In this episode, Steve Fretzin and Chelsea Williams discuss:
- The importance of having financial clarity in all aspects of your life.
- The greatest financial bottlenecks for law firms.
- Parkinson’s Law as it applies to your finances.
- Flat fee versus hourly billing models.
Key Takeaways:
- Create systems that capture your margins, but also contribute to your cash flow.
- Until you take getting paid seriously, nobody will take paying you seriously.
- There is a difference between a financial statement and a meaningful financial statement.
- Regardless of how you choose to bill, be transparent and upfront with your clients.
“Once you understand the power of knowing your storyline, you will understand that you have the ability to be the author of that story and change the direction of your numbers and manipulate them into a direction of your choosing. That is powerful and freedom in and of itself, because then it’s up to you.” — Chelsea Williams
Connect with Chelsea Williams:
Website: https://www.yourcoresolution.com/
YouTube: https://www.youtube.com/channel/UC80TT79FdeRwH2oNaSkqvQA?view_as=subscriber
Facebook: https://www.facebook.com/yourcoresolution/
Instagram: https://www.instagram.com/core_solutions_group/
LinkedIn: https://www.linkedin.com/in/chelsea-m-williams-%F0%9F%92%B5%E2%9A%96%E2%8F%B1-8303b45a/
Book Reference: The E-Myth Attorney
https://www.amazon.com/Myth-Attorney-Legal-Practices-About/dp/0470503653
Connect with Steve Fretzin:
LinkedIn: Steve Fretzin
Twitter: @stevefretzin
Facebook: Fretzin, Inc.
Website: Fretzin.com
Email: Steve@Fretzin.com
Book: The Ambitious Attorney: Your Guide to Doubling or Even Tripling Your Book of Business and more!
YouTube: Steve Fretzin
Call Steve directly at 847-602-6911
Show notes by Podcastologist Chelsea Taylor-Sturkie
Audio production by Turnkey Podcast Productions. You’re the expert. Your podcast will prove it.
FULL TRANSCRIPT
SUMMARY KEYWORDS
numbers, lawyers, money, people, law firms, attorneys, clients, talking, bloomington, flat fee, receivable, paid, chelsea, bill, business, big, billing, marketing, charge, understand
SPEAKERS
Narrator, Steve Fretzin, Chelsea Williams
Chelsea Williams [00:00]
Once you understand the power of knowing your storyline, and you understand that you have the ability to be the author of that story and change the direction of your numbers and manipulate them into a direction of your choosing, that is powerful and freedom in and of itself, because then it’s up to you. Right? It’s up to you to deploy that operational strategy to get those numbers to reflect the story of your financial life.
Narrator [00:34]
You’re listening to be that lawyer, life changing strategies and resources for growing a successful law practice. Each episode, your host, author and lawyer coach, Steve Fretzin, will take a deeper dive helping you grow your law practice in less time with greater results. Now, here’s your host, Steve Fretzin.
Steve Fretzin [00:58]
Hey, everybody, welcome to be that lawyer. I hope you’re having a fabulous day today. Listen, as you know, this show is all about helping you be that lawyer someone who’s confident organized in a skilled Rainmaker, and I know that a big part of being a lawyer is taking care of yourself and taking care of of the balance of your day. And maybe it’s about outsourcing, how you do various things. Mostly, it’s about how you take care of the money. Are you profitable? Do you have the right metrics to figure out you know, where the money is coming in how the money is going out? And how to continue to you know, stay stay in the in the not in the in the know about your money? today? I’ve got a guest that’s going to really enlighten you on that subject. It’s Chelsea Williams. She’s the financial architect of core Solutions Group. How’re you doing Chelsea?
[01:46]
I’m doing fabulous. Thanks for having me safe.
Steve Fretzin [01:49]
Yeah, absolutely. My pleasure. And you are in Bloomington, Illinois, home of the Redbirds correct or near normal. Alright, Go Redbirds. That’s my alma mater. Which by the way, I think is a lot better school now than it was back when I went in the 90s. Is that the case?
[02:03]
You know, they’ve grown and done a lot. So wouldn’t surprise me.
Steve Fretzin [02:08]
Yeah, yeah. And I hear it’s much harder to get into, I think I kind of eat my way in at the time. But anyway, do me a favor, and give a little background because you have a pretty deep background in accounting and finance. So help us understand where you come from?
