Are you a law firm owner looking to achieve financial success and create a thriving practice? Look no further!
In this episode, Darren Wurz and guest Chelsea Williams explore the unique challenges faced by law firm owners when it comes to financial success. They discuss the importance of assessing the current situation, and delving into team KPIs, marketing KPIs, and profitability KPIs. Chelsea shares insights on building a successful mindset, understanding human psychology and neurobiology, and decoding the numbers of your law firm to drive positive change. From creating effective cash management systems to strategic decision-making and scaling, this episode provides invaluable advice for law firm owners seeking financial mastery.
Throughout this eye-opening conversation, you will:
- Learn how to bridge the gap between human behavior and financial management by decoding the numbers of your law firm.
- Discover the importance of financial literacy for lawyers and attorneys and the steps needed to overcome any barriers in understanding.
- Gain insights on the significance of key performance indicators (KPIs) and metrics in monitoring your law firm’s growth and profitability.
- Understand the art of balancing business investments and personal wealth creation, as well as the role of mental well-being in achieving financial success.
- Uncover effective cash management systems and strategies tailored specifically for law firm owners, such as the Profit First system.
Connect with Darren Wurz:
- 30 Minute Chat With Darren
- Wurz Financial Services
- The Lawyer Millionaire: The Complete Guide for Attorneys on Maximizing Wealth, Minimizing Taxes, and Retiring with Confidence by Darren Wurz
- LinkedIn: Darren P. Wurz
- LinkedIn: The Lawyer Millionaire
- Twitter: Wurz Financial Services
Connect with Chelsea Williams:
About our guest:
With over a decade of experience helping business owners understand their numbers, Chelsea has the knowledge to not just get your financial house order but set it up for long-term sustainability at a healthy profit.
For the past 6 years, she has been focusing her zone of genius on law firms. Why law firms? It’s a pretty cool story you can check out here.
It’s about the day she met a local lawyer who changed her life and showed her exactly what she can help law business owners avoid. It’s why she does what she does with such conviction. Learn how to get a grip on the numbers so you can continue the journey with clarity.
Darren Wurz [00:00:41]:
Are you a law firm owner seeking to elevate your financial success and profitability? Being a law firm owner is not just about being an exceptional lawyer. It’s also about strategically managing your firm’s finances to secure your future. Welcome to the Lawyer Millionaire podcast, where we explore strategies and insights to maximize your financial success. I’m your host, Darren Wurz, financial planner for law firm owners. Today we’re joined by Chelsea Williams, founder of Core Solutions Group. She is known as the legendary money whisperer for law firm owners, and she’s here to share her expertise on the business financials of running a law firm. She has a wealth of experience helping lawyers crack the code for financial success and I’m super excited. I have so many questions, but we’ll try to get this in; and Chelsea, welcome to the show.
Chelsea Williams [00:01:43]:
Hey, thanks for having me.
Darren Wurz [00:01:45]:
Yes, I’m so glad you’re here with us today. Running a law firm and I know they don’t teach you about the business side of things in law school, and that’s something that you help your clients with. But first, I’m curious. I want to know a little bit more about this money whisperer. What does it mean to be the money whisperer for law firm owners?
Chelsea Williams [00:02:09]:
Yeah, so, to me, the Money Whisperer is made up of two parts. It’s made up of the technical understanding of bookkeeping, accounting, taxes, financial strategy, the numbers. Right? That boring piece that we go to school for and we learn in the real world through street smarts. But the other piece that makes it the whispering part is understanding human nature, understanding the psychology of law firm owners, specifically due to, like you said, law school and the conditioning of the mind that we go through and how to bridge the gap between that kind of human behavior and nature and the specifics of the psychology of law firm owners and that technical piece.
Darren Wurz [00:02:56]:
Okay. Wow. That’s fascinating. The numerical side and the mental side or the understanding? Tell us a little bit more about that, and how do you help law firm owners bring those two pieces together and make improvements to really master their business financials?
