Episode Transcript
[00:00:00] Speaker A: When they get that big first couple of cases, Ferrari is outside the office or the Lamborghini is out there, which is fine. They deserve it, they should have it. But you got to keep in mind, you building a business.
[00:00:12] Speaker B: Hey there, everyone. What's up? We are live, we're recording. And welcome to another episode of the Managing partners podcast.
I have a cool guest, as always. Of course. Got Emil on here today, Shadow and me. He is a expert in finances. He's a cpa. He's got some awesome stuff to share today with law firm owners that are listening in. And finances is a huge part of success. Knowing your numbers, getting a handle on those things. So Emil's here joining me from California. So we got coast to coast, Virginia to California here, and we're gonna have a good time and he's gonna share some cool strategies with us today. So, Emil, welcome to the show.
[00:00:59] Speaker A: Thank you, Kevin. Thank you so much for having me. It's a pleasure.
[00:01:02] Speaker B: Ella and I like your new your in office studio setup over there. Good job.
[00:01:07] Speaker A: You gotta do it right, man. Do it right or don't do it at all.
[00:01:11] Speaker B: That's right. Yeah, you're doing it right.
I have to ask him why you didn't come in person to my house here in Virginia.
[00:01:18] Speaker A: And we'll do it, we'll do it next time.
[00:01:20] Speaker B: Next time. So, Emil, you know, I wanted to kick it off and we're going to be talking about key financial strategies, unlocking law firm profitability.
Sounds pretty awesome, right? So excited to get into that. But first, you know, tell us your story and kind of how you got where you're at today and how you're helping law firms be successful.
[00:01:41] Speaker A: Yeah, appreciate it.
So as you mentioned, I'm a CPA here in California, Kevin, with Council CPAs where I'm a CEO. I been a CPA for the longest time. I grew up in Sweden, moved out to California in 2007. Here before, right before the financial crisis, where I started working for a larger firm. And a couple of years in about a month before I was, we were getting married, I. I got laid off. This is 2009, and it was not a good, good situation back then. And I said, you know what, the hell with this. I'm just gonna start my own practice. So after our honeymoon In July of 2009, I opened up my own practice. And keep in mind, I've been here for about two years. I didn't, I didn't go to school here and I didn't have many connections. So I started off basically with zero clients, very few connections. It was not. It was not fun times. But that kind of. I think that. That kind of build me to where we are today. I started taking on all kind of clients. Anybody who kind of knocked on the door, I opened the door, I served them whatever they needed based on their needs, which kind of put me in a pretty. Excuse my French, my shitty situation pretty quickly, because there's a lot of clients out there. Lawyers know that also. CPA firms and law firms are pretty similar in nature. We provide different services, but it's still the same kind of operation. And pretty quickly, I started getting a lot of clients doing millions of different things for everybody out there. And I couldn't do that anymore. I said, I gotta figure out a way to kind of build a practice or build a business rather than an employment here. So that's why I got into law firms and started working specifically with law firms. It didn't happen overnight, obviously. Gradually, I grew my law firm practice. And where we are today, about 15 years later, we work only with law firms. That's our only clientele. And that's. I preach that because I. I think that that's how the CPA world, or account and law firm world should be also. There's enough clients for everybody out there. We don't need to do everything for everybody. So niching down really helped me, and that's why we're here today. And we work with law firms, and we want to talk a little bit about how law firms can do it and how. How they can be profitable.
[00:04:03] Speaker B: Amen to that. I mean, we have a very similar story. I started my company in 2006, you know, was not married yet, was on the way, and, you know, probably the worst time to start a business, but, yeah, we had to. We had to be tough. That probably put both of us in a spot that we had to figure it out. So two things I heard there. One, she still married you.
[00:04:30] Speaker A: She still did it.
[00:04:31] Speaker B: Yeah. She's still your.
[00:04:32] Speaker A: We're still married.
[00:04:33] Speaker B: Yeah, I got fired and I'm gonna start my own thing.
[00:04:37] Speaker A: She got worried for a moment there, but. Yeah, but she did. It was too late to back up.
[00:04:43] Speaker B: Yeah, no, I got a lot of credit to go to my wife for at the time, we were stating. And I started my own thing and quit a job and lost all my income. So a similar situation there, but so good. Women behind us. We could. We couldn't be here, that's for sure.
And then, you know, the other thing you said, you know, you know, Niching down and focusing, you know, everyone. I get the question all the time, why law firms? Why lawyers?
And it was a process of time and elimination and experience, I think. But best decision I made, for sure. And, you know, being able to hone in and understand and learn how a law firm needs our help and how we can help them and, you know, could choose any other industry.
