Set Your Law Firm Up for Success in 2025: Two Key Areas to Focus on Now

I’m Melissa Shanahan, and this is The Law Firm Owner Podcast Episode #284.

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.

Hey everyone, welcome to this week's episode. We are having an exciting week because Syndicate members, which is a private program that we run, they are coming into town.

We have a group of law firm owners and their spouses attending this event. And man, we couldn't be more excited. So I’m gearing up for that as I record this. Tomorrow is the day where we kick off and I am so looking forward to it.

And next week we have a Mastery Group live event that we're hosting. And two weeks after that we're hosting a second Mastery Group live event. Members get to choose dates that they want to come to. And so there's two back-to-back. So we'll see some members next week and then other members we will see at the beginning of December.

Lots of in person events. And that is not to mention the private client Strategic Planning retreats that we facilitate. So we have just so much fun in front of us, so much work, rolling up our sleeves, working with people, connecting with people, helping them make sure that they continue to make progress in their own ways.

We meet them where they are, and we roll up our sleeves and get to work. So I’m really looking forward to this time together in person with members and with clients.

Now, today is all making sure that you're teeing yourself up for 2025 in the best ways possible. So I will talk through a few things. You don't have to do everything that I mentioned here, but I want you to think about some of this so that you can be proactive as you turn the corner into 2025 and not just slam into the year. It's so easy to do that with as crazy as work can be. Plus all the holiday celebrations and gatherings and all the things that come with the exciting time of this year.

So because we're going to be talking about 2025, and because I just finished sharing with you about how much in-person work we are doing with people right now as we close up the year, I want to invite you, if you want more in-person work and partnership next year and brain trust, mind share, with people who are focused on the same things you are, schedule a consult with us so that we can learn more about you and your situation and help figure out if this is a good fit for you to consider next year.

Next year's going to be here before we know it and being proactive about decisions that you make can set you up for success. So that's one way. Just starting out the episode with that. If you want more in-person, if you want more work, if you want more momentum towards the things that you care about, and you want to be able to plug into the things that you know you should do but you're not exactly sure where to start and guidance would be helpful, we are here to do that and would love to talk to you to see if it's a right fit.

Go to VelocityWork.com/Melissa, and that will schedule a consult with me. You can always go to our site as well to check out information, poke around there, and there's a way to schedule a consult. Okay.

Well, so we just mentioned the first thing that will tee you up for success in 2025, thinking proactively about what groups or what people you want to affiliate yourself with, that you want to be around, that you want to learn from, and that you want to be inspired by. This could be groups of people, it could be a close friend that you want to meet up more regularly with, it doesn't really matter, but do consider, for next year, the people that you want to be around more of the time.

I'm starting with people on this because there's so much energy that we get from others around us. And taking stock of your current set of the people that you hang around the most and what you notice about your energy when you're around certain people, it doesn't mean you need to cut certain people out of your life.

You may decide to do that, but what it does mean is that you'll take stock of your current state, your current reality as it pertains to the people that you surround yourself with. That could be in personal life, that could be in professional life, but it's worth asking those questions.

And making some deliberate choices about people you want to bring closer to you. You want to have more in your circle, in your corner. And people that you would like to step away from a bit more, or groups of people, that it makes sense right now or in the coming year to maybe just take a step back from.

Who you surround yourself with can make or break you. It can make or break your dreams. It can make or break your energy. It could make or break your day. We all should take full responsibility for the results we get, but you can tee yourself up for success by surrounding yourself with people that inspire, that encourage, that support, that teach you, that show you ways to operate, ways to be, or ideas for how to thrive.

And so that's why it's the first, it tops the list, about evaluating the people in your world and making decisions to be really deliberate with your community and the people you surround yourself with in 2025.

The other reason I'm doing this episode is because if you make these decisions or you have these realizations in 2025, you are behind the ball and you could have given yourself the gift of just having something in place that's really adding to your life in a meaningful way. But if you don't take the time to think ahead, you start scrambling.

And this is speaking from experience. But I’ve watched this a lot too. This is where people start to make really graspy decisions. They find themselves in a situation and they want to fix it, and so they reach out to solutions, right? And in this instance, we're talking about people. Wo maybe it's a group or a program or something, right? You reach out and there wasn't a lot of proactivity with it.