Chelsea Williams [00:03:15]:
Yeah, so it really starts for me because I have a personal passion for understanding Human Psychology, Neurobiology. I think in another life, I was a neurobiologist, a neuroscientist, because these things just fascinate me, and it kind of just hit me one day how to bridge the two. And the way that I help law firm owners do that is by helping them see their money story. Money is a tool, and it is our nature, our human nature, to attach all these emotions and these values and a sense of worth to these very emotionless numbers. And that’s the beauty of the numbers. So by looking at the numbers of law firms and decoding what they’re saying, we can start to see, okay, what is showing up mentally, emotionally, in my numbers that I need to change. And the magic happens when we start to execute the plan, because numbers are very simple. You know, the math that you need to know by fourth grade, honestly, to do what I do, it’s not hard. I think it’s one of the excuses that we tell ourselves, like, I’m not good at math. I can’t do these things. That’s not the case. The math is easy. Showing the numbers behind scaling your law firm two times, five times, ten times, 100 times, scalability is easy. Following the plan, that’s where we start to encounter the mindset, the mental part of the money.
Darren Wurz [00:04:42]:
Chelsea Williams [00:04:42]:
So it’s a journey.
Darren Wurz [00:04:44]:
Yeah, sure. If I just do X, Y, and Z, then I’ll get to where I’m trying to go. But it’s the putting it in practice and actually making it work. You’re so right about that. So you said you have a passion for this. I’m curious where that came from. Could you share with us a little bit about your background and how exactly you came to specialize in working with law firm owners specifically?
Chelsea Williams [00:05:07]:
Yeah, absolutely. So the story of how I became the technical side of accounting and financial strategy is that it was by complete accident. I kind of stumbled across my first accounting class in college. Had no idea what it was, but it was very clear to me very fast that my brain just worked in that way. And so I ran with it. I ran with it for about eight years before I decided to start Core Solutions Group. And when I started Core Solutions Group, I did want to niche, because I understand that when you focus on a very small group of people, your impact is exponential. As opposed to being a jack of all trades, I wanted to be a master of few. And when I was looking at different areas to niche in, somebody had suggested to me the legal space, and my mind went to what I think the typical consumer mind is of, I don’t want to deal with lawyers and attorneys. I don’t want to that sounds terrible. Right. But I’ve also learned, don’t go with your first thought. Right. Always think it through. It a couple of times. So I started to do research into the industry. And I found some things that I could get my heartstrings attached to, because I’m a person of passion. If my heart is not in it, I’m not going to do it. And so I found things that were unique to the industry that I knew that I could help with. And one of them was the psychology of lawyers, being that as consumers, we look at them in a negative light maybe sometimes, but we don’t put ourselves in their shoes. People don’t come for legal services from a place of happy, happy, joy, joy. They come out of a place of reaction, of urgency, of a very emotional space for these services. So imagine a law firm dealing with so many clients who are in this very reactive emotional space, and it is incredibly overwhelming. It is a huge emotional toll that is hard not to bring home. And that emotional toll shows up in the space, too. In recent years, the legal space has become very aware and very proactive in addressing things like mental health. So I saw this opportunity for me to make a positive impact while staying in my zone of strength.
Darren Wurz [00:07:32]:
Yeah, absolutely. And I bet as you’ve grown your business and worked with more lawyers and law firm owners, you’ve come to really enjoy working with them, as I have. Let’s get into some of the things that you’ve learned along the way, and as you’ve worked with people and you’ve seen some of the things that they’ve struggled with. I’m curious, in your experience, what are some of the common big theme mistakes that you see law firm owners making and how you’re able to kind of help them mitigate and avoid those mistakes?