But the. I think the importance that, you know, niching allows you to become an expert and understand your client so much deeper than if you work with everybody.
[00:05:42] Speaker A: So I think, I think. I think that's what it comes down to. Like, it could have been any kind of industry, but you don't want to be a specialist. Just call yourself a specialist. You need to be able to provide some specific value. And law firm accounting is very specific compared to other. Many other industries with the trust account reconciliations and the state bar regulations. So as long as you can provide value to your own specific industry, I think that's valid, valid reason to choose that industry, in my opinion.
[00:06:12] Speaker B: A hundred percent. I love it. That's great stuff. I mean, you know, there's lots of CPAs out there, and if you're a law firm owner, that's, you know, there's plenty of CPAs in your local area, all over the place. But the fine one that really specializes is in working with law firms.
You know, I don't know many of them, so check out Emil. Connect with him, and we'll make sure throughout this episode that you can connect with him. Of course, you can always reach out to me and I'll. I'll make a direct introduction and make sure you can connect. So, you know, the topic Emil sent me was unlocking law firm profitability key financial strategies.
So I wanted to kind of kick it over to you. Like, let's. Let's dive into that and, you know, share some of those things. And again, I'll just follow you along, but interested to see, you know, some of those specific strategies and things that you see that, you know are done to help your clients.
[00:07:16] Speaker A: Yeah, yeah, absolutely. So it's obviously running a business is. You're wearing millions of hats, especially in the beginning when you can't afford hiring all kinds of people, all kind of advisors for your firm. You're wearing the business, the business owner hat, the IT guy, the marketing guy, the bookkeeper guy, the receptionist guy. You're everything. And we all started there, and that's that. There's no secret with that. But.
But I think you gotta decide very quickly in your kind of business career where Do I want to build a business or do I just want to have a good stable employment where I'm deciding my own basically destiny. Which is fine. Both, both are fine. There's no, no one who can tell you otherwise. But if you really want to build a business, which based on my experience from talking to all hundreds of attorneys where we work with, majority of them are opening up their firm because they want to build something. There are three major reasons why they opened up the firm. They want to build something, they want to have flexibility, but also they want to do it their own way, which all three are kind of hard to accomplish if you're an employee, employee of a firm.
So one of the three reasons, and all three is basically connected to the business. Business owner hat. And that's num. Maybe not number one, but that's very, very important for you to kind of make that decision early on and take that route and don't look back. Because if you want to build something, you have to put on the investor hat on very early on.
And unfortunately with that comes taking some risks. Like there's no business out there. No matter what anybody says, you gotta take some risks. And with risk, what do I mean with it? I'm not talking about crazy risk of investing million dollar and hoping to double that. No, that's not what we're talking about. But you need to invest in professionals, you need to invest in marketing, you even invest in infrastructure software to be able to build that business that you really want to get to. And I usually compare that to any other business. Let's say you're a restaurant or a chef, you want to open up a restaurant, you got to invest hundreds of thousands, if not millions in maybe buying a business, existing operation or even in a. Even if you're starting off from scratch, you have equipment and all kind of investments you gotta make. Why not. Why is law firm difference there. No, no difference. There's a spill, it's still a business. So that's, that's a big, big misconception in solo law firms that are just starting off that, you know, I don't need to invest it, I'm just gonna do it and gradually increase it, which is fine. That's also okay. But to scale your, your firm to business level, you need to put aside certain amount of budget for, for investments. As I said, the marketing inf software and, and, and, and so on. I think that that's, that that's very important to, to think about.
[00:10:26] Speaker B: Yeah. I think I had a conversation recently.
You know, sometimes lawyers Depending on what your practice area you're in. But we'll just say like personal injury or something like that. You can kind of be successful out the gate and get a couple cases and then have some big checks come in and easily not treat that, that money properly and reward yourself and not think about, you know, do I have a good pipeline of business, have I started marketing, have I done these other things? Basically reinvest.
But I've definitely heard some stories of lawyers, quick success, get paid a bunch and then, and not really think about that. Reinvestment, the infrastructure, growing the business, taking that money and putting it to use and then also saving for a rainy day and things like that.
[00:11:17] Speaker A: So I've seen so many cases when they get that big first couple of cases, the Ferrari is outside the office or the Lamborghini is out there, which is fine, they deserve it, they should have it. But you gotta keep in mind you're building a business. You'll get to that point sooner or later. But not after first, second, third cases. You get there after a few years. So I'm with you. You gotta reinvest. And, and it's not, it's not only in one, one area. You got to invest in multiple areas to be able to build a complete firm that could run as a business and not as a high paid employment in, in my opinion, 100%.
