Financial Metrics: The Key to Growing Your Law Firm with John Scott and Kip Bilderback

Welcome to Accountants LawPod, where accounting professionals and law firms converge, hosted by Lynda Artesani, Sarah Prevost, and Steven Libhart.

Hello and welcome everyone. Welcome to the, to the show where we have some special guests joining us today. We're going to focus in on a topic called, in the area of financial metrics, the key to growing your law firm. And we have 2 special guests. We have Jon Scott and Kip Bilderback. I said that correctly. They are partners at Anders CPA Advisors. They specialize in maximizing law firm profitability and strategic financial planning. And they, they've been together doing this for what I understood earlier, 20 years. So—

Wow.

I think Jon's the partner at Anders and Kip, you are, You are buddies, like you guys are partners in other financial— you work together. Okay. You're the attorney. John's the— well, John's like us, the tax, the accounting side, not the tax side, but the accounting side for our side. He specializes in that.

I would love to hire Kip at my firm.

Oh.

He's got his own firm.

Yeah.

But we do work closely together quite a bit.

We do.

Yeah. So, well, thank you for joining us all today. I've, I've had the pleasure of doing a little research on you, John.

I loved listening to some of these podcasts that you've done earlier this year.

And, um, so yeah, I'd like to open it up and please feel free to introduce yourselves further, say more, and let's talk. Sure.

I'm John Scott. I'm a tax partner at Anders and I head up the VCFO niche for law firms. And we about 3 years ago acquired a VCFO firm that was fully remote, fully distributed, and they had some specialties that we didn't have. And they helped us, they helped us embrace the remote work environment because they had been doing it for 10+ years way before the pandemic. And then we helped them, gave them the resources to help scale their VCFO services into different areas. And one of the areas that we picked up was law firms. I've been working with law firms for 20+ years, and I really was very fortunate early in my career to meet an entrepreneurial attorney who had a niche practice that he decided early on he didn't want to work in the business of law, but rather on it. And he worked— once he got the secret sauce for one metropolitan area, he moved to 44 different states and to the UK.

Wow!

Not practicing law anymore, but managing lawyers who were practicing law on his behalf. He was the only owner too. So, he made a lot of data-driven decisions. He made mistakes along the way, but because he was paying attention to the data, he could course-correct pretty quickly.

Sure.

So from there, just happened to work with a bunch of firms, and it was just a natural fit to consult with firms after that.

Man, what a—

Kip has a unique background as well in that he works on the process side of the firm.

Okay, that's fantastic.

So I'll share real quick. My name is Kip Bilderback. I am an attorney with 30 years experience. I had the good fortune of working with my law firm for a number of years in the mortgage-related space that was a type of practice that had high repeatability, had— was fairly document-driven, and managed to match the increase in technology with the ability to create processes to make repeatable, measurable actions in our law firm using data very creatively and effectively. Such that we were able to work on the business rather than in the business, start with one state, get up to 4 states. And now, because I have so much fun doing that, I'm helping other lawyers who are more trained to do a craft on how to create process, how to use data to grow their practice and provide better service to their clients.

Kip, what type of real estate work was done in your law firm?

So my law firm had a very small niche. We represent mortgage lenders in the defaulted mortgage space.

Okay.

Closures, evictions, bankruptcies. And that is kind of unlike any other process in that for most states, you can really have a flow from case receipt through the end of the transaction. Hopefully someone reinstating their loan or finding a loss mitigation solution and keeping their home. But not all the way through acquisition. And as we progressed, we found ways to utilize document forms, to utilize a database to track the salient points of data for not only documents, but for measuring our effectiveness. And once we kind of had that piece down, we started tracking all the financial data. We looked at how our clients paid, what our expenses were on files, etc., so that we could manage the finances of the practice. And I was very fortunate to have 2 partners who looked at it both from the legal end, providing great quality representation, but also understanding that we had to create a profit and had to act as intelligent business people. And that's where folks like John Scott come in, in helping us, those of us who are trained in law school, understand those additional factors to become successful business people.

One more quick question I have. Were you involved at all in the 2008 housing crash?

Well, involved, I wouldn't say. I didn't cause it, but I mean, I was there at the time, and we experienced from the beginning of that all the way through the end. And frankly, our ability to use data and to measure things are what allowed us to grow and work effectively. It was a very, very wild 5 to really 10-year period.