Chelsea Williams [00:08:08]:
Yeah, so two things come to mind when you ask me that question, the first of which is avoidance, avoiding the numbers, avoiding keeping books at all, avoiding spending time with their financial reports so that they can understand it. And I think that the root of that. Avoidance is kind of like we talked about. I can’t make sense of this. I feel like there’s something wrong with me because I can’t look at a financial statement and understand it. Right? And my answer to that is nobody taught them. Nobody’s teaching anybody except for, I think, two states right now require financial literacy in high school. But other than those, in recent years, we come into adulthood, we come into business ownership, and especially lawyers and attorneys are held kind of on this social platform, right? Like, we look to them as this like this is a prestige, this is a place to be. Right. So then being in that position and looking at things like numbers in finance and not understanding them makes them feel some type of way understandably so. So To the avoidance piece, I encourage you to consider the fact that you’ve never been educated, and if you don’t have that opportunity to learn, you can’t possibly understand it. And so it is a journey, it is a skill that you must learn. Darren Buffett said know accounting is the language of business. It is a must. Just like marketing, just like hiring a team, if you want to scale, eventually numbers are going to force you to look at them. You can only grow so much through avoidance. And I would say that the second thing is thinking that you’re a unicorn. Thinking that these simple systems and concepts and financial management strategies aren’t going to work for you because of, for example, contingency fee practice areas where the cash is volatile, it’s unpredictable, right? And thinking that none of this is going to work for them, therefore they just don’t do it.
Darren Wurz [00:10:10]:
Yeah, it’s so interesting. You’re so right. These are things that many of us were not taught. Hardly any of us were taught business financials growing up unless we learned those things in college. And then those of us who become business owners either have to learn on our own or have to hire professionals to help us. And you’re right, it can be daunting when it’s something you don’t know. But it is a side that you got to dig into and you got to wear that hat of being a business owner. And I’ve seen it, I’m sure you’ve seen it. I’ve seen law firm owners that have actually taken that step of hiring professionals to really help them with the business side of things. And it makes such a dramatic difference. And then they’re able to grow and scale their businesses and it can be scary to think, oh, gosh, scaling and growing and hiring. And it’s so much to think about. Especially when you have to be a practitioner and you have to build hours and you have to work with clients and all that stuff. But it can be done and I’ve seen it done and I’ve seen people do it successfully. So those are great words of encouragement, I think, for a lot of people in helping clients improve their business financial. Oftentimes we talk about KPIs or key performance indicators and other metrics. And I’m curious for law firm owners, are there specific numbers that you recommend they really look for and monitor and what are some of those? If you don’t mind giving us some examples.
Chelsea Williams [00:11:41]:
Yeah, absolutely. And just to speak real quick, the delegation and hiring knowledge outside of what you have is a skill and it takes a certain level of humility and seeking someone like you. For example, I talk a lot about who are your key financial players and you are one of them. I skimmed your book that you sent me. Thank you for that by the way. I’m going to ask you for more because you are one of the key financial players that you are part of who law firm owners should have sitting at your table. And I am one of them as well. And it’s not just one or the other, right? It takes that team so to come to a place to where you recognize, I need someone who knows more than me and who can basically give me the shortcut. That is what will set these struggling law firms apart from those that find that flywheel to being able to scale, for sure. And so, when it comes to KPIs, a few specific ones, that every law firm. And we have free resources on our website, which I’m sure will leak in the show notes here. And I have a KPI graphic that I had in my head for like two years before I finally used canva to get it out in a visual. But a few of those that I think everybody needs to have is your team KPIs numerically, what that looks like for law firms, it’s fairly predictable. There’s an industry standard. I know you can hear this in the background. My cat is closed in the laundry room. So that’s what you hear. And so team KPIs are really important. We’re talking about scaling, right? And the only way to do that is to leverage a team, not only people like us, but people internally, like Paralegals and other attorneys on your team. And there are very clear industry standards for ROIs return on investments on each team member, and that is four to five times ROI. So one of the KPIs on your financials that you should be looking at is your team costs as a percentage of revenue. Another one that I talk a lot about is your marketing investments. These are the ROI revenues, right? These are the needle movers that are going to move these numbers in a way that allow you to scale while protecting profits. But your marketing investments should be a KPI, and not only as a percentage of revenue. And a lot of people like that 10%, invest 10% of your revenue back into marketing. That’s a very cookie cutter approach, but I say start where you’re at, find what works for you, and kind of go with that. But the other metrics that you won’t see on a financial statement when it comes to marketing is are the metrics that are going to ensure an ROI. Just because we’re spending on marketing doesn’t mean that it’s working and contributing to revenue and profit. Right? So things like lead source, lead conversion, days to onboarding, those are all of the KPIs that happen before you see it on a financial statement. And then the third most important, I would say, is your profitability. Like, how much profit are you actually keeping from the revenue that you’re generating? Because making a million dollars is great, but when you spend 1.2, it doesn’t really matter, right? There has to be this profit margin to maintain in order for it all to be worth it.