[00:11:58] Speaker B: So yeah, I think there's some risk up front, you know, with law firm owners specifically, I think, you know, to other businesses, you know, you could work your butt off and never really make a big, a good profit. And so that's another bad thing. But I think with law firm owners, lawyers, they can make a bunch relatively quickly and that can, that can, you know, blind your judgment and make bad decisions, I guess with that. So this is good.
[00:12:25] Speaker A: But from the, from the other angle, you know, you get those, that cash flow in and if you make wise decisions, you can just explode the business very, very quickly with, with correct management, obviously. And it comes back to, from my perspective, from how I help my clients, from the financial and the accounting and the tax planning and preparation perspective, it comes back to really understanding your numbers because a lot of time we see new clients coming to us, they make, they make significant amount of profit. They have no clue about where the money is going, how much money actually came in and how did they spend it. And I'm usually asking them, what's your, what's your labor cost? What's your, how much are you spending in marketing? You generated $3 million revenue last year. How much was generated from marketing, I have no clue is the typical answer. Which is maybe sustainable in the beginning for a few hundred thousand dollars or maybe up to million dollar revenue, but thereafter to take it next level, you got to know your numbers to the detail, to the penny, in my opinion, and really know where you're spending your money to be able to put it back into the right place. Because as you know, Kevin, doing marketing, you know, one thing might work for me but might not work for you. And it's, you got to try and see it. If you try, try it for three, four times, it doesn't work. Time to change your strategy and do something else.
So, but they don't, a lot of time they don't understand where the money is going and how it's giving them back. So that, that's a challenge. I'm seeing that they, they should work on law firms, solo and small law firms specifically, which is the target that we work with anywhere up to maybe a hundred, 150, up to 200 employees. Firms, anything about that, typically they have their own in house fos or accounting departments, so we can't be involved and provide as much value. But solo guys, anywhere from solo guys to 150, 200 employees, they need to really look into the numbers as a managing partner and understand those numbers.
[00:14:28] Speaker B: Yeah, and I think just like processes and things like that, like early on, you know, if I was to start a new business today, you know, these are things that you would put in place immediately and under have if you made $1, like it would be like, where'd the dollar go? And we could see it. So, you know, just having those things in place, you know, we're always working on our P and L and understanding, you know, do you have a P and L? Do you understand the P and L? How detailed is it? Ours gets more detailed every month and quarter of the year pretty much as we learn new things or we see new things that don't make sense.
You know, it's a work in progress and it's something that you always have to be up on top of. I, you know, we get financial reports every single month, within the first few days of every month. And it's across each company and we can see everything and we got, you know, there's, there's all kinds of strategies. But of course, this episode, you know, you're talking, we're talking about kind of strategies that some of these solos and smaller firms could, could implement. Things that you see, I think you share with me, Clio put A report out, it was like 80% of law firm law firms or law firm owners struggle with financial planning, tax planning, things like that. That's crazy.
[00:15:44] Speaker A: It's a big number. Yeah, that actually clio's trend report is actually fantastic. Kind of a wake up call where you see a lot of, lot of data there that lawyers should look at also kind of, we see that every year. I'm reading that every year because we clear consultants and that's helping me to kind of get into it and be able to provide more value to our clients. But one system that you mentioned, systems and processes like if you are an hourly billing or flat fee billing firm doesn't apply as much to contingency based cases if you're PI or workers comp for plaintiffs. But if you are hourly billing and flat fee billing firm, what are your billing processes?
A lot of solo and small law firms we work with just procrastinate that and don't bill maybe for two, three, four months until they build, build for work done four months ago, which creates so many problems because it's not only cash flow. Number one is cash flow. Obviously you wait four months to collect, excuse me, you, you hurt the firm. But also from collection perspective, imagine if I provide you services and don't bill you until four months. The chances for you to have forgotten about the value I provided 4 months ago are relatively high.
And then when I send you a bill, I don't know, $5,000, $10,000, whatever, that, it doesn't matter, $1,000 four months from now, you will question it. No matter what. You will question it. You forgot about that, that service and the bill that should have come out to you. So you're creating a lot of issues for yourself by pushing the invoice firm's cash flow is going down. But also the risk for you to not collect or collect the full amount is going up significantly higher.
[00:17:36] Speaker B: Yeah, that's crazy to even hear some of those numbers there. I knew for. And I give a lot of credit to my business partner. He's, he's the, he's the numbers guy, he's the, the process, the task, you know, detail guy. That's not me. If I ran my own thing it would, it would go and down in flames probably but.