[02:23]
Yeah, yeah. So I’ve been doing this tax and accounting thing for a little over 12 years now. And, you know, I really started to develop this passion for not just the technical, do the books, look at taxes, all of those things. But really helping entrepreneurs understand how to read their numbers, and how to use them operationally. And it’s a deficit that I noticed while I was Vice President, at a brick and mortar here, where I live. And I jokingly say, that’s where I learned everything that I don’t want to do. And so, you know, my passion really revolves around helping law firms specifically, get a read on their numbers, understand what their numbers are telling them and also understand how they can grow in scale in a specific direction and kind of be the author of the story that their numbers are telling them.
Steve Fretzin [03:12]
In most lawyers, and especially small law firms. I don’t know that they’re thinking about this at all, meaning they’re, they’re taking in money, and they’re paying bills, and they’re paying people and they’re hiring people, but there’s no rhyme or reason. It’s just sort of like happening ad hoc. And so what’s the downside of doing it that way?
[03:31]
Yeah, you know, you have to have purpose. And here’s the thing, and why I have so much passion for what I do. Financial literacy is not being taught in our schools. Law school is not teaching it, the schools aren’t teaching our children, nobody is telling us how to manage our money and what to consider. And the reason that it’s so important, first of all, not knowing or having financial clarity can contribute to a lot of stress in life, a lot of stress in marriages, in personal situations and business situations. But having that financial clarity allows you to move, grow and scale in the direction of your choosing, as opposed to kind of doing what your business is doing organically without having any control or power over it.
Steve Fretzin [04:13]
Yeah, so take that a bit deeper. I mean, what are the money mindsets of of many of the lawyers that you come in contact with before they engage you?
[04:22]
Yeah, so there’s there’s a few of them that I have been able to notice in a lot of, you know, attorneys who own law firms. Number one is the fear of charging what they’re worth, you know, they especially when you first start out, you look at what your competition is charging, and you’re like, oh my gosh, I’m brand new. They’ve been doing this for 10 years. I can’t charge that much. And so they get into this commoditized version of the services that they’re offering, which which can be a huge mistake and you know, will when you first open your doors, heck, you’ll lose money to get business, right. You’ll take clients that you know, you’re not going to make money. On so not charging, what you’re worth, is a money mindset that I see a lot. You know, another one is avoiding the numbers altogether, because most people don’t have that understanding of how to make sense of their financial data, they avoid it 100%. And don’t look at it and don’t get the books up to date. And don’t look at those monthly financials, which also is an incredibly costly, you know, mindset to maintain. And I would say another one, and it’s so funny, you know, I talk to a lot of vendors in the space companies there. They’re actually their attorneys that have built successful law firms, and then they go on to create another service for attorneys like software marketing. And we always talk about how attorneys have this unicorn mindset of you know, systems and procedures won’t work for me, because my law firm is so different. And there’s just no way that I’m the same as any law firm, or that these systems are going to work for me. So the mindset of thinking that proven systems processes and procedures are not going to work for your money for your firm, is also another mindset that I see.
Steve Fretzin [06:10]
Yeah, and I think it’s just again, in easy out, right? I mean, to look at the numbers and take a really hard look at, at how you’re spending money, how you’re making money, how you’re charging, you know, it just that’s like, I don’t know if it’s scary, or there’s some fear involved in that. But But there’s something about looking at the dollars that lawyers are avoiding.
[06:31]
Yeah, yeah, I think you’re absolutely right. I think it’s kind of a way to be like, Oh, I don’t understand it. It’s too messy. So I’m just gonna leave it alone. It’s just it’s easier to do it that way.
Steve Fretzin [06:39]
Yeah, or, you know, what, I’m making plenty of money. So why bother looking at it, when in reality, their profitability is way off? Or they’re taking on bad clients, or they haven’t worked out their collections yet? So I think it’s, it’s, it goes back to an old management saying, If you can’t, you can’t manage what you can’t measure. And in measure measurement is all about, you know, numbers, right? It’s all about about what what, you know, what’s coming in what’s going out, and what’s in the middle. So, let’s let me ask you about the biggest bottlenecks that lawyers are having or law firms are having as it relates to money, where where are they getting, you know, kind of their greatest challenges?
