Life Beyond the Briefs

Mastering Law Firm Money: How to Create Predictable Profit in 2026 | Leah Miller

• Brian Glass

Share episode

This episode of Life Beyond the Briefs is a breakout session from the GLM Summit with Leah Miller, founder of Firmly Profits and fractional CFO for law firm owners. Leah started as a paralegal, worked her way up to firm administrator and CFO at a PI firm, and now helps firms around the country actually understand their numbers and build real profit on purpose.

If you have ever opened a profit and loss statement, stared at it, and quietly closed it again, this one is for you. Leah walks through the basics of law firm finances in plain language. She shows you how to read your financial statements, set a realistic budget, and use a few key benchmarks so you know if your expenses, wages, and marketing spend are in a healthy range. Then she connects it all back to something practical. How much you bring home, what it really costs just to keep the lights on, and how to build predictable profit instead of just taking money when it happens to be in the bank.

In this session, you will learn:

  • The three financial statements every firm owner should review each month and what numbers to focus on first
  • How to break your expenses into revenue driving, profit driving, and personnel so you can see where the money is actually going
  • Simple benchmarks for marketing, operations, and wages that help you spot when something is off
  • A straightforward way to build a budget using your real historical numbers and adjust it for your goals
  • How to plan for bonuses and growth hires so they are baked into the budget instead of last minute stress decisions

Leah’s goal is not to turn you into an accountant. It is to help you feel confident with your numbers so you can make better decisions, spot problems early, and pay yourself what you actually want to earn.

Connect with Leah Miller

____________________________________
Brian Glass is a nationally recognized personal injury lawyer in Fairfax, Virginia. He is passionate about living a life of his own design and looking for answers to solutions outside of the legal field. This podcast is his effort to share that passion with others.

Want to connect with Brian?

Follow Brian on Instagram: @thebrianglass
Connect on LinkedIn

SPEAKER_01:

Okay, so we are going to get into the budgeting part of everything. And this is what I do with my clients. This is how we set budgets. And we're the perfect time of year right now for you to start looking at that for 2026. So what I do with my clients the first time we meet is we talk about goals. And I know that if you've ever listened to different podcasts or gone to conferences, everybody's all about goals, but it really does give you a roadmap to where you want to go with your finances. So not only do you need to talk about goals for your firm, I want to be a$5 million firm in five years. Okay. So how do we increase our revenue every year to get to be$5 million? I want you to really think about why do we want to be a$5 million firm in five years? And what I always ask people, and I always get almost the same answer, is how much do you personally need to bring home from the firm? And a lot of times, firm owners who are in probably like the$300,000 to almost million dollar range where they're in that really big growth period, they have no idea. They don't even know how much they're bringing home now. They're just taking money when there's money in the bank.

SPEAKER_00:

Hello, my friends, and welcome to another episode of Life Beyond the Briefs, the number one podcast for lawyers choosing to live lives of their own design and build the kind of practices they actually like showing up to on Mondays. Today's episode is with my friend Leah Miller. Leah has a company called Firmly Profits. She is a fractional CFO for law firm owners and is somebody you probably need in your life if you are a lawyer thinking about starting a practice on your own or if you already have your own practice. Now listen, I went to law school in part because I am not good at math. The math that I can do these days consists of adding medical bills, adding lost wages, and taking a settlement or a verdict and dividing by three. Anything beyond that, I don't trust myself to do. I have learned enough about what CPAs do and accountants and tax strategy and financial planning to be dangerous to myself and annoying to my advisors, and they will tell you that. But you do need to have an advisor. So many of us try to do this on our own, especially when we're starting out. Handle the bookkeeping. You know, I have a friend who runs a um a real estate company who's talking about doing his own taxes next year because he's learned enough also to be dangerous. I think that's a bad idea. I've shared with him that I think it's a bad idea. I think you need to have trusted professionals by your side. One of the ways to get to know whether you can trust somebody is to consume their content on podcasts and on stages. Which, by the way, is why you should be creating content and either creating podcasts or getting on stages, right? This gives you content for your in-consumer ultimately to consume. This is why we're doing most of this. Okay. But one of the ways you can start to build a relationship and a trusting relationship with your ultimate vendor for uh CFO, CPA services, whatever it is, outside of the hour-long intro call, is to consume their podcasts and their video content. Leah Miller has been creating a bunch of video content on TikTok. She creates Instagram and uh she creates content on LinkedIn. And that's how we got to know each other. And I invited her to speak at the Great Legal Marketing Summit. I think this is an episode that's going to be particularly good for you to listen to a second time with the notes. And you can get the notes at the GLM SummitNotes.com website, glm summitnotes.com. I will let you download 122 pages of notes and slides from every single speaker that we had at our events in October of 2025. I think this is a good listen and it is worth you listening to through once. But this is one of these episodes where it would be helpful for you to have the slides in the video in front of you. And so you go to glmsummitnotes.com. You can download the slides, download the notes from Leah's discussion, and there's an opportunity also for you to access the video. In this episode, Leah's going to talk about financial statements, budgeting, PL, expense management, cash flow, and strategies for bonusing and motivating your employees if you're running a law firm in 2026. This is a cannot miss episode. So without further ado, Leah Miller of Firmly Profits.

