: Okay, what's the next one?

Darren: Yeah, the next C would be Human Capital. Your human capital is the people in your organization. And not just the people, but their skills, their abilities, their technical knowledge, their specific knowledge of your organization. Their “institutional knowledge”, we call that. It's the team that you're building.

So think about how you could build your human capital, build into your team? How can you help your team become more skilled? Give them more capability and more responsibility? And culture is a big part of that, as well. How can you run your team more efficiently? Are you running team meetings on a regular basis? Do you have a cadence for those team meetings?

Are those team meetings effective and productive? Are you doing your employee performance reviews with your team? How's your team buy-in? Are you having regular team meetings, where you're thinking about the vision together? Things like that. Really gelling the team and building into your human capital.

Melissa: Yeah, absolutely. These are all big; human capital is big. I hear people a lot saying… I don't disagree with it, that people can be the hardest part of owning, growing, and running your firm. But to your point, it's a really important part; getting this stable, and where morale is solid. And there has to be something really solid about your human capital. I think people struggle with this one, but keep at it. Keep working on it. Keep developing people. Keep pushing the future.

Darren: I’ll give you a little clue. You’ve got to really nail down your core values.

Melissa: Absolutely.

Darren: And that becomes how you determine who's a good fit for your organization.

Melissa: So true. Yeah.

Darren: And don't go and hire yourself. Have somebody else screen the candidates and interview the candidates for you. And then you just look at the top three. Because you're not going to know. You're not going to know what you're looking for. But someone else is going to help you. We have such incredible people on our team.

Melissa: I do think… That is a good point. I hear people, all too often… And I sometimes it's a struggle; I understand that it's not a struggle, that's a subjective. It's not a cakewalk. Sometimes they're not just going to fall on your lap, but good people who want to work at a great place are out there. If you aren't a great place to work, it's going to be harder to attract great people.

Sometimes I'll hear people say, “There's just no one. The market's totally saturated. There's no one available.” I'm like, “That is the most unproductive and un-useful attitude about hiring.” It's not true. You can prove it true. You can find evidence for it. But you can also find evidence for the opposite. So why don't we focus there?

Anyway, I just think it's worth everybody checking themselves on their beliefs about what's available in terms of talent.

Darren: Yeah, I agree with that so wholeheartedly. Because I do hear that a lot, of struggle with the people. And I'm like, “But there are such great people out there.” Two questions to ask yourself from the world of EOS: Right people, right seats. Do you have the right people? Are they in the right seats? Are they doing the tasks they're best suited for?

And are you really understanding them? Are you really understanding their own personal goals and dreams for their future? And how does that tie into what you're doing? That's really important as well.

Melissa: Yeah, absolutely. Okay, what's the next one?

Darren: Okay, next Customer Capitals. We’ve got structural capital, human capital, and customer capital. These are your relationships with your customers, your clients. Clearly, obviously, this is a big part of your capital. But don't just think of it, “Yeah, obviously clients, those are important.” Okay? Now let's think, how do you improve your customer capital?

So the way you do that is by improving their loyalty. Improving their propensity to generate repeat business. One of the core, fundamental step one, things you can do is to have an email list. I’ve talked to so many law firm owners that don't have an email list, and they've been in business for 20 years. I'm like, “You have a huge database of former clients that you could be communicating with on a regular basis. That could be huge for you.”

And then I’ve talked to other law firm owners that have a database of 20,000 emails, they're up to date, and they've kept it up to date. Do you know how valuable that is? That's extremely valuable. If you have a database like that, wow!

Melissa: That’s interesting. So your email list, essentially, is considered customer capital.

Darren: Yes. The clients are customer capital. But the email list itself is a huge piece of capital for you. Yeah.

Melissa: I get it. And it would be, when you're looking at customer capital, that is where this would be considered, even though they're not all customers. But knowing that you have the potential through this list will bump your customer capital; this intangible part of the business.

Darren: One hundred percent, yeah. And how are you engaging previous customers? How are you continuing to stay in touch with them? That's really critical. One of the key drivers of value for any business is recurring revenue. How can you build in recurring revenue in your business?

Melissa: I don't know if you have clients that have subscription models. I feel like I see more and more people moving that direction, or offering something like in terms of a maintenance fee. And shout out to Fidu, Kimberly Bennett. That's her whole business, is helping law firm owners with subscriptions.

And so I see this becoming more of a focus. It makes me happy because this can create some stability and increase the value, which is great.

Darren: Hugely, yes, 100%.

Melissa: Yeah. Okay, what's the fourth one?

Darren: Yes. The last one we have is Social Capital. So your email list could live in either place, customer capital or social capital. But social capital is more like your reputation in the community. It's your network of other professionals, your connections with other organizations, with stakeholders, strategic partners, referral sources, and also the broader community.