Darren Wurz [00:15:10]:
Yeah, absolutely. That’s good stuff. So your team KPIs your marketing KPIs, your profitability KPIs. And I’m sure there’s a lot that goes into that. And probably the key is just to kind of start knowing where you are initially and then try to make some improvements in all of those areas. Good stuff. Absolutely. One of the things we’ve talked about on this show is succession planning. We just finished doing a whole series on succession planning in prior episodes. And I’m curious if you’ve had some experience there with law firm owners who are selling their firms and what are some of the key considerations that you think law firm owners should be aware of there?
Chelsea Williams [00:15:57]:
Yeah, I love talking about this because it’s a fairly new concept in the legal space. A lot more states are getting on board with deregulating who can and can’t own a law firm. So it’s becoming more of a real option for law firm owners that you should absolutely be considering. And of course, you want to consider what a bank is going to look like because if a bank is financing the buyout, they have very clear ratios that they are looking at. And so by working with a team like mine and someone like you, you can create and you can see where your firm is valued right now. Right, but one of the things and Marcus Lamonas says this, have you heard of Marcus Lamonas? He does. He’s the prophet I love Marcus Lamonas. He says, you know, people don’t buy businesses, people buy systems that creates value. It is not something that you’re going to see on an income statement, but what it does is it creates future revenue. It ensures the consistency of the revenue, of the profit margins, of consistent deliverables in what you’re actually doing. And so having those systems built is what contributes to that value. And of course, there are a lot of different ways to exit your law firm in the form of selling it. Whether you’re vetting an internal team member to take it over, whether it’s a family situation, which I love that that’s kind of where you come from. It’s a very interesting dynamic, but it can be done right. And some law firms are looking at the fact that in the industry we have kind of corporate law and we have small law. And something that we’re seeing is corporate law buying small law firms out to build them and put them into their portfolio, which is also an option.
Darren Wurz [00:17:46]:
Yeah, I love that systems. What I think of when I hear you say that is the idea of a machine. You’re turning your business into a machine. And I’m sure that we’ve talked on the show about how getting your law firm ready for sale, a lot of the work that’s involved in that is just good business practice. These are just things that make for a more profitable, more successful business. Let’s maybe peel back the onion on that a little bit. What are some of those systems that should be in place that you can recommend or that you see really good law firms executing on very well.
Chelsea Williams [00:18:34]:
Yeah, and there’s systems in everything, right? There’s systems in marketing, there’s systems in your money, there’s systems in the actual deliverable and in the follow up. Your entire business has systems. Whether you see them yet, whether you’ve documented them yet or not. Every piece of business has systems. And when it comes to your money, those systems look like basic bookkeeping outsourcing that to an accountant or a bookkeeper which they have their own systems that you may or may not recognize. But there are certainly systems that go into you inevitably receiving monthly financial statements. Then that’s where your systems come in, right? That’s where you put your CFO hat and you look monthly at your financial statements and you create action items based on what you see. And you look quarterly to see if you’ve been holding yourself accountable to your numeric goals. You look annually. You have a system to not just look at what has already happened, but you have a system to continually refine the numbers around where you want to go, which is a really important piece for business as a whole. And you spoke to this when we talked before we recorded here, that even you with your processes, you start with the vision. What is your vision? Because each person on your team, it’s kind of like you have to first communicate your vision. Otherwise they’re going to be going with their vision, right? If you don’t give them your vision, they’re going to build systems around not your vision. And your money is the exact same. Your vision can be boiled down to numbers in black and white. And so having that continuous system in your money to be able to not just look at how you’re doing in the past right now, but also in the future, and then another really important system to have in your money is cash management. Cash is different than profit, right? And there’s a completely different cash management system to be implemented to stay on top of that. And we do it with our clients. It’s very similar to Profit First, where we take that kind of old school envelope system and we bring it into the new age and we use multiple bank accounts and we physically separate our cash and we prioritize profit and we control spending right out of some of those accounts. And that system is so powerful and we see it with our clients. And again, there is no unicorn that this system will not work for.