SPEAKER_01:

Good morning. I am sure everybody is so excited to talk about law firm finances at 9 a.m. It's the perfect time to do that. I recognize a lot of people in the room from LinkedIn. My name's Leah Miller. I am the owner and founder of Firmly Profits. We are a fractional CFO and bookkeeping firm for law firm owners. A little bit of my background. I started out as a paralegal, and my goal one day was to manage a law firm. And I thought I would be like really old in my 40s, which I know is not old because I'm almost there. But when I was 25, that's what I thought. And then when I was 26, right place, right time, and a lot of hard work on my part. Our office manager left and my boss looked at me and he said, Do you want to manage my law firm? And I was like, Yeah, let's do it. And so I got a crash course on QuickBooks and all the things. And I continued to be a paralegal. And over my 10 years at that personal injury firm, I worked my way up till by the time I left, I was a firm administrator and CFO. And I started doing some bookkeeping and financial consulting on the side. And I started talking to some friends of mine that were law firm owners. And I realized that law firm owners really needed help to feel confident and understand their finances. And so that's kind of how I left that job and started Firmly Profits in February of 2023. So I'm coming up on three years now. And my goal is to help law firm owners just feel confident in the finances. Because how many people have received their financials at the end of the month and looked at them and had no idea what a profit and loss even meant or said? Probably most everybody. Because that is probably what happens. That's what I find happens a lot of the time. So today we're going to bring it back to the basics. We're going to end today with going over how I do actual budgeting for my clients and how we set up the budget. But before that, I want to get into just the basics of law firm finances so that you guys understand or have a basic understanding of what that looks like. And what I really hope you take from this is to go back to the office when you're done. And I know when you come to conferences like this, you're overwhelmed with information. So when you have a minute to sit down, I really want you to go in and pull those financials and just take some time to look at them and get familiar with a couple of numbers that I'm going to tell you about today. Okay. And then at the end, we'll have time for questions. But if you have questions in between, you can let me know. So first part of basic fundamentals of law firm finances is to have a good accounting system. I hope everybody here with established law firms has an accounting system set up. If you're just starting your law firm, I suggest that you get QuickBooks or Xero or whatever you want to use to set up your accounting system and have it set up from the beginning the right way. You know, in the beginning, when you're not generating a lot of revenue, it feels like, oh, I don't need that. But then if you get two or three years down the road and everything's a mess, you can lose money because you have to pay somebody like me to fix it. You can lose money because you've overstated your income or understated your expenses on your taxes. And so you really want to make sure that from the beginning that's set up and that it's maintained monthly. Um, then you need to know how you're going to receive your money your money from your clients. So if you're a contingency fee firm, this is also important. Are we writing checks? Are we wiring money? How are we receiving money into our trust account? If you are billing clients monthly or bi-weekly, you need to make sure that you make it really easy for your clients to pay you. And then the third but most important is knowing the trust accounting rules. And so I was just talking to some people about how I was in Florida and they are very picky about trust accounting. And some people claim other states are not as picky. I think everybody should have their trust accounting balanced and set up in a really just perfect way every single month. So know those rules and make sure that you have that set up correctly. So understanding those financial statements. If you are getting your financials done, you should be receiving financial statements or you should have access in your accounting system to pull these financial statements. And these are what you want to look at every single month. First is your income statement or your profit and loss. So that's going to show you your revenue, your expenses, and then your net profit at the bottom. This is important. A lot of people think of this and they're like, I need this done for my taxes. But this is also a really valuable tool for you to start making decisions, operational decisions using the financials in your firm. So you want to be familiar with that. And I would say when you're pulling that, if it looks really confusing because there's so many lines and so many numbers, familiarize yourself with what is your revenue, how much are your expenses, and what that net profit is at the end. I think there's some seats up here, and there's some in the middle. And those are the numbers that just start looking at those and looking at the trends every single month. And that's what really matters. If you're looking at these financial statements on a monthly basis, you start noticing trends. So I'm not saying go to the office tomorrow and pull your financial statements and make some huge decision and change everything about your firm today. I want you to just start looking at them and noticing trends so that you can start and you almost subconsciously start making changes when you start looking at this. Your balance sheet's going to show you your assets, your bank accounts, your liability, your equity. A lot of people track advanced case costs on their balance sheet. So how much do you have out in advanced case costs? How much do you owe on your loans? Things like that. So look at those and make sure that you're familiarizing yourself with those numbers. And then your cash flow statement will show you how the cash is flowing through your firm. So if you look at