Or I, I just, I'd hire people to, to handle it for me but.
But luckily I've learned and I know and I see and just from my own perspective, you know the kind of way that I forgot it was years ago. It was in an entrepreneurship or eo which is entrepreneur, organization. And you know, someone was there talking about, you know, ar. So you're, you know, how fast you're collecting or how much you have out in outstanding invoices or whatever. And someone made a comment which kind of stuck with me, which was if you're performing the services and the work and then you're, you're taking a month. Because I, I do like a monthly, right? So if I do marketing for you, you know, let's say it's five grand every month. And so if it takes me a month to collect for the work that I've already done, or 45 days, or 60 days, or 90 days, I'm basically financing your marketing. Like I gotta pay my people still. I gotta pay for my building and I gotta pay for electrical and all the utilities and softwares. And so I'm, I'm, I'm financing the whole thing until I collect that. So it's kinda like, wow, okay, I never thought about it that way. We're gonna eventually collect it. But what about if you look at the year, the faster you can collect the money, right? The faster you can put it to use and the faster you can hire more people and yada yada, you can reinvest. So for us, we, we took a, we took that the heart at the time and we went to ACH and I think our aging's like 1.5 days right now or something like that. We collect everything, but what that does is you collect it all and now you can do something with it and now you can get to working on your business instead of worrying about collecting invoices and billing and having the anxiety of all that. So yeah, great point. Like any law firm listening, that's something you should definitely handle as soon as you can. How you're billing, how you're collecting, and how do you get it closer to immediate as possible?
[00:19:58] Speaker A: That's actually a really good point. There's another report here about comparing hourly billing versus flat fee billing. Your sounds like you, you guys are doing flat fee. You have a, you have a fee and you provide services based on that and it increases the chances for you to collect faster. About you, you collect about five times faster by having a flat fee structure rather than hourly billing structure. So now flat fee doesn't work for all practice areas, but lot of practice areas does work like immigration, criminal, state and trust attorneys. Flat fee is perfect scenario for them. But still, even that, the majority of the firm, I think it's over 80% of the firms out there that are still on hourly base billing. Which, what is, what is the reason? I don't know. I'm actually writing a book right now. Hopefully by next month we'll, we'll getting it out. And that's one portion of the book where we're talking about how to bill, how to structure your, your service services and we compare hourly and flat fee. I don't. If you can do our, if you can do flat fee billing, I think you should really work on that. We, when I started my practice initially we're doing all kind of, as I mentioned, all kind of for everything. But when we went over to law firms only we have been doing flat fee sense. And I don't regret it for a minute because it creates so much transparency between you and your client. There's no, there's no disputes whatsoever about the fee. There's no issues collecting. And there's also a, a study in Clio's trend report where flat fee attorneys or firms are closing cases 2.6 times faster than hourly billing firms. Which means that you're making, you're more efficient when you're doing flat fee, which works better for your client as well as for you.
So that's something for lawyers that are starting off to think about. If you can structure your, your services in a flat fee billing structure, you should strongly consider it because that will help both you and it also helps you create good relationship with your clients because that, that way you're building relationship rather than just billing per hour that you, you provide services.
[00:22:16] Speaker B: Good point. And yeah, obviously your contingency attorneys out there, PI firms that are listening, which is probably the, you know, a big chunk of my listeners, but different situation there. But you know, what are some other things that you see or strategies that you've helped put in place say for PI or just other things that you're seeing firms struggle with within their finances?
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[00:23:56] Speaker B: Get back to the show.
[00:24:02] Speaker A: One of the main issues is the planning, planning perspective.
Planning is not just a one time event at tax time or even before year year end. Planning is year round kind of engagement. That's why we would not take on a client if we're not involved with them throughout the year. If a client knocks on the door for me and just wants a tax stream preparation, I would not take that client on because there's not much I can do for that client. You have to give me the the data financial statements up to plug into my software and give them the tax return which anybody can do that. The key here is for law firms in general, but specifically for contingency based law firms. Because their income can fluctuate significantly from year to year or even month to month. And to to have a proper planning and sit down with your CPA regularly, it's a requirement for our clients to meet with us every quarter at the very least. Sometimes we meet them every month, but even that we talk to them regularly like my team is talking to my clients like weekly basis. And that helps us provide the planning that they really need to be able to first of all from operational perspective, give them financial statements. They can kind of make decisions based on actual data. But also when it comes to tax planning because if you come to me in end of December or beginning of January, it's not much I can do well end of December there's still some work to do for, for that year. But if a lot of times new clients that I talk to, I just need tax return, I'll bring you my data in February and just give it to me in April or whatever. What's the point? Yeah, think about working with your CPA throughout the year to be able to take advantage of CPA's expertise to plan for your year. That will help you to save save in your tax situation significantly because that's a big chunk you're making few million dollars, you save 20% on your taxes. That's a huge amount. And I can guarantee you with proper planning there is so much you can do that it's, you can't even think about that. It's so much low hanging fruit even. I'm not even talking about anything crazy or anything aggressive. Just as an example. Just to give you an example, a client came to us about a month ago, decent size, $5 million revenue, two partners, $5 million dollar 5 million in revenue. I think they're about $2 million profit or so. And that's a decent size for two partners.