[07:17]
Yeah, I would have to say, for this, so there’s this, there’s this movement in this space that’s been going on for a few years now of converting from this hourly fee structure to a flat fee, and obviously, depends on your practice area, and it’s easier in some than in others. But, you know, what it boils down to is creating those systems that are going to capture your margins on what you’re trying to get, but also, you know, create a system that’s going to contribute to your cash flow. So one of those things is your billing procedures, and your accounts receivable. So I see a lot of firms that, you know, they’re not sure how to build when to build, they’re inconsistent with when they bill, you know, they get piled up, we’re not billing for a month or so we’ve got cash hanging out and accounts receivable, and we’re not taking accounts receivable seriously. So I have this system that I’ve identified, it’s Four Steps to Effective AR, accounts receivable management. And you know, number one is clear it up on the first date. So know how you bill know when you bill, and communicate that to your prospects to your clients so that there are no surprises when something happens, or when a bill comes, they they expected it, you know what I mean? But in order to do that, you have to know what you’re billing. So that goes back to money mindset, right? Charge, what you’re worth, we’re fearful of telling our prospects, hey, this is what we’re going to build, we would rather engage them and then let the bills start coming until it becomes you know, it can become a conflict that way. And, you know, accounts receivable, so having that AR Aging system, for example. You know, 10 days past due a late fee is charged 20 days past due all non essential work stops all the way through to collections if you’re allowed to do that within your state in your practice area. I had a I was talking to a lady once and we were talking about her accounts receivable because it was out of control. And she says Chelsea, I just I wish people would take paying me seriously. And I said until you take getting paid seriously. Why should they? You know, you have to take that seriously yourself.
Steve Fretzin [09:31]
Yeah, and I know that it’s just a tough subject, right? I mean, talking about money and talking about setting expectations of of what, you know, legal fees might cost or what the investment is going to be and how that’s going to be billed and just having that conversation may not be happening in the proper way or at all. And so what are you recommending for lawyers to say to their clients to set the tone or to set the pace or to Make sure that that they’re not you know that they’ve got a basis of having that conversation later versus leaving it sort of open.
[10:08]
No, I want to, I want to let your audience know about a really good book on this. The E Myth attorney. So there’s the E Myth revisited, which is one of the books that are in what I call my my business Bible, my set of business Bibles. But there’s one specifically for attorneys. And it was written by an attorney who installed this flat fee system, and they talked about from the clients perspective, so what we think our clients are going to care about is often very different from what they actually care about. And you know, even Cleo Trends report for both 2019 and 2020 talked about the biggest consumer complaints when, you know, engaging with law firms is lack of proactive communication. And by understanding how all of this works, and posing it to your prospect or client upfront on the first date, it really sets the tone because here’s what clients are looking for clients are looking for the experience, not so much your your you know, your ability, obviously, the result matters. But when you give them an experience of upfront newness and candidness, and here’s what you’re going to be billed, here’s when here’s how you can pay, so there’s no confusion about actually getting the money, you know what I mean? And setting them up and giving them a glimpse of the workflow. So not only the price, but what are you going to do during the entire process of the case to make sure that they are in constant communication?
Steve Fretzin [11:35]
I think communication is probably number one. And then number two is in part of this communication, is setting expectations. Because if you’re not doing that, and I’m a business owner whose work, you know, use legal services for years, contracts, and non competes and different things that I’ve done, and I get a bill that’s twice or three times what I thought it was going to be, you know, I’m going to pay it, but I’m going to have kind of a bad taste in my mouth. Because nobody set the expectations. I just assumed the contract would be similar to the last one I did, which was 2000. And I get a bill for 5500. And I’m like, what? Right? And so it’s so credit, and then then of course, you know, I’m gonna either argue it, or I’m gonna pay it or I’m gonna pay it later, I’m gonna drag my feet because it’s a lot more money than I thought, and I’m feeling a little raw. So is it about about helping people avoid surprises?