Yeah.

Well, and Kip, the other half of that would have been, well, that was wild during the financial crisis. COVID shut you down, right?

Yes. So, yeah, we were effectively shut down in COVID. The government, I think rightly so, said, hey, let's put a pause on putting people out of homes. And our business dropped by 80% in one day. We not only had to find a way to take our people home, which involved our pandemic plan, planning that we had, but we also had to turn around and face the fact that our— we had employees who needed to get paid and revenue that wasn't going to come in. And I joke with John, for the first time in my life, I started looking at ramp. You know, how many days do we have? How are we going to feed it? What are we going to do? And fortunately, we had that data. We understood what we could bring in. We understood what we had to outlay. We understood and had the data to effectively use PPP to manage that. My partner in the firm, Vern Singer, is really a financial genius, and, and we would look at things on a daily basis, and we managed to get through the pandemic with losing less than 10% of our team due to layoffs. And being able to hire back those folks as things eased, it was, it was tough, but, but we really did, we survived it very well.

That's incredible. I don't even know what to say because I feel like we learned so much as a community on the accounting side of growth in ways that we, I just don't even know if we knew what we didn't know. Like both Lynda and I have been virtual, our entire team has been virtual from the, from the beginning and We've, we've always often said modernizing a law firm and everything we were doing, we were being asked, how do you do it? Where it sounds like you were kind of in a good space in a lot of ways, ahead of the curve in some ways, and, and being able to assess and figure stuff out. But I don't know, Lynda, I felt like we did a big lift and it kind of slammed into us. Very sharply.

Yeah, we had to teach attorneys how to use Zoom and a camera. They didn't even know how to do that. I mean, it was to that level of— and for us, work just continued, but we saw how it affected certain practice areas. And it was interesting too. It's a testament to you having yourself already all set up and had planned through a lot of that. We chirp about it with our clients. You need a rainy day fund. And then the end of the year comes and they strip the business out of every penny that's in there and divvy it out. And then we're sitting there going, how are we going to pay the insurance bill. So, you know, the conversations we have, you want to be prepared. And how do you prepare for a pandemic? I mean, that's a— I hope I never have to prepare for a pandemic ever again.

Well, now we know how to. Now it's just—

No, but I can't imagine what you had to go through. I mean, just the fact—

The next one will be different. Yeah, we're going to have to prepare for the next one. It will be wildly different. I will say, since this is an accounting piece, I think 2 of the very smart things that we were able to do with the advice of the folks we dealt with is one, we always kept a fair amount of resources, cash on hand before this time. We weren't the kind of firm that emptied out the accounts at the end of the year. We also maintained a very fairly significant line of credit that we never tapped into. I'd never hit it before that time, but it was there when we needed it to bridge, say, the gap before we got our PPP funds. And, and so by being smart ahead of time, we were able to do that. And I do have a number of colleagues in my area of practice who went out of business as a result of it. So, so being smart in how you plan for this stuff, being conservative in your approach puts you in a position to survive the downtimes, whether it's a pandemic, whether it's a drop in business, whether it's a dramatic change in personnel, maybe. So a lot of what you provide, a lot of the lessons that John teaches us, put you in a position not only to succeed but also to weather the downtimes.

And you had that line of credit in place before the pandemic?

Absolutely.

Good for you.

Absolutely.

And we literally, I think we had it for 10 or 15 years and never touched it. It was just something there for a rainy day. And it just turned out the pandemic was a rainy day. And fortunately, we didn't have to Tap it hard, but it was there if we needed it.

What size line of credits do you all suggest your firms have? And then I'll give you my answer after, after you give yours.

Having just come from trying to get a new one for my house because I live where Ian hit, and, um, probably we first bought the house, we paid for it, so had no mortgage. And I'm like, yeah, no mortgage. And my husband's like, we need a line of credit. I'm like, for what? What do I need a line of credit for? We have insurance, we have this or that. And then the hurricane hit. You know, how many years later? 15 years later. And we had to tap because the insurance did not pay out for 9 months, and we had to tap into a line of credit, which it is 15 years ago because the line of credit is expiring on December 31st. And we went back to the bank and said, hey, you know, we reused it, we paid it back, we want a new one for coming up. And They made us— I'm still working through it. And it started— we started the process on— we own a lot of property with no mortgages. So it's not just this house. And we're not even asking— we're asking for, like, I don't know, probably 20% loan-to-value to what we have. Not even, I don't think. And what they're making us go through to get this loan. And it's been— how long have I been doing it, Sarah? 3 months, something like that? 3, 4 months?