And in California and there's 36 other states also. I'm not sure about your state, but the, there is a tax deduction you can take it calls a pass through entity tax deduction.
You're familiar with that. So you, you're done, you're done. Your, your CPA sounds like a good guy. He helped you already. But majority of clients that they come to us, they haven't done that. And you can Pay in California 9.3% of your profit, firm's profit in your personal taxes, which typically is not a deduction for you, but if you pay through the business, you get a deduction for it. So in this case you're talking about 90, about $180,000 in deduction that they lost for four, four years in a row since it started. So we're talking about 200,000 four years. We're talking about $800,000 in deduction with about 40% bracket. How much did they lose? I don't know, $350,000 or so by not doing proper planning. And I'm not blaming, I don't know who I should blame. Is it the client or does their prior cpa. But this is, this is because of lack of, lack of planning. So make sure, planning is there to make sure that you take advantage of all the, all the breaks up.
[00:27:56] Speaker B: Yeah, I mean I can, I can speak to that too. I mean we've, for, we've been burned and many times for, without planning. And it always seems, you know, in the past it's always been like easy to be like, oh wait, oh, it's, you know, it's April and we haven't, we didn't started planning or. And then the CPAs get backed up and just to do the corporate taxes and then you're filing in October and then you know, you just kind of, you can easily get kind of on this wheel of late behind the eight ball and then engaging with your CPAs when it's, you know, they're too busy or whatever, so.
And you pay a ton of extra taxes. You can't take advantage of, of whatever's there. And you know what, it's all about tracking what you're doing throughout the year. You can't go backwards and go well, let me. We could have done this or we could have done that. So, yeah, to your point, you have to plan it. What can we do? And then also looking at the, you know, as an owner of a law firm or other, Other things that you're into. I have real estate, and I have, you know, business with my wife doing real estate.
There's all these other things, right. That are, that are in there that you can be planning for and you can take advantage of.
[00:29:12] Speaker A: Very good point. With the, with the real estate. Sorry for interrupting before we move on that real estate is a fantastic tool for tax planning. You can do so much with real estate. Like, it's, it's, it's mind blowing. I think, I think the tax code is built around real estate. American tax code is built around real estate because it's so much you can do. And there's no losing. It's all winning. It's all upswing. So I'm glad you're, you're in the, in the real estate world and you're taking advantage of it. I like that. Kevin?
[00:29:42] Speaker B: Yeah. If you have kids, I mean, there's just a lot of things that, you know, you need to be asking questions. Me, with your cpa ask questions. If you're in business groups, I know times we'll, we'll hear one guy doing this thing and then go to the CPA and say, hey, is that, Is that real? Can we do that? And sometimes they might say, yeah. And sometimes they say, well, it's a little sketchier. You know, if you're going to do it, do it this way.
[00:30:05] Speaker A: But they should, preferably the CPA should come to you with those ideas.
[00:30:12] Speaker B: I agree.
[00:30:14] Speaker A: And if you sit down, if you have those regular meetings with the cpa, those kind of topics should come up. And I hate it when clients come to me with ideas because I feel, I feel like I failed. That's the worst thing I know. And I, Well, I like that they do that. If I missed it, I take responsibility for it. But I hate it because I feel like we failed and we should have captured it. We should have asked the right question.
And I'm not gonna lie, we do that also. We humans, we miss certain things. But that's the least thing I want to do. I really want to be prepared. And we trying to avoid this kind of mistakes by having these regular meetings. And I keep asking clients questions more than, more than they ask me questions, because that's how I can learn their situation and learn and help me with the planning. So sit down with your cpo, meet with them regularly.
[00:31:09] Speaker B: That is awesome. That's a huge tip right there. So I would say, anyone listening, your CPA should be proactive, bringing ideas to the table.