your profit and loss and you see you have$50,000 in net income last month, but you have no cash in the bank, that probably means that you were paying back loans or things that are not showing up on your profit and loss. And so that's when we go and look at the cash flow statement. So what are different types of revenue? I'm sure everybody is familiar with their revenue, but just so you know, we have hourly, which the biggest LinkedIn post I ever made was asking people their opinion on the billable hour. If you really want to get attorneys fired up, that's what you ask them. Contingency fee and then flat fee. And so just know how you're gonna bill your clients, how you're um receiving your revenue. So then we have expense management. And this is where I see a lot of times things get out of control with your finances. Um, we have fixed expenses like office rent, salaries, utilities, things like that, and then variable expenses like client costs, office supplies. I suggest everybody at least once a year. I'm starting to do this with my clients as we're going into the new year. Look at all of your expenses, your software. I know I do it with my business. I'm like, oh, this new software, it's only gonna cost me$50 a month. And then this one is gonna help us and cost us$100. And then none of my staff is even using any of this software. And we just spent$500 on nothing. So go through that and look at that at least once a year. Okay, so we are going to get into the budgeting part of everything. And this is what I do with my clients. This is how we set budgets, and we're the perfect time of year right now for you to start looking at that for 2026. So, what I do with my clients the first time we meet is we talk about goals. And I know that if you've ever listened to different podcasts or gone to conferences, everybody's all about goals, but it really does give you a roadmap to where you want to go with your finances. So, not only do you need to talk about goals for your firm, I want to be a five million dollar firm in five years. Okay, so how do we increase our revenue every year to get to be$5 million? I want you to really think about why do we want to be a$5 million firm in five years? And what I always ask people, and I always get almost the same answer, is how much do you personally need to bring home from the firm? And a lot of times, firm owners who are in probably like the$300,000 to almost million dollar range where they're in that really big growth period, they have no idea. They don't even know how much they're bringing home now. They're just taking money when there's money in the bank. So I really want you to sit down and say, how much money do I need to bring home from the firm now? What are my goals for next year? What does it look like in a couple of years? And if you come to me and you say, Leah, I have to bring home$50,000 a month or I cannot survive, that is fine. But we have to then work backwards and see how much revenue do you need to generate? What are your expenses? What kind of expenses do we cut? Can we afford to hire that attorney if you have to bring home$50,000 a month? I always tell people I don't judge them on their expenses. You can tell me whatever you want. You can spend your money on whatever you want as long as you have a plan. So once you have your personal goals, then yes, let's talk about firm goals. We want to have, we want to hire four new attorneys in the next five years. We want to handle 350 cases every single year. We want to generate this much revenue. We want to have this type of team. We want to buy a new building. We want to give back to the community. Whatever those goals are, it's going to look different for everybody. And then I want you to communicate those goals to your team. Not your personal goal. You don't have to tell your team that you need to make$50,000 a month. But I want you to tell them like, why are we doing this? How many clients do we want to help? What do we want to do in the community? How much money do we want to make every year, generate revenue so that we can give our team bonuses? I think there's a a lot of value in communicating that to your team. So make sure you're really clear on your goals for your personal life and your firm. Another way where this comes into play, I had a client who wanted to make a certain amount of money but work less hours. So we had to hire an associate attorney to obviously do some of the work. So that is going to change our budgeted numbers. And when we start looking at the budget and talking benchmarks, that's going to change those a little bit for that firm. Whereas, you know, I've talked to people in the room before we started, they want to manage the firm. They don't want to do the legal work. Fantastic. That's what a lot of firm owners are doing. So then you have to hire associate attorneys. So then that's going to change what your expenses look like. So those are the types of goals that you really need to think about as we're working through this budget. All right. So basics of budgeting. This is how I do it. I do it in a Google Doc Excel spreadsheet. Super simple. It looks overwhelming when you go to do it, but it's really simple. So we're going to walk through exactly what I do. And then I'm also going to make the Google Doc available to everybody at the end if you want to do it. So first, I start with averages for the last year. We're in October, so you could even use this year. And so what are our averages? Average revenue, average expenses, and that gives us a starting point. And I literally put that into the budget sheet. You know, this how much we've been spending. And then you want to adjust for your current expenses. So if we pull it up and our average rent was$2,000, but we know we just moved into a new building and our rent's going to be$5,000, then we're going to change that. Same with wages. You know how much you're paying your people right now. So we can put those numbers in as well. And then you're going to look at the bottom net profit number. So I do all the averages, adjust for current, and then I look at the net profit at the end. And if it's negative, then we have to go up and adjust something. You know, we have to make