It doesn't mean it won't be good, but it definitely is more on the fly. And I'm telling you, giving yourself just a little bit of space … And I don't even mean a bunch of research … just a little space to consider what you are going to need or to want for yourself in 2025. And just get the ball rolling. Find out what the deal is.

What's the scoop? How do you get involved when you want to get involved? Can you set up a recurring event for something that's going to really serve you and support you in 2025? Again, this could be a recurring coffee date with a friend or a colleague. This could be a group that you're a part of. It could be a program that you decide to participate in.

But whatever paths you choose will be proactive in thinking ahead for yourself, what you will likely need in the upcoming year, and putting it into place or get the ball rolling so you can learn more. You can figure out what it's going to take. You can figure out scheduling stuff. Just get the ball rolling so that you aren't scrambling for this in the new year.

All right, we're moving on to the second thing to tee yourself up really well for 2025. And this is centered around data. I know for sure that most of the listeners here do not have their hands on the kind of data that will take you from where you are right now, in terms of how great of a business owner you are, up a notch. Just up one level.

Because the thing about data is the more you get into it, the more you get curious and you realize, “Oh, okay, that's interesting. Why is the number that way?” And so then you'll go look into a couple of numbers that contribute to that one number that you were looking at, and you'll get curious about those and you'll get more granular with your tracking. But you don't have to be or have this really complex spreadsheet in order to get a handle on the basics of your firm.

And if you already have a handle on the basics of your firm … I will say more about that in a minute ... what's next? Because I'm telling you, I work with big firms that are always learning, at minimum every year, of new data that they realize they need to have a look at. It doesn't stop. You start to look at different things and you get curious along the path.

So everyone listening to this, every single listener has an opportunity to get clear about the data they want to have their hands around in 2025. And that may just be one extra source of data, one piece of data information, one number that you track every month. That's fine. But make a decision now about that for 2025. Because you can get the right people clued in to what you're looking for and looking to track if you think about it now.

You can have a call with your accountant. You can have a call with your bookkeeper. You can have a regular meeting with someone from your client services team, if the data pertains to something that comes from the work in that department. Wherever it is that you want to get the number from, you can start to have those conversations now.

It doesn't have to be you digging in and getting this piece of data. It can be you starting a conversation that you would like some more visibility into the measuring progress in a certain area of the firm. So this is something that is often an afterthought, and people don't realize what they'd like to see until they really start digging in.

So the reason I'm including this here with data and ways to tee yourself up in 2025, and having data be a part of it, is because I really hope that each of you finds a way to plug in to numbers that give you more visibility into the things that really matter, into the things that are the blood supply and the heartbeat of the firm, that are meaningful to the health of the firm.

Now, there are some basic tracking metrics that I have gone over before on this podcast. There have been episodes for that. I will give you a quick rundown here of just basic information that you should be able to pull. And when I read these off, I want you to know that if you can't get one of these numbers, it is not the end of the world. But what I would suggest is that you don't keep it that way. Take the steps to figure out what it would take in order for you to be able to get that information.

The first thing is the number of cases, this is by month by the way. You can always track more granularly by week if you want to. But at least by month you should be able to track the number of cases that are open in your firm, the number of cases closed, that are finished up, in your firm, the total firm revenue for sure, total firm income.

And I would look at this after your advance case costs, by the way. So this is your gross margin. Where your advanced client costs are not considered income, you don't want those in your income number. That's been coming up a lot lately. So I'm just making sure to say that here. You should be able to have income by practice area or by case type.

This requires customization of software so that you can run the right reports. It also matters how it gets pumped into your accounting software, QuickBooks or otherwise. Some people do have a hard time getting this information when we're first working with them, and my advice to you is, okay, don't stress about it. Just stay with the total firm income number and the gross margin number.

And then start to make headway, and have the conversations, in order to figure out how you can run reports so that you can see how much income is coming in by practice area or by case type. You can do work to figure that out.

The other things are, when it comes to the expenses side of things, you want to know your total expenses, of course. And you want to know your people cost. And people cost is all of the money that the firm puts towards people, invests in people, to do the work at your firm. Knowing that number. This includes wages. It includes bonuses. It includes benefits. So insurance benefits, health benefits, malpractice insurance …. that's a perk, that's a benefit … any dues that you pay, retirement accounts.

So all of the money that the firm spends on the person as an employee or as a contractor at the firm. This includes employees and contractors, both.