Like, like you're saying on a consistent basis, like, hey, I don't, you know, ask questions. Hey, can you, can we, we can do this if, if this is true, and bringing those ideas to the table. I've barely ever really found a CPA that, that's that creative or really proactive. They might say they want to be. So if Emil is doing that, then kudos to him. But you should find someone. You need to find someone like him or a CPA that's bringing ideas consistently. And just like with marketing, if your marketing company is not proactive and creative and saying, hey, every month, we should be doing this, you should be doing that. Why aren't you doing these things? Here's things that you can do outside of what we even can help you with, then they're, you know, they're, they're not, they're just stagnant. They're not taking. They're just taking orders. And so, and I, I don't think.
[00:32:05] Speaker A: To your point, Kevin, I don't think the CPAs that don't do it don't have the knowledge to do it. I don't think so. I think the most, most CPAs are very, very knowledgeable and they know the tax code itself, but they just, they're just doing what the client is telling them do. Like, client come into your office and ask you to prepare a return and you take it on. It's kind of CPA's responsibility to take, Tell the client, hey, this is the wrong structure. I will not be able to provide value if you want someone to just prepare returns. I don't want to be that because I don't want you to sit on the dinner table with your friends and talk shit about behind my back. My CPA is not calling me. My CPA is not giving me advice. That's the least thing I want. So it's, it's about, it's about the structure. You work with your CPA rather than the knowledge of the cpa, in my opinion.
[00:32:51] Speaker B: No, that's a good point. I think it's up to them to be, be proactive and to, to run their business that way. I think, you know, lawyers are really good at this, right? They. They get lawyers, they, they are creative in every situation and helping the client navigate and come up with solutions and offer those solutions. So if you think about a Lawyer. That's what they do, right? So why shouldn't your CPA do the same thing? Why shouldn't your marketing company do the same thing?
And so this is the way to go. So I think it's a good tip right there. If any lawyers listening that doesn't have that. And it's always last minute tax time.
Hey, by the way, you gotta send this big check in and you have a week's notice to send in a quarterly, you know, payment or something like I have in the past. It's not fun and you don't understand it and you're, you're asking questions and it's too late. At that point you better start looking at next year and the, and the things you can prepare for.
Nothing's better than planning for your, your taxes and stuff and being ahead and being sure as well, like being confident that, hey, I'm not going to be stroking some big check or having some penalties.
[00:34:06] Speaker A: Well, you might, you might get hit with a big check because you made a lot of money. But if you get that information in November, December and the payment is not, or the tax is not due until March or April, you have plenty of time to get ready for it. But you don't want that. Get that email or phone call a week before the deadline. That's a brutal.
[00:34:25] Speaker B: I've been there many times before. We got, you know, our stuff together, but you know, we, we also follow, we followed Profit First, a book by Mike Michalowitz pretty early on. And so, so we have like tax account, bank accounts, you know, we're, we're accounting for, you know, based on their profit, just, you know, distributing that money to a tax accounts that we can pull as owners and partners to prepare for those things. And then to your point, you gotta adjust that and meet quarterly to make sure you're on the right pace. If you had a big influx of income, you know, then that's, that's gonna change.
[00:35:05] Speaker A: So are you using all the, all the buckets Mike is talking about in the book?
[00:35:11] Speaker B: I think we took it to an extreme at one point. I think we, I don't know how many accounts we have across three companies, but dozens of accounts. I do it personally as well where I have my real estate accounts, savings accounts, checking accounts, taxes, anything I do on the side.
So I kind of file it to my, on a personal level as well, which I, which is really helpful. So, you know, that's another good thing. But profit versus a great book, very simplistic way to think about it, I guess.
[00:35:42] Speaker A: I like Mike Mikhailovich. It's a good. He has another one, the Pumpkin Patch.
[00:35:48] Speaker B: Yes.
[00:35:48] Speaker A: That was one of the first books that I Kind of. Not the first books I read, but the. One of the books I read that made me decide to go the law firm kind of industry specialization, as you kind of kind of weed out, the 20% or 80% of the clients are taking 80. 20% of the clients are taking 80% of your time to open up time for the clients that really need the value and want the value. So I think that's a good one. If you haven't read it. I think it's really good. Yeah. To start with. Yeah. My.
[00:36:19] Speaker B: Everything Mike picks out is really good. And he. Mike was on the show here. Oh, yeah. Recently. So he's got a new book too, called All In.
[00:36:27] Speaker A: Yeah.
[00:36:28] Speaker B: Which is more like, you know, culture and team.
But yeah, he. Mike puts out great stuff all the time. That's so. Yeah.
[00:36:34] Speaker A: That's awesome.