[12:24]
Exactly. And here’s like, here’s the thing. Let’s say you’re talking to a prospect, and you’re like, you know, this is going to be $5,000. And they’re like, oh, that sounds like a lot, because the guy down the street is only going to charge me 275. So let’s say they go back to that guy down the street, but now they know to ask, Okay, how many hours at 275? Are you going to be billing me? And then to their surprise, it may be pretty close to that $5,000. And they’re thinking, well, this person was upfront with me, and gave me a whole lay of the land of what to expect, you know,
Steve Fretzin [12:54]
yeah, or even giving a range, right? I mean, at least if I have a range, like because I know things aren’t perfect. And they might find things once they dig under the hood and, and everything. But give me a range, like, you know, this is going to be you know, four to 6000. At least that way I you know, I’m hoping for four. But if it goes to 55, I’m not torn up about it, but to not even discuss it and then hit somebody with a big number that can be can be problematic. And it could end up maybe being one of the reasons why your AR is so high.
[13:22]
Yes. Yeah. Yeah. All right.
Steve Fretzin [13:24]
So let me let’s move on to, you know, you know, money you. I’ve heard you say before that, you know, your money tells a story, and that you have ability to change the storyline. What do you mean by that?
[13:39]
Yeah. So you mentioned earlier, I think you put it you can’t measure? What was that you said earlier, you can’t manage what you can’t measure? Exactly. So I always say you can’t measure what you can’t see. So you know, back to one of those things that lawyers like to avoid is getting a visual on their numbers, getting the books up to date and making their financial statements meaningful, not just existing, because there’s a difference between a financial statement and a meaningful financial statement. Your numbers are a direct reflection of your operations. There are so many things when I look at somebody’s balance sheet and income statement and cash flow patterns that I could tell you know, having never sat down and spoken to you about your firm, because your numbers reflect what’s happening operationally. And once you have a visual on those numbers, and this is why I love numbers, because numbers don’t lie. There is such a thing as garbage in garbage out. Don’t get me wrong, but numbers will tell me what you won’t write once you understand the power of the storyline that your numbers are telling you from seasonality to employee productivity to marketing metrics, and ROI right to overhead and to break even all of these things. Once you understand the power of knowing your storyline and you understand that you have the ability to be the author of that story and change the direction of your numbers and manipulate them into a direction of your choosing. That is powerful and freedom in and of itself, because then it’s up to you. Right? It’s up to you to deploy that operational strategy to get those numbers to reflect the story of your financial life.
Steve Fretzin [15:28]
Yeah, I mean, I feel like right now, we’re in a weird, a weird place and legal space where lawyers are getting a premium if they’ve got the experience, and there’s a need at the firm, and everybody’s busy and looking to offload work, especially to associates. And they’re getting paid a premium for big bonuses being handed out a big salary increases, maybe 50%, what someone was getting paid a year ago, now they’re able to get you know, that plus 50 How is that going to impact the legal space in the future, if people are getting paid more now than they ever had before?
[16:09]
You know, I think there’s a, there’s a few different ways that we could go with this. So personally, let’s talk personal finances, even business finances, let’s keep it general, there’s a lot out there called Parkinson’s Law. And as it applies to money, it says for every increase in revenue expenses will rise to meet or even exceed that increase within three to six months. And what that says is, you know, if you don’t have control, so unless a specific force is put against it, if you don’t have that specific force, that discipline to know how your money is changing what your financial goals are having a plan with it, because unplanned profits will get eaten up, right, and business or impersonal. So whether that’s your retirement strategy, if that’s a marketing investment that you want to make, if it’s start signing up for Steve’s groups and courses and programs, right, having a plan with your money, as it changes is that control so that you don’t let it get out of hand or go on managed?
Steve Fretzin [17:14]
So maybe looking at the numbers first and realizing that, you know, look, I’m making four to five times, you know, or making profit on, let’s say, an attorneys billing or is is getting paid 200,000 a year, that’s like their general salary, bonus, etc. And then we want to make four times that so that you know, billable of 800,000, as an example. And then they get a percentage of I don’t know, if that’s the right, I’m just I’m throwing out numbers, but then increasing that that individual salary, then they just have to build more hours? Or do they have to build at a higher rate? Or how do they make up for that, that that, that increased salary or bonus that they’re now offering that didn’t exist a year ago?