Things that are not included: bookkeepers. Nope, that is not required for your firm to do the work inside, unless you have a specific need for a bookkeeper on your client files. The coaches: Nope, that's overhead. It's just overhead. Same with the bookkeeper software licenses per user. I get this question a lot. Nope, that doesn't count either. That is overhead. That is not an investment towards the person, it's just considered overhead.

People cost is the investment in the people, not investment in the tools so that they can do their job inside your firm. Hopefully, that makes sense. So you want to know your people costs.

And then, the beauty of this is, if you know your total expenses and you know your people cost, then you can subtract people costs from the total expenses and you get an overhead number. Knowing what those percentages are of income, your people costs. Percentage of the overall income. Your overhead percentage of overall income. Your total expenses of the total income.

You want to know those numbers so that you can start to get a baseline of your current state of reality. And then you can get more information on how you should affect those. But everybody always asks me, “What's the right ratio?” There's no perfect ratio. It depends on the firm and the practice areas. I know nobody wants to hear that, but that's the truth.

And if I were to say what it should be, it would be irresponsible. You will hear out there, golden rule of a third, a third, a third. So a third should be profit, a third should be on people costs, and a third should be overhead. When I'm really digging in and working with firms, very rarely is that the way this shakes out. It feels irresponsible for people to shoot for that when that's not actually the best fit.

I'm telling you the best way to do this is to look at your percentages and what it is. And this is what we help people do. I hope I'm giving you information that feels helpful and not overwhelming. But this is what we help people do. You can find where you are sitting currently, and when you look at that percentage, does it seem high?

You know your firm. Are you paying too many people? Are you paying salaries or wages where the deal is so sweet that it might not be healthy for the business? Is your team not producing the amount of work that they should be? Maybe that's not because it's a people problem. Maybe it's a systems problem, right?

So there's certain things you can look at to affect the numbers and levers that you can pull to get your percentages and your ratios more in line with what feels like it'd be a healthy move for the business.

But listen, all of this, this is where everybody wants to jump to, “What's healthy? What's healthy? What's healthy?” But I'm telling you, most people can't even tell me what theirs currently is, so just do that. Just figure out what your ratios currently are, for the way we're talking about expenses. And figure out where your income has been sitting month over month over month over month. And where you are year to date.

I’d just get the lay of the land with some of the basics that are on a P&L, that you can find from a P&L statement. Talk to your accountant. Meet with them or your bookkeepers and tell them you want to learn more. You want to be able to understand, by month, certain things. Maybe you want a regular meeting with them so that you can get more and more educated about this side of the business.

And the more you do that, the more awareness you have around the current state of the numbers, the more obvious it is what levers to pull, and what you need to be doing in order to line your firm up with better health, better profit margin, better client experience, better team morale.

All of this becomes very clear when you have data. If you don't have data, the hunches that you have about what will probably work and what probably won't work, to get you more of some vague version of what you want, that is where you get yourself into trouble. You can spend a lot of resources on the wrong things.

But if you have data, and you use that data to drive your decisions, to be underneath the decisions, then you're setting yourself up to be in a very good spot.

So the second part that I'm talking to … The first part was people … the second part is all about data. It’s just creating a simple place, one spot you can go to, to look at numbers that matter to you. And I would suggest starting with the numbers I just shared.

We talked about cases open and cases closed. We talked about income and income by practice area. If you can get that information …. We've talked about total expenses. We've talked about people cost and overhead. And then what can be calculated, because you have your total expenses number, is profit.

So these things, you could make a list of these things and say to your accountant or bookkeeper, “I want to know these things and I want to know them by month. Can you help me?”

You can also join Mastery Group. This is what we do for people. If you are a larger firm, sure, you have some of this. But you know that there is a way to improve what you're doing. Figure out what is the next thing that you know you need to look at. What is the next spot that's a little fuzzy in your practice that you could use some insight on?

You could use some information to help you understand the health of that portion of the business, or what's going on in that portion of the business. So just no matter where you are on the spectrum, when it comes to data, do yourself a favor.

You don't have to go build the tracker right now, that's not what I'm suggesting. What I'm suggesting is you get clear about what you need in 2025. That's what I'm suggesting. Then you could put some balls into motion. You can reach out to the right people. You can schedule time over the holiday break to maybe start working on a spreadsheet. You can take the steps you need to take to get the ball rolling.