[00:36:34] Speaker B: Check out any. Any book by Mike McCallowitz. Profit first would be a good. Good fit for what Emil's talking about here. But, um. So back to, you know, planning and getting ahead of this stuff. You know, if you're. You're trying to run your firm, you're trying to grow your firm, you're trying to add team members and employees and delegate. The finances part is what's going to kill you if you don't have that figured out. If you don't. If you. You don't like that part, which I don't really like, the. The numbers part of it, as far as, like, you know, reports, all that stuff and the work that it takes, but it's necessary. And if. If you really want to grow and build, like Emile's saying, you gotta get that far figured out and, you know, find a good cpa, someone like. Like Emil that's gonna be there to review it often, you know, every single quarter, I think, at least. And you should get reports. I mean, every single month, first of the month, on your desk, you know, and have a good feel for what's going on.
[00:37:33] Speaker A: That's the structure we have. We provide financials every month and then meet quarterly. Some clients, we meet monthly because if they're big enough, they. They. They want to meet monthly. But I think quarterly is. Is fine to meet, but you need to see the financials on a monthly basis. That. That's. I think that's fundamentals of running a business.
[00:37:51] Speaker B: Yeah. And then you got, like, me, who kind of just, you know, I look at the big numbers and I, you know, see where we're at. And now I got my partner who, who likes to dig into them. So whatever you are in your firm, you know, if you have multiple partners, it's still good to have every single one of you get the reports, review the reports, you know, make sure that everyone's on the same page. So you don't have a partner that's, you know, in the dark or just doesn't look at them. You know, I think it's good as a team or partners to. To make sure everyone's on the same page and know where you're at and if things aren't good, what's going on and how can we fix it. And then when times are good, you know, partner distributions and reinvestment, new marketing initiatives, whatever, growth, new buildings, whatever. So about.
[00:38:39] Speaker A: About that, Kevin, for your client, the client that you work with, are they typically solo, Solo practitioners? Are they partners? How many partners are they in general? It'd be interesting to hear a little bit about that.
[00:38:51] Speaker B: Most of my clients are a few lawyers and up. So we have. We got. I got a couple solos, but typically, our price point, you know, there's. There's a. At least two partners with some staff, and then up to. We had the largest divorce firm in the country at like 380 attorneys, something like that. So. But I would say our sweet spot is, you know, you know, three or four attorneys, up to, you know, 50 attorneys, something like that. So.
[00:39:24] Speaker A: So in those. So in those firms, it's very important because it's not only you now, and we're talking about profit distributions, allocations and guaranteed payments. All. All kind of different things that comes in that if you don't do planning, that's. Forget about the tax saving. Like it's. You're going to have partnership issues.
[00:39:43] Speaker B: Exactly.
[00:39:43] Speaker A: Yeah.
[00:39:44] Speaker B: Yeah. Again, if, you know, again, like my partners, he just goes deep on the numbers, and so he probably always is a little bit more. But he'll give me a debrief and then I look at everything as well.
I just don't go as deep as he does. But there's no surprises. Right? Neither one of us has surprises. And that's healthy and that's where you need to be. So, yeah, you don't have to have.
[00:40:08] Speaker A: All the partners look at all the numbers in detail, as you said, enough for your partner to look at it, and you just look at the overall picture. So it's. But someone at the firm needs to do it, whether it's you, your partner, you have an operations manager VP of finance, whatever, whatever that person is, someone needs to look at it, then kind of deliver the message to the rest of the people that needs to manage it.
[00:40:32] Speaker B: Yeah, and just like, you know, just like marketing or leads or things like that, like you can start to see things and get trends. Right. Hey, we're our profits going down month over month or you know, what's happened or hey, our profits going up and maybe that was by design and you know that's going to plan and that means you can, at some point you want to bring that back down. Maybe you need to hire more people. So if your profitability is getting so high, maybe it's time to hire because you're going to burn out your team, you know, so there's so many cool things you can do with that information.
Too much profit could be not a good thing in some cases.
So. Or yeah, hey, we're, we've hired a bunch of people, we brought us some new software and then profitability's dropped significantly into a dangerous place that we don't want to be.
And then you, you know, you know, balance sheet, like how much money can we run on how, you know, how do we make sure we keep just enough for, you know, if we're got no more business for X amount of months, like how will we survive? So it just gives you all that, that information to, to be able to feel comfortable and then to make decisions.
[00:41:43] Speaker A: You know, I, I usually compare that to someone trying to lose weight and if you don't know what your current weight is, how are you going to change it? Like, where are you going?