[17:58]
Yeah. So, you know, we have to evolve right? In business and the way that looks in the legal space, you know, I talked about flat fees. So you know, coming up with a flat fee structure that again, justifies itself in the client experience in the value that you’re providing the client above and beyond the actual service or doing of the legal work. Technology is also a huge factor. So knowing your margins, right, how much does it cost you to generate X amount of dollars and being able to have that visual so that you can reverse engineer these numbers, right, as salaries go up? What do I now have to charge? And what does that look like for each practice area that I’m working in?
Steve Fretzin [18:39]
Okay, so alterations are going to have to be made, but you’re saying things will evolve naturally based on what what you’re paying out and what you’re bringing in and what what needs to be shifted?
[18:50]
Yeah, and I mean, I’ll speak that also, you know, one of the other cash bottlenecks that I see is not exercising highest and best use of time in team, you know, billable, billable seats are being filled with administrative functions, right, making sure that your team is freed up enough to allow that productivity to contribute to that profit margin.
Steve Fretzin [19:15]
Yeah, and the employee bottleneck right now is, for example, I was talking to a litigator yesterday, and she’s doing all of her own ri, she’s a partner, right, a equity partner at this firm. And she’s doing all of the low level associate stuff because they just can’t find an associate firm. They can’t get someone under her because they’ve had a couple people poached, and they just can’t see. So we were we spent, you know, half an hour just working on her trying to recruit an associate and get that that space filled because she’s spending her time on lower level less profitable endeavors. So I think I think that’s really important that that lawyers understand what your time is worth. And that all of the administrative even more some lower end marketing stuff is all taking away From your profitability
[20:02]
yeah anything that can be duplicated you know, I watch the shows a lot like restaurant impossible Hotel Impossible Do you ever watch those are the
Steve Fretzin [20:11]
watch I watch more like like restaurant nightmares and like, you know, we’re experts go into the show the profit was kind of fun to watch where somebody goes in and just identifies all the gaps and then works to fix them, right?
[20:24]
Yes, yeah, absolutely. Marcus the Monus. I actually I had an opportunity to see him in Chicago a couple years ago. It was amazing seeing him in person and the way that he interacted with the crowd like that was his power. But Marcus Lemonis on MSNBC is the prophet always says, People don’t buy businesses, people buy processes. If what you’re doing as a rainmaker is a duplicatable process that anybody can sit down and see through. It should be delegated. Now, don’t get me wrong, especially in marketing. I personally believe that you should know and understand your marketing and be develop the voice first. So that you can properly manage it once it’s delegated, that specifically is incredibly important to let your authenticity show through. So putting in the groundwork, but then identifying the repeatable processes that are easy to delegate.
Steve Fretzin [21:18]
Yeah, really, really smart. I want to wrap up on on one question that I’m bringing back from, from something you’ve mentioned a couple of times now, the billable hour, versus moving to flat fees. And I have a number of clients that have done this, and they’re super happy. And so talk about why that might be a good fit for for some lawyers.
[21:41]
So there are a lot of benefits internally to doing that. You know, we just talked about processes, having a flat fee structure creates so much more opportunity for streamlined processes. It’s just cleaner. But what I really want people to understand is the value that your clients get from flat fee models, because number one, you’re able to tell them up front transparency, how much it is going to cost for them to get services through you. Number two, look, there’s a real stigma out there against lawyers. It’s it’s one of the reasons why I chose the legal industry because you know, come to find out that stigma has false grounds. But let’s just be real. People think that lawyers are jerks that charge them for everything. Why? Because you’re billing for every 20 minutes, you compose an email for every conversation, right? When they get that hourly invoice, they’re looking at it and overwhelmed going, well, I could have written that email in five minutes, I know exactly what email you’re talking about, and how you charge me for 20 minutes to get you know, you give them an opportunity to pick apart what you’re doing as opposed to that one invoice with one line item that says milestone X. Yeah, you know, and it gives them that that anticipation So then again, they don’t have anything to complain about because they knew up front what was going to happen you showed them the lay of the land. So in my opinion the most value there’s definitely internal value for law firms that choose to go flat fee but the biggest value in my opinion is your clients experience.