Darren Wurz [00:21:02]:
Yeah, I love that, the separate bank accounts. We definitely do that on the personal side. And while we’re getting into the topic of cash flow, cash flow is so critical for law firm owners. It’s one of the biggest struggle points I find when I’m talking with law firm owners. Can you give us some other tips or strategies in terms of better managing, better optimizing that cash flow.
Chelsea Williams [00:21:31]:
Yeah, absolutely. So I think there’s three really important pieces to cash flow, right? There’s the cash you’re bringing in, there’s what you’re spending it on, and then there’s what you’re keeping and or investing or both, right? And so when it comes to the money that you’re making, this is taking us back to that marketing, right. The awareness around where is my money coming from? How can I find the vending machine? There’s that analogy of, like, the slot machine versus the vending machine method. So you have to find what your vending machine is, invest more into that to affect what you’re bringing in. And then there’s the spending piece. And this is where habits, money habits, will really show up. I talk about money myths a lot. And one of those myths is that you have to spend money to make money. And I think oftentimes we overthink that myth. And we think, I have to invest in, for example, this brand new, huge $10,000 website before I can even open my doors, right? Or I have to. Software is kind of a shiny object syndrome that I see on financial statements. You can see, this is why I love numbers. You can look at things like software and subscriptions and see that we live in a day and age where we are being bombarded with the newest and the best, and you got to have this and you got to have that. And we are falling for it, right. Instead of creating financial boundaries and really leaning into what makes us entrepreneurs, which is our creativity. And what you find when you create financial boundaries and you stick to them is that you get to have that creative side of you turned on to be like, okay, I am not spending $10,000 on a website. So then what now? How? And it can be a really fun process if you have that creative entrepreneur spirit. And then the third piece being how much we keep, which I think is the easiest to lose sight of. And that comes in by making sure that we are charging enough that we are aware of how much time it takes to produce a certain level of revenue and that we are maintaining the margins that we want to maintain and we are honoring our financial boundaries in a way that we get to keep that bottom line profit.
Darren Wurz [00:23:55]:
Great stuff. I was laughing as you were saying the second one, because I have so much experience with that. I think I have business ADHD. I see something shiny. I’m like a new software or something. And I’m like, oh, I want to try that. Let me sign up for that. And it’s so easy to do. Or you spend stuff on your office, you’re like, oh, I really need this, that or the other. And you justify it to yourself as well. This is business spending, so this is okay. But you really have to consider your cash flow, your profitability, your revenue, your numbers, and try to make a really strategic business decision. Is this something that I really want to invest my time and money into, or is this something that can wait, I can evaluate later, or even, hey, maybe I can negotiate this or shop this out and see if there are other alternatives instead of just clicking the button and buying it.
Chelsea Williams [00:25:01]:
Absolutely. Yeah. And I think I talk about going three layers deep, asking yourself why and answering that why at least three times and what you almost find every time you ask that third why is a core value or belief. And when it comes to expenses and being so tempted to spend money that we really don’t need to, when you get to that third layer, it helps to have that vision that very set in stone. What is it that I am going for here? And is this necessary for my vision? Is it required? Do I need it right now? Is there another way?
Darren Wurz [00:25:38]:
Yeah, that’s good stuff. And I’ve got one more question for you here along those lines, and there’s so much more I wanted to get into, but we’re coming near the end of our time. What advice do you have for law firm owners in terms of trying to balance investing in our businesses for growth, but also trying to ensure our own personal well being? How do law firm owners strike that balance?