And it's very similar to not knowing, understanding your numbers. Because if you don't know what your numbers are today, you just want something better. But where, what is that better? Where, where is, where are we going? So it's very, very similar. Like you have the data, you look at your data. I'm 200 pounds today, I want to get down to 180 in the next six months. Okay. Then we'll put plans together to get to 180. Very similar structure, very similar way of looking at it. So it's not rocket science, you just gotta do it. It's just, that's what I, what I call. It's not difficult. You need someone to break it down for you because as a lawyer your mind works different than obviously an accountant's mind. But if you have the right structure in place and you break it down, it should be straightforward. It should not be anything very, very super complicated.
[00:42:40] Speaker B: Yeah. And you can start Right away, if you're just solo by yourself, you know, there's things you can be doing to put the right things in place.
And I saw someone post, I had a, a friend and a podcast guest actually started her own business and she had posted like, hey, what should I, what should I get for accounting software? I'm really small. I'm only going to have a couple clients and one of my accountant clients actually that we do stuff for, she's in the law firm space. So she's like, hey, could, can you do my stuff? I'm not a lawyer. And I was like, yeah, sure, we can help you. But anyway, she responded, people are like, oh, go with this or this cheap option here or this other thing over here, say get QuickBooks. And then as you grow and scale, you don't want to like have to unwind or fix all this stuff because it'll be a lot more expensive later. So whether or not you're going to be huge or small, just get the right tools and hire the right people and put the things in place instead of trying to cut corners and, and things like that. So although that was pretty good advice.
[00:43:44] Speaker A: So hiring right people and put them in the right place. I see that you have the book Traction behind you there. It's just popping up, I don't know, right behind you.
[00:43:52] Speaker B: Yeah.
[00:43:53] Speaker A: So Attraction by Gino.
[00:43:55] Speaker B: Yeah.
[00:43:55] Speaker A: And that, that's a big, big part of that. That but comes back to like, you got to put the right people in the right place. You can't do everything yourself again, if you want to stay solo, that's perfectly fine. Who am I to say that that's right or wrong? But if you want to build a business and not a high paying employment, which I typically call most solo employee, solo practitioners. High, high. It's a high paid employment. You know, you're probably getting more paid than you were at the firm, but you're doing everything now. Is it worth it? So Gino is talking about that interaction, but putting the right people in the right, right place.
[00:44:35] Speaker B: Yeah, it's a great, great book right there.
I mentioned that book all the time. Yeah. Right people, right seats, all that good stuff.
[00:44:43] Speaker A: It's interesting. It just popped up there from there. I don't know if it's the orange color or what it is. It just popped up. Popped up behind your back.
[00:44:49] Speaker B: That's actually signed by Gino. I met him in some conference I was at a few years ago.
[00:44:54] Speaker A: Yeah, I like him. I like him.
[00:44:57] Speaker B: Yeah. Good stuff. Yeah. Another tip, get traction. If you're starting out solo by yourself, a partner or two or even a few partners. Traction has got a good blueprint for setting a lot of this stuff up. So good recommendation there and well, Emil, I appreciate you sharing.
What's the best way people can find out more about you and connect with you?
[00:45:20] Speaker A: Email is best. I'm on my email day in, day out. Feels like I'm spending most of my day days on my emails nowadays like everybody else. Uh, it's simple. My first name Emil E M I l@councilcpas plural then s councilcpas.com we I'm on LinkedIn. You can just Google my or LinkedIn my name, search for my name. We have council CPAs, have an Instagram and a Facebook page on Instagram. Instagram. I try to share a lot of videos with some information and just value that I want to share with with law firms out there. Short clips don't take long. So you want to get some value. Just, just follow us on Instagram and get some. Get some valuable information there on almost daily basis.
Email is great. You want to send, send me an email. You have questions, just shoot me an email. I'm more than happy to just answer you. You don't have to sign up with me or anything. I want to be able to help, help as many law firms as possible.
[00:46:19] Speaker B: Well, we're on a mission together so I appreciate you coming on the show today and I know we could share. You could share a whole lot more.
So yeah, anyone wants to connect with the meal, let me know. I can connect you. I'll do a direct introduction, email or whatever you want and but yeah, find a good cpa, a proactive cpa and if at all possible find a.
Wait, it's this way.
A law firm specific proactive CPA like Emil. So change your.
[00:46:49] Speaker A: Appreciate it. Appreciate it, Gavin.
[00:46:51] Speaker B: Thank you, sir.
[00:46:52] Speaker A: Pleasure talking to you. It was really good conversation here.
[00:46:55] Speaker B: Likewise. We see eye to eye and we're definitely on the same page. So everyone, thank you so much for tuning into my podcast like always. I appreciate everyone and we'll be back soon with another awesome episode and we'll see you soon. Care.