our revenue higher. We have to change our expenses, or, you know, we have to kind of look at it for our goals. So that's the first part is just getting it on paper, getting the budget. And I'm going to show you an example of it. When I'm doing budgeting and reviewing finances with clients, I split all of our expenses into three categories. So we look at revenue driving expenses. Those are going to be expenses that as you spend more, in theory, your revenue should go up. So marketing. The more you spend on marketing, your revenues should go up. Then we have your profit driving expenses or your operational expenses. Those are your rent, your utilities, your office supplies. The more money you spend there, the less net profit you have. They're really not driving revenue or anything like that. So those are kind of expenses where we're going to go look at our software. And that's the thing. If we spend$500 a month on a software we're not using, that's$500 less in net profit. And then the third category that we look at is personnel expenses or wages. How much are you paying your people? So in those three categories, revenue driving, operations, and wages, everybody always asks me what are the benchmarks for law firms? How much are law firms spending on those three things? And I can give you benchmarks. So normally marketing expenses, you know, I see between 10 and 20%. If you want to be really aggressive, we can go up to 25%. But I want you to at least be at 10% so that we can be driving sustained growth. There's caveats to that. If you don't need to spend that much because you have all the leads coming in from referrals and things like that, then we we don't want to spend money just to spend money, but those are what we typically see. Operations expenses, I typically see between 10 and 15%. If it's over 15%, you know, it's getting a little bit high. If you have a if you live in a high cost of living area and have a large rent, then that's normally what pushes that over the edge. And then wage expenses, I like to see between 30 and 40%, not including owner's pay. If your wage expense is at 50 or 60% of your revenue that you're generating, then there's an operational issue and there's something going on within your operations. Because if you have that many people, you should be driving revenue. There's caveats to that. When you add, you know, a new attorney, it's going, if you're in personal injury, it's going to take 12 to 18 months to really see a turn in revenue. And so like it'll go up and down, but that's generally what it is. So then when we have our budget set up and we have these three categories, you have to review it monthly. So when I first started as paralegal, I worked in bankruptcy for a short period of time and I loved setting budgets for people. And then I loved going home. I was like 23. I would go home and set a budget for myself. And then I wouldn't look at it again for like six months, and then I'd go set a new budget. And I'd like wasn't saving any money because I never actually looked at the budget or followed the budget. We actually, with my clients, we look at the budgets every month. We're like, okay, we said we were gonna spend$5,000 a month on software. And so far this year in 10 months, we have spent$7,000 a month in software. What's going on? Did we budget wrong? Are we spending too much? And then on the flip side, we look at it. And if we say we're gonna spend$20,000 a month on marketing and we're only spending$10,000 a month on marketing, why are we not spending more? What is going on? It doesn't mean there's something wrong, but we talk about it and we talk, you know, what is the explanation? Okay, we're ramping up marketing slowly, or oh, we forgot we were gonna spend more money. Let's spend more money. We didn't tell our marketing people that. Things like that. All right, so let's walk through a budget now. So this is literally what it looks like when I do this. And there's two ways that you can break it out. And I kind of talked about it on the profit and loss. When I do bookkeeping for clients, I like to break things out a little bit more because I want you to have more information. So for tax purposes, you just need to know your total revenue, your expenses, and your net profit. You need a little bit of breakdown of expenses, but not a lot. When I do things, I like to break it out a little bit more. I want to do our two different practice areas. So we can see how much practice area one is generating and how much practice area two is generating. You can do this if you're only doing personal injury. I'm doing it pre-suit in suit for some clients. So we can see how many, how much of our revenue is pre-suit, how much of our revenue is in suit. And then you can make decisions like right now, I'm working through something for a client where we're trying to decide if we want to refer out smaller cases because we don't want to handle the smaller cases. So we're breaking out that information so that we can see if we refer out all of these cases, can we still sustain the firm and still have enough revenue? So those are the types of things that you can do when you're budgeting and when you're looking at your um historical financial data. When you are setting the goals for revenue, I want you, especially on your budget, I This is gonna be a little bit different than your regular goal. So if you sit down with your leadership team and you do your whole goals for the next year, I want you to be realistic about it, but I also want you to push yourself. So if you're saying we're doing$10 million next year, but this year you only did$2 million, I'm gonna ask you, great, I want you to do$10 million, but why do you think we can generate$8 million more next year? Should we really set our budget goal at$5 million? Because that's more realistic. Not that I don't want you to get to six or seven, but I want to be realistic because we are going to set our planned expenses based off that revenue. So be realistic, but still push your team to do well. And then these are expenses. It's hard to see. There's a lot of them here. Um, and this is gonna be everybody's gonna have different categories on your chart of accounts and your