Much longer than that. Sorry, I'm muted.

Yeah, it probably has been much longer than that.

On only a 20% loan.

And it's been frustrating, especially because we had a history with them. So we already gave up on Bank of America. We're like, you know, screw you. And now we've gone to another bank and started all over again. So that ended up— and that's been a process. And it's funny because I, I took— right now I'm dealing with a permit on a house that we're putting Powerwall on the house so that we have power if there's another hurricane. It's, I don't know, $30,000. And, and the permit is there for something in March, and the bank is withholding the approval of this loan because of that permit. And I'm like—

It's always those sneaky moments that happen, even for businesses. They're like, wait, what's on record? Why do I— but I feel like to answer the question is, when you're looking at those operating expenses, I prefer at least a 3-month runway because— I like 6. I know it.

But I agree. If we can get 3, we're happy.

Yeah, it depends on the firm and it depends on the individual. And so it, and also like the type of firm, because that's another scenario. Like—

I think you're exactly right. Yeah, it's a risk analysis, right? And so we like to set cash targets based on a percentage of expected revenue. So somewhere between 10% and 30% of expected revenue, which really is just an easier way in our mind of getting to, is it 2 months or is it 6 months? But if it's an hourly billing firm with great clients that pay by return mail, They're going to be closer to that 10% goalpost. If it's a contingent fee firm or firms that don't have good billing hygiene, they're going to be closer to that 30% number, which is probably going to be closer to 6 months' worth of cash.

Yeah, exactly.

The trouble is getting them to keep it in there.

And sometimes it's translating it to those things and also looking for avenues to bank in places where you can park it, have easy access to it, and grow interest on it. Because let's Put it nicely. Everybody here in the law firm world, they I we watch them. Where are you swiping out that money to? Oh, I make more interest over here on this personal side, and then I'll put it back. Like that's a lot of accounting on our side just for that moment. It doesn't. Yeah, just don't. We'll find another product so you can earn interest on it without it being tied up. But I agree. I I try. I feel like John, what we try to do very hard, like very sizable chunks. Little measures building onto bigger measures. So okay, you're a new firm, you're setting up. We'll give you what our ideal goals are for you, like what we think is smart at the front end. Obviously, it's your firm; you're gonna run it. But if you're we're coming into it and we've seen this, we've had you know a good size firm. Cash is the the problem, and they can't catch up, and it's this bad cycle. And you can see this existing debt and these long term things and these loans and. What are these and are they real? And did we ever validate this stuff? And what is the AR looking like? How do you bill? What are the processes? Back to KIPP.

Like, what are the processes? Right, right. Yeah.

It's just like this full exam. So we go from like, we do accounting to now we're doing a financial team, a whole process-oriented viewpoint to how do we help you drive? Because we're business owners. We talk the same language. We just happen to be in 2 different professional industries that are like-minded in some ways. But yeah, I think it's a great question. I feel like it's the most— that's the least asked thing when we're even teaching. I feel like, Linda, it is the least asked question of what is your comfort? We ask what's comfortable in the bank account for you? Because you know that they have that number, so they'll answer that. Why? Like $100,000. Okay, what does that mean? What's inside of that $100,000?

Not all of them though, Sarah. Some of them don't even know what it costs to run the business. Just what's the— what's it cost per month, you know, to run your business? What do you need income-wise? Just to break the break-even number, what is it? And it's amazing that we ask those questions, but I think a lot of times a lot of bookkeeping firms put the head down. They're just doing data entry. They're not really having conversations with their clients. And I think that's kind of where we rise above. So you're getting a different level of service. It costs a little bit more, but you're going to get that service where we see so many accounts and we know what we see and we want to help. We have some smaller attorneys that we work with, that smaller law firms. It's funny, you get some that are real eager to learn and, you know, Sarah gets out her board and she's writing circles around all this stuff and they get excited. You can see some of them and some of them, like, you could tell that you're just annoying them. They just don't want to even have the meeting. It's such a different vibe from each one. It's just fascinating which ones will land where.

Well, you know, a good place to start the conversation, especially with your new solo firms, is asking them, did you come from a firm where a group of people left and went and started their own firm? Or if that happened