Steve Fretzin [23:22]
Yeah. And that ends up being a big part of how you get referrals how you grow your book, how you keep clients happy over the long term because right now you know people are people are going to move around people are going to look for you know, you know, new new ways to save money or increase efficiency etc. So really insightful. Chelsea, thank you so much. Let’s move on to the three best of and again, I spent some time down in normal Bloomington as a as an Illinois State Redbird and I loved going to school there. I had a great time. I may have learned some things I don’t remember much from it. But tell. Let’s talk about Bloomington Illinois is a beautiful place down states a little bit you know, south of Chicago. So what’s your favorite restaurant? If you if I was visiting Bloomington I’m coming back to my alma mater. What restaurant am I going to what’s your favorite?
[24:15]
Okay, if you ever make it to Bloomington or even around the area I’m going to tell you about a restaurant who won Best in state for their hotlinks it is amazing. So it’s called schooners. Okay, it’s fried on Front Street in Bloomington. This place has hands down the best hot wings there. Onion rings are amazing. And they have a pork tenderloin that can make six sandwiches out of one line. Like it’s the most amazing thing you’ll ever eat.
Steve Fretzin [24:49]
Wow. All right, I gotta come back. Now that’s that alone, I think is other than visiting you or visit you hot wings in that I’ll go with you. You’ll go with me. Alright, I’ll bring my let’s do it. Here. So that that alone might be answering my next question about visiting. If I’m if somebody is visiting Bloomington, obviously they’re going to go to schooners. If they like hot wings or pork tenderloin, what would be an activity? What would be something that we would also want to see or do when we’re in Bloomington?
[25:16]
Yes. So this is actually right outside of Bloomington. Makena Valley vineyard, this place hosts events, obviously, in the summertime, but they will have bands out there. They let you bring your own food and snacks into the vineyard. Right. It is a really awesome place for entertainment.
Steve Fretzin [25:34]
Awesome. That sounds wonderful. And what are people into that live in Bloomington? What are you into? What are all your neighbors into? Like, what are you guys doing these days?
[25:45]
Yeah, so we have you know, ever since COVID, people have gotten out a lot more outside. So there’s a place called funks grove. It’s actually a maple syrup. Place is how it like kind of got on the map. Yeah, and other than just being outdoors and having a beautiful view. They have a really cool Park. So those of you who have little ones, kids, there’s like this outdoor explore area, they have a dinosaur digs sand pit where your kids can look for dinosaur bones. But it’s a gorgeous outdoor place to go.
Steve Fretzin [26:21]
Wow, that sounds fantastic. Well listen, your knowledge and expertise and your knowledge of wings now as well. So you got the money, expertise, the law firm expertise in the wings, expertise? How wings expertise. Really, if people want to get in touch with you, they want to reach out they go look, I haven’t looked at my numbers in years. I don’t know what it all means. I hate dealing with it. I’d love to have an expert in my corner. How would they get in touch with you?
[26:47]
Yeah, so our website, your course solution.com has links to all of our social media pages. We’re a little bit of everywhere.
Steve Fretzin [26:56]
Okay, wonderful. And obviously, I’ll have all the details in the show notes. And Chelsea just thanks so much for a hopefully a budding friendship that we can continue. And also just for sharing your expertise. I know there’s a lot of lawyers out there. And that this is like a big mystery area for them. They’ve never really thought about looking at the p&l and the numbers and, and all that and trying to make improvements. So hopefully, you know, they’ll consider you as a resource and reach out soon, but just thanks again for taking some time for me.
[27:23]
Yes, thank you so much. And I just want to say if you are that attorney that feels a little bit insecure about your numbers, if you know you’ve got a mess. Look, I promise. You are not the only one and nothing here is unfixable.
Steve Fretzin [27:35]
Wow, that’s wonderful and very, very reassuring. Listen, everybody, thank you for spending some time with Chelsea and today. Hopefully you got a couple of good takeaways and you’re really thinking about the money moving forward. And listen, just take care of yourself. Take care your law firm, take care of your people if you have people really important right now, and be safe and well and we’ll talk to you again soon. Thanks so much. Take care everybody. Bye bye.
Narrator [28:00]
Thanks for listening to be that lawyer, life changing strategies and resources for growing a successful law practice. Visit Steve’s website fretzin.com For additional information, and to stay up to date on the latest legal business development and marketing trends. For more information and important links about today’s episode, check out today’s show notes