accounting. You make this work for you. But you can see here where I have the revenue driving, and on this one, they're spending 11% of their revenue on marketing. I have the profit driving, they're spending 13%. So 11% is a little bit low. We might say, how can we increase this? Do we need to increase this? What do our leads look like? Operating 13%. I wouldn't think too much about that. Um, but we would still, even if we're within the 10 to 15% we want to see for operating, we would still go through and audit our office expenses at least once a year. Yes. Yeah, yeah. I just write profit driving because the more you spend there, the less profit you're gonna have, or the less you spend, the more profit you're gonna have. Yes. I do. We do normally break it out. Like if there's health insurance, this is this is like all made up numbers. So yes, you would want to put health insurance, any other ancillary benefits in here, in your personnel expenses. The big question I get all the time is do we include marketing personnel down here? And that is completely dependent upon what you're trying to do and what decisions you're trying to make. I have been splitting it out and putting it up here in this advertising and marketing. We'll put marketing uh personnel. If all they're doing is marketing, we will put it up here and not down there. But again, there's so many different ways to do this and to look at data. You need to do what's going to help you make the decisions that you need to make. So, what is your end goal? What are we trying to look at? But yes, I have been splitting out the marketing uh personnel up there to see that. But yes, anything that goes into hiring somebody. So you have health insurance, 401k match, all of those things should be part of that wage cost. And then down here, the wages are at 60%. Now I have owners' wages at 6%. So we're really at like 54, 55%, 53%, which is still pretty high. So it's not too high, but it could, I'm not saying like I wouldn't say go fire people, but like how can we generate more revenue? How are we doing things like that? Again, all made up numbers, and just to kind of, you know, give you an outline there. But this is literally what it looks like when I meet with clients and we talk about it. I do, under the personnel, break out attorneys, support staff, operations, however, your firm is set up and it makes sense. I've broken out paralegals and legal assistants separately from each other. And all of that information helps you make decisions. So, you know, if our wage expense is too high, where are we too hop top heavy? Is most of it in operations? Do we need all of those people? I don't ever jump to firing people. I hate it. I know everybody hates it. But I just want you to be aware of the numbers. So again, you don't have to make huge decisions when you look at this. I just want you to know what the numbers mean. So this is it all just um without all the extra stuff. So we have income, revenue driving, profit driving, personnel, and then our total expenses are 87% of our revenue. So our net profit margin is about 12.5%, um, which is terrible, but on the low. And if you take the 6% of owners' wages, then you're looking at, you know, you're closer to 20% net profit. Can you get higher than that? Especially, I know a lot of people are personal injury attorneys. Yes. So I have clients that are at 25, 30%, all in, some even higher than that. It just, you just have to make small sustained changes over time, and you can get that net profit up. But again, when you're starting this, I just want you to be aware of the numbers and see what it is. So, first we're gonna do um what is the importance of budget of a budget and looking at a budget. We want monthly planning and control, and we want resource allocation. So just knowing where your resources are going, having that planning. Okay, we talked about creating a budget. We do revenue projections, expense projections. The expense projections are what I really love about the budget and what I really want, what I really focus on sometimes with clients. So we'll go through this whole exercise, and I'll say, okay, it costs you$109,320 a month just to keep your firm open. And it's sometimes that number is a shock because, and that's actually kind of on the lower side for personal injury firms. It's a shock because they've never actually looked at the numbers and thought about how much does it cost to keep this firm running? And so that's a great number to start thinking about when we're talking about driving revenue and what our goals are and how much we need to settle every month. It can help you kind of figure out, you know, where bottlenecks are and things like that. If you come to me and you say, Leo, we have the inventory, we've got 300 cases out there, but we're not settling any cases. Well, it's not necessarily a financial problem, it's a process problem. Okay, where is the bottleneck? Is the bottleneck in sending a demand out? Is the bottleneck in getting depositions and mediation set, or you know, or is the bottleneck a lot of times we settle the case and we move on to the other one that needs to be settled. And then the money sits in trust for just a little bit too long because nobody's focusing on distributing the money. So once you start looking at these numbers and being aware of them, then you can start fixing those other issues. Sometimes there's no issues at all. Sometimes we look at this and we're like, okay, we've got some extra money to spend. And that's the beauty of knowing your numbers. If you know that your expenses are$109,000 a month and you have$5,000 in savings and you just settled a case for$300,000, my favorite thing to tell clients is to take money, go spend it. You've you've got enough to put back into the business, so go spend it. If you want to take money out and go do something for yourself personally, do that. So that's the beauty of what these numbers show you. So then, like I said, I love setting budgets. I do look at them now. I've evolved since I was 22, but we go back and look at it every single month. And we say, all right, so we planned 125,000 in revenue and we're doing a lot better on revenue than we expected. Great. We should