So we can think then about, how do you improve that? How do you improve your image? How do you improve your branding? How do you facilitate collaboration with other professionals?

Let's say you have a group of people that refer you business. Great, how can we take that to the next level? How can we make that more of a thing? Is there a partnership that we could build? Is there a way that clients could pay for your services and get mine also? Something like that, right? How can we lock in those relationships and make them more secure? Make them less prone to risk and disruption? Stuff like that.

And if that all depends on you … I have these five people I know, and they refer me business just because they know me … how do we get them more tied to the firm, and to the other people at the firm, and really just gel that social network, essentially?

Melissa: Yeah, absolutely. Gosh, my thoughts... I'm looking back. I just made some notes while we were talking. So structural capital, human capital, customer capital, and social capital. And a lot of the things that are commonly talked about among law firm owner communities are systems, processes, hiring, firing; the things that are commonly talked about are couched into one of these.

But I think that, I hope that, people see a broader picture from this conversation. You need a 30,000-foot view on why all of these things matter. And if you are going to put these things into place, like the systems, templates … documenting that stuff … get the people … the right people in the right seats, focusing on that. Get that solid. Customer capital, are your customers loyal? Do they stick around? Do you have repeat business?

Darren: Are you asking for reviews and feedback?

Melissa: Yeah, okay.

Darren: That's a big part of customer capital. Do you know what they think about you?

Melissa: And so if you do those things, and you have that… And then the social capital; your reputation, your brand is strong, you're connected with other strategic partners. You can imagine, having a business that gives thought to each of these, is a better business to run than probably the one that you have. And bonus, it means that you'll have options, more options, when you decide to transition out. I think this stuff is so important.

Darren: You're so right. If I think about these things, I think about what a strong image of each of these looks like. That's the business I want to buy.

Melissa: And a lot of these things… I had a very wise person once say to me that if you are a business owner, but your business has an IV hooked up to your arm, not only will that be… You won't be very satisfied running that business for very long, but also that's not valuable to anybody who wants to buy it. Because if you don't come with it, that business will shrivel up.

Darren: Yeah. And so that that owner independence is probably the biggest thing that every law firm owner struggles with. But here's the thing, it's the biggest thing that every business owner struggles with.

Melissa: Absolutely.

Darren: So don't think that you're alone, “Woe is me. This is just what makes being a law firm owner so hard.” It's what makes being a business owner across the board so hard. It's the number one thing that every business is trying to solve. When you solve that you have a business that's sellable.

Melissa: Yeah. Absolutely. One thing … And this is just thanks to you for this … A lot of times we host strategic planning retreats, and inevitably, there are Rocks that come out of that … which that's language that I know EOS popularized, but they didn't come up with that …. They’re just key quarterly priorities that people will choose. And they tend to fall into one of these.

But I'm going to push them to think about this. They should have a Rock from … depending on the bandwidth that they have in any given quarter …  they should have a Rock from each of these buckets. Why wouldn't they try to make headway for themselves? And think broader, not just about what's in front of them, what they need relief from, or what they think the next thing is that will push up revenue or increase profit? No.

What is the next thing that should be done to increase the value of your business? And looking at it that way, maybe it'll be a similar Rock, maybe it'll be the same Rock that you would have come up with, but the spin is different. You're looking at things differently.

Darren: If you do that before you grow, when you grow it's so much easier.

Melissa: Oh, my gosh, yes.

Darren: Growth, it can be challenging and it can be risky. You're not ready for it.

Melissa: Exactly. It's more of a headache.

Darren: Yeah, it can definitely be more of a headache. Some of these things don't necessarily seem like sexy, if we want to focus on our human capital. But if you do, then you get to, “Okay, now we're ready to go.”

Melissa: Yeah, absolutely. I'm probably going to botch the saying; I don't remember exactly what it is. But there's something really common out there, that a business has a subset of problems. And when you grow, those will be times 10. Those problems will get 10 times bigger than what they are right now.

So if you try to get things in place to reduce the issues that you're having … this is to your point right now … when you grow, you won't have those things blowing up because you paid attention to them early. Darren, thank you so much for coming on. You’ve got to come back because there's more stuff I would love for you to share.

Darren: Absolutely. I'd be happy to.

Melissa: Everybody should check out your podcast. I know you've gone deep on these topics on your own podcast. People can listen to those episodes for more… just a little bit different conversation around it. Yeah, they should absolutely check out everything you're doing.

Darren: And we'll send over some links to those episodes. You can put those in the show notes for people to check out.

Melissa: That is great. Yeah. Thank you. We’ll have you back on soon.

Darren: Thank you.

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Thank you for listening to The Law Firm Owner Podcast. If you're ready to get clearer on your vision, data, and mindset, then head over to VelocityWork.com where you can plug in to Quarterly Strategic Planning, with accountability and coaching in between. This is the work that creates Velocity.