This is not about cramming before 2025 to get everything perfectly in line in terms of data. This is about walking into 2025 knowing that you're going to have a clear picture on data because you sat and thought about what needed to happen. And you started the ball rolling with some conversations that are going to give you more insight and allow you to handle your business in a better way than without it. That's it.

People don't think about this until they're cramming. And what I have learned this year, working with the Mastery Group members, especially this last cohort ... We, as many of you know, revamped the onboarding process for Mastery Group so that we work more in depth with them over the eight weeks.

We got them started in customizing a tracker so that it fit their firm, to the best of our ability, then handed it over to them and they started to put data in. I was shocked how tough it is for them to really get their hands on this stuff. They're sharing their screen with me. I can see what's going on. I can answer questions.

I'm so glad we did it this way this time. Having a partner to help you with your data is, I think, truly important. It's not your full-time job. Your full-time job is to be a law firm owner, and that requires you to do some lawyering sometimes.

Having a partner to help you think through how to optimize, and the numbers you should have, and guidance on how to get those numbers, and who to talk to you for those numbers, that can be a godsend when you're a busy lawyer running your own practice.

So my eyes were opened. It was a big part of the inspiration for doing this episode. I'm working with a group of people who are doing such an amazing job. They are sticking with it; we are helping them. They're showing up every week. They're entering data into their spreadsheets. They are doing a great job, and they are going to be ready for the strategic planning retreat that they get to take part in in December.

It took this amount of time. It took this much time to give them the space to get clear, to give them the space to pull the numbers that they needed. And it just made me realize I need to talk to listeners about this. Because not everybody's doing Mastery Group. Not everybody's in Onboarding. I can't do this for everybody unless they decide to come in.

But what I can do is throw you all a bone, and tell you it is definitely going to be in your best interest to get clearer data in 2025. Not perfect data. That's not what I'm suggesting. Clearer. Start with the basics. Do not go beyond that. Just fill in the basics.

And then you can take it to the next level after you've gotten all that information in. Then you can get used to looking at that information, month over month for a few months. And then you'll get curious about what is making these numbers or what's contributing to these numbers and how is this happening. And so you'll dig in and you'll say, “You know what? I also want to see this other piece of data.” So start small, start basic.

And no matter where you are, I am not suggesting that you spend a ton of time giving your data and your tracking an overhaul between now and January. But I am suggesting that you give some thought into what you are not going to be missing anymore in 2025.

What data are you going to have that you just haven't been able to have your hands on? And you haven't been able to have visibility for? That needs to go away. What is a number or two or five? Just stick with the basics.

What are you not going to be without next year, as it pertains to data? Make that decision now. Put some things in motion and it will start to come together in a way that will really serve you. And you won't be making these calls, or dealing with trying to get all this in line and getting it organized at the beginning of a fresh year, you'll have done that beforehand.

All right, everybody. I hope this was helpful. I had written down a question here that I could pose to you guys so I'm going to give this to you now. When it comes to people and data, that's the best way I know how to tee yourself up for 2025 as a law firm owner and to support you as the owner.

Now, from a life perspective, of course there are other things, right? Health being a main one. Wealth being another one. Or environment and home and all of that. This isn't an exhaustive list of the things that you can do to tee yourself up, but I've got to say, as a business owner, these two things have such an impact on your success and they just should not be an afterthought. So that's why we're talking about it here.

The question I had down for you to ask yourself is: What is one thing that you are going to wish was just done when it comes March, 2025? If you didn't do anything, if you weren't proactive in any way, I want you to put yourself forward to March of 2025, and just think through and try to make an educated guess about what would you wish was taken care of that's still not taken care of.

What would you wish you had clarity on that you still don't have clarity on? What would you wish wasn't a problem that is still a problem? And if you can answer that, it might help point you in the direction of the right people that you need to put yourself in tune with and the right numbers that you need to put yourself in tune with.

All right, everybody. Thanks so much for tuning in and I'll see you here next Tuesday.

Hey, you may not know this, but there's a free guide for a process I teach called Monday Map/Friday Wrap. If you go to VelocityWork.com, it's all yours. It's about how to plan your time and honor your plans. So, that week over week, more work that moves the needle is getting done in less time. Go to VelocityWork.com to get your free copy.

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.