have some extra cash. Then we kind of look through here and we're like, okay, we're spending 7% of our revenue instead of 11% on marketing. We're coming in a little bit lower than we wanted to on marketing. Why aren't we spending enough on marketing? And I say, go back to your marketing people. How can we incrementally increase that? Now I don't ever say, go out and say we're spending$20,000 a month on marketing. We want to be at$50,000. So go increase by 30,000 tomorrow, but let's incrementally increase it and over time get to that goal. Or do we need to allocate some of that planned marketing money somewhere else? Are we bringing in enough cases? Do we have enough leads? Do we need to hire somebody else? Maybe we need to increase our wage expense a little bit so that we can handle all these cases. Operations expenses came in high. Again, I made up these numbers. So operations expenses are way high. Okay, we need to go through and see what we're spending money on. Now we're only looking at the first three months of a year. So are there things that you pay for, like your software in January, that you don't pay for in November? Yes. So this is not a problem. We just want to be aware of it. And that's what I'm saying. And that's why I tell everybody is just be aware of the financials and know the numbers. It's okay if they're off. Yes. So if you are cash accounting, which I'm assuming just about everybody is, I have not run across a law firm that does accrual. Um, I work with law firms in like the zero to$10 million range. Credit cards should be booked when you swipe it. Some accounting people will do a journal entry when you pay it. And so it doesn't book when you spend it. But the rule is if you are cash accounting, you should book it when you spend. So, like we're coming to the end of the year, and I'm having this conversation with several clients. We have really good net profit this year. So we need to spend some money. So we can spend the money on the credit card in November, December, and it counts for this year's tax season. So if it's not being done that way, I would encourage you to look into it. I have done some swaps to fix that, but that is how it should be. And I would encourage everybody, you want your bookkeeping updated on a weekly or bi-weekly basis so you can see your numbers throughout the month. If you're getting it done quarterly, you really don't want to do that. If you're getting it done right before tax time, if you're handing your CPA all your bank statements in February and you're like, here you go, terrible, terrible idea. But I would say you want it done throughout the month because you want to be able to pull profit and loss today and see how you're doing this month. So that's just a little aside there. So we want to go back and look and see, okay, we're spending 40% of our planned revenue on personnel that's lower than the 60. This 60 included bonuses. So I skipped over that part. I like to plan out bonuses. If we know we're gonna bonus our employees, our planned bonus amount, allotment, is$150,000 for the year. I put that in that original budget. So when we see the break-even of$110,000 a month, that includes you bonusing your employees for the work they did. So you're not getting to the end of the year at Christmas time and you're like, okay, how much money do we have in the bank to give bonuses? Let's see what this looks like. Oh, wait, I have to pay taxes. We have to pay due bonuses, and the partners want some money. I've done this before. Can you tell? I did that in my old job. So you want to make sure that you're planning that in as well. So that's what's throwing this number off here is we haven't paid any bonuses yet this year, but we budgeted for them. So we'll have the money saved for that. So this is what you want to look at every single month and just look at the comparison and see. And again, I'm not asking you to make any big changes. I just want you to be aware of what the numbers are. And I've seen it in action. I've been working with clients for two and a half years now. They haven't like you, I'll meet with clients the first time and they're like expecting me to give them this like, this is what you need to do to fix all the problems. And it's not really that. It's let's strategize and talk and make little changes. And just paying attention to the financials over a sustained period of time will fundamentally change the financials in your firm. Promise. So then the other thing I look at when I compare is we look at the quarter one average or the quarter average. So quarter, and these numbers are different than the last ones. So quarter one average on this slide is 155 in revenue. So we came in at 93% of our planned revenue. So that gives you a percentage and idea of how much we're did we come in low? Did we come in high? Same with marketing. We came in at 95% of our planned marketing spend. So we're almost there on that. This one, education and training, we came in at 275% of our planned education and training expenses. Again, you might front load that in the beginning of the year. So if we're looking at one quarter, that's not a problem, but we need to look at it and be aware that when you decide you want to do a big education and training thing at the end of the year, we've already reached our budget. And so then you as the firm owner can decide to go over budget. But I want you to be very aware of your goals. And that's kind of like, and that's where somebody like me helps when I can go and I'm the outside person. And I'm like, hey, I know you really want to go to Florida for that conference. It's a fun one, but that's not gonna get us to our goals that we've set. So, you know, do you want to reach those goals? Do you want to go to this fun conference? And that's what these numbers will tell you. So again, here, options expenses, we're almost at 200% of our operations expenses. So just being aware of that number, yes. That's 200% compared to, so we've spent$11,000 on office rent and we only budgeted$5,400. So we spent 200, we spent double what we planned on spending per month. So it's the average per month. So this right here is the average that we spent over three months' time. Yeah.

unknown:

Yep.

SPEAKER_01:

And then wages, we came in at 81% of our planned wages because again, we only spent a little bit of the bonus, but we spent more of the bonus than we wanted to. So we just have to be aware of those numbers. So again, it's just being aware of the numbers and what you're doing. So, how does all this work? A lot of times we have a lot of conversations about bonuses. How do we motivate our employees? Sometimes they are motivated by money, sometimes they are not. If they are not, I don't know how to help you. So, how do we motivate our employees to reach the goal of the firm? Again, go back to those goals. We want to tell them the goals. We want to be transparent about the goals. And then we want to motivate them to buy into our mission of the firm. So looking at all of those data and the numbers, we know what we have to hit. We have to hit$100,000 a month in pre-suit revenue. So that means if we send out 20 demands a month and we're settling 10 for an average of, you know, 10,000, then that gets us to our$100,000. So you can start using those planned numbers to start setting some goals for your employees that aren't necessarily revenue goals. So, you know, how many cases do they have to go through a month? How many hours do they have to bill monthly? I come from a personal injury background, but I've actually been having a lot of fun figuring out the billed, billable hours stuff. And then time on desk for each file, we already mentioned this. Or I already mentioned it. How long are files sitting on a desk? So that again, if you tell me, Leah, we have 300 files in the office. We are bringing in more leads, we are signing more cases than ever, and I have no cash in the bank. Well, how long are you holding on to those files? Is it too long? Again, where is the bottleneck? And so knowing the numbers, having the data really starts helping. And this is where I said the small changes over time, you start making different operational decisions. You look and see, okay, this paralegal is sending out four demands a month. I really need her to send out five. It's not that much more, it's just one more. And so then you can communicate, hey, if we send out five demands a month, we're gonna generate this much revenue. I'm gonna give you this bonus at the end of the quarter. Like everybody is, it's gonna be great for everybody. So you can start making those decisions and setting those goals so that you can incentivize your team. And again, we build in the incentives and the bonuses into that original budget. So if you set up, you know, the bonus plan for the year and everybody's hitting their KPIs and their goals, you have the money in your budget because if you know if they hit those goals, you're gonna generate enough revenue to pay for the bonuses. Any questions? Yes. Um, I think based on revenue, I'm working with people that are like in the 750 to getting to a million range. I always tell people, and to be completely transparent, my fractional CFO fees start at 2,500 and go up from there depending on what we do. So you have to be able to sustain that. Um, and I think that's pretty standard. I tell everybody when you're going from 500,000 to a million a year, it's probably one of the biggest changes you're gonna go through with your firm because you're hiring people, you're gonna have clients in your office that you've never talked to before because you have other associates handling it. You're going to feel like you're spending more money than you've ever spent and you're making no money at all. And that's the climb from 500 to a million. And then when you get over a million, there's more strategy, but you feel less like you're just spending all the money and not making any. It's what I find with a lot of people. Yes. So an in-house CFO is probably gonna cost you about$250,000 a year. I'm working with people that are doing seven, eight million a year and they're still getting the strategy and everything they need. I find a lot of people need an in-house COO and things like that prior to what they need. So I would say probably like over the 10 million range is when a lot of that makes sense.

unknown:

Yes.

SPEAKER_01:

So the key difference is your profit and loss is not going to show financing activities. So if you're like paying back a loan and things like that. And so it only shows like the expenses, should only show expenses that you can deduct on taxes. Um, it doesn't show, you know, your owner's pay and things like that. There's a lot of items on the balance sheet that don't show up on the profit and loss. The cash flow is going to show like your financing activities, your, you know, things like that, those outside of the profit and loss is what that's going to do. So again, if you're booking iFirm and you're booking advanced case costs on your balance sheet, you're not going to see that on the profit and loss. Going to show cash, like net profit, but you don't have cash. So the cash flow is going to show the actual cash. It goes back to, I hit somebody one time, they're like, all big companies run in the red. On paper, you run in the red because you can, you know, like there's ways to manipulate that. But the cash flow shows the actual cash coming in and the cash going out. Yes. Well, that's a that's a fun gray area. No, that is the proper way to do it. That's the way I do it. So if you are a firm that is recovering costs within the next month, so if you bill hourly, you're billing your clients monthly, I put it on the profit and loss, it balances itself out. Like I do it as an expense. Personal injury firm, it should be on the balance sheet. Some people don't have it on the balance sheet. I try to move them all over. I like it, and this is not a tax reason. I like it because you can look at it and see how much you have out in outstanding costs. When I worked at a firm, um, we did not do it that way. We expensed it. And so I one day I said to the owner, I'm like, shouldn't we know how much we have out and outstanding costs? Like if we settle every case today, how much money are we getting? And nobody had any idea. And so when it's on the balance sheet, you can see it. Some other reasons, if you expense it, if you have a really good revenue year and you don't spend as much on case costs, then you're paying more, like you're it's just off. It's not like a real accurate depiction. So you're doing it right if it's on your balance sheet. Then it moves to your profit and loss. Yes. And then it goes to it's so then it shows up on your profit and loss as an expense. Yes. That's the proper way to do it, in my opinion. Yeah. No, there's still a lot of people that don't do it that way, and I switch them. If I'm doing their books, I switch it over. Yeah. Yeah. So the theory is it nets out in the end.

unknown:

Okay. Yes.