Chelsea Williams [00:26:07]:
I would say that the cash management system has a specific bank account and we call it profit. But what that really is, number one, it is creating and reinforcing the habit of saving and setting aside money. And way too often the objection to this is, well, I don’t make enough to save, or I don’t have enough right now to save. And my answer to that is saving is so much less about the amount and so much more about creating that habit, because that is what savings is. That is what wealth is. That is how generational wealth is maintained, is by passing along the habits just as strongly as we pass along those numbers, that money. Right? And so, like you said, I am not a fan of cookie cutter percentages or dollar amounts. I say just like you start with where you’re at, and even if it is 1% of revenue, start setting aside, start saving, and then continuously work to increase that percentage from where you’re at now to where it is that you want to be. And so with that profit account, working with someone like you to be like, well, how much of this should I reinvest? How much of this should I invest in my personal wealth? Right? And that account works really well with a lot of people to set it aside, to build it up. So then when you get to the place to where you need to grow and scale, you can take from that. And invest it in your business, whether that’s a new hire, whether it’s a new marketing campaign, it is something that produces an ROI, because that’s what an investment is. An investment puts money somewhere to create more money on top of that. And I think that it is really important for us to strike that balance between investing in my business and investing in myself, and especially in this industry where mental health needs to be prioritized more, figuring out what that looks like for you. Right. And that may not necessarily require money either, by the way. There are a lot of things that you can do for yourself to balance out your peace of mind, your mental well being that doesn’t necessarily require money. Now, on the flip side of that, some people have a lot of shame around, well, my happy, my mental well being looks like taking five vacations and having a yacht and darn. Is that bad of me? Is that not good of me to want these materialistic things? No, it is not. However, character and values have to be at the root, right? Because it’s not about the money. It’s about the time that the money creates and the things that we do with it so that we can make the most of those moments of those times.
Darren Wurz [00:28:58]:
Excellent. You and I are so on the same wavelength because it sounds like so many of the conversations I have had with clients. And that’s why traditional financial planning doesn’t really work very well for law firm owners. And we had to create kind of a new process for it because it’s like, okay, I create a plan for somebody. And then I’m like, okay, you need to save $10,000 a month in order to get you to retirement. And they’re like, what? How am I going to carve $10,000 a month out of my revenue from the business? And it’s about more than that. Taking those incremental steps to get there. It doesn’t matter where you start. Start somewhere, get the habit going, and then make improvements from there. So that’s really excellent. I love it. Well, Chelsea, we’re kind of at the end of our time other I’ve got so many other questions I want to ask you, but if people want to know more about IOLTA accounts and cash flow management and improving their business financials, they can get in touch with you and they can learn more about that. Before you give us the ways to get in touch with you, though, I’ve got one last question I ask all my guests, and it’s different for everybody. I’m curious. What does your dream retirement look like?
Chelsea Williams [00:30:15]:
I would love to spend one month per year in a different country, immersing myself in a culture and getting outside of this red, white, and blue box, which I’m about a couple of years away from. Me and my 15 year old daughter are planning this together.
Darren Wurz [00:30:30]:
Fantastic. So where would be the. First place you’d start.
Chelsea Williams [00:30:34]:
I am rooting for Greece. She is rooting for Brazil. So that is TBD.
Darren Wurz [00:30:40]:
Sounds good. Sounds good. All right, Chelsea. Well, why don’t you share with our listeners how they can find out more about you or get in touch with you if they have questions?
Chelsea Williams [00:30:49]:
Yeah. So our website would be the landing place to find us everywhere else and to get in touch with us and to look at our free resources I mentioned earlier. And that is yourcoresolution.com.
Darren Wurz [00:31:01]:
Well, thank you so much. And thank you, the listener, for joining us today on The Lawyers Millionaire. If you want to learn more, check out our website, thelawyermillionaire.com. There you can find free resources and webinars, grab a copy of my book or even schedule a time to chat with me about your own financial goals and creating a plan to make them happen. If you enjoyed today’s episode, be sure to subscribe so you never miss an episode packed with useful advice and expertise for law firm owners just like you. We also invite you to leave a review and share The Lawyers Millionaire with your friends and colleagues who might benefit from our discussions. Together, let’s empower more law firm owners to achieve even greater levels of success and freedom. Now take what you learned today and go make your dreams a reality. I’m your host, Darren Wurz, and I’ll see you next time.