SPEAKER_01:

Uh-huh. If it's not set up, my favorite way to do it is set up liability accounts and have a sub-libility account for every client. If it's already set up and you're using customers, it is hard to switch it over. Uh, I have a couple right now that I'm going to maybe switch in 2026 because it's harder to pull reports if you're tracking by customer. If you're using sub liability accounts in QuickBooks, you just go to the chart of accounts or the balance sheet and you can see a list of your clients and it's your client ledger. Yeah. I will say. If you can reconcile, can you reconcile in jurisdiction? Yeah. So if you can do that, I don't track it in QuickBooks. Like if you're confident, yes, yes, then you can do it. You can do it in QuickBooks. The only limitation you have is you can only have 150 chart of accounts in the lower QuickBooks programs. You have to pay for the highest QuickBooks if you want unlimited. So if you have more than 150 clients in your trust account at one time, then you have to track them by customers. And in my opinion, it gets really clunky, but there's ways around it. So it does work. With people tell you don't connect. Actually, my favorite way of doing it is having a completely separate QuickBooks online for your trust account. Yes, set up a separate company. You pay$25 a month and it's only your trust account. Now, if you use a program like Filevine and you want to connect Filevine to your QuickBooks, do you then have to choose do you want to connect it to your operating or your trust? You can't connect it to two separate QuickBooks accounts. I no, no, I like keeping it separate. It's 50-50 of my clients. If I set it up, I set up two separate companies. If you're going to do the integration with Filevine, you have to keep it one. Or you have to decide, do you want to generate operating checks in Filevine or trust checks in Filevine? Yeah. Through Filevine. So if you do that, do you do your trust checks through Filevine? Okay. Yeah. Yeah. There's no way to. I like keeping them separate unless the efficiency of using Filevine outweighs keeping it separate. So, Chris Early. Yeah. I like to see if you're a personal injury firm, I like to see three to six months of expenses. Sometimes it feels very high with the caveat: do you have access to money if you need it? My biggest fear as a business owner is not being able to make payroll. I have worked with people who have come very close to not making payroll. So that's my biggest thing. So if you have personal money or a line of credit and you like there's a slump and you can inject money into the firm, then you don't have to keep three to six months, but that kind of changes. If you bill monthly, then I would say three months because you can generate more revenue. Yes. For the profit number. Ideally, over 20%. But it can take, like, don't be discouraged if you go pull it and you see it's 12%. That's not bad. There's things you can work towards to get it higher. I'm seeing personal injury firm owners, all in owners pay at 25-30%. But again, going back to the example, if you're somebody that wants to work less, and so you have to hire people to do more work, your profit's going to be a little bit lower. And that's a personal decision that you're going to make to say, I'm going to take less money because I don't want to work as much, but I'm making as much money as I need to make. Does that make sense? Yes. No, it really doesn't. I mean, you'll have different, no, you'll have different um line items and things, and your percentages will be different. So obviously, if you have less people working for you and things like that, your percentages might be different. But no, it's it's essentially I do one-time like CFO work with like so my bookkeeping clients, if they want to do just a one-time budget, I literally use the same exact thing as I use for my clients that are doing six million a year. Oh, so you're talking about like how much you have to pay yourself a salary. So yeah, the attorney, owner or the attorney that you're hiring? Just one owner. We're talking about the same person. So that is a tax question because if you are an S-corp, then you have to have a reasonable salary, and that is a really big gray area that I don't all the way get into because I have clients who have met with their CPAs and their reasonable salary is$85,000. And I have clients who have met with their CPA and their that CPA says their reasonable salary is$150,000. So that is a tax strategy. I don't care how you get the money, whether it's W-2 or distribution, as long as it makes sense for your tax strategy. I just want you to pay yourself, which a lot of people don't do. Yeah. So that's where the the benchmarks are going to change. Yeah. So it may not be 20%. It's going to be higher than 20%. It could be there. I work with firm owners who are only paying themselves$100,000 or less a year. So when you're in that$250 to$750 range, things get really weird. Not weird, but like, so it can change a lot. I think I'm out of time. I will be here all day at the conference looking around. I love talking about this stuff. I could talk about it forever, and my husband hates hearing about it. So if you want to talk to me, you can find me and talk to me about it. And then find me on LinkedIn because I do post and I interact with everybody. And I'm always open to having conversations. Even if you're not at the point of being able to hire me or anything like that, I just want to have conversations. So thank you.

Head Shot

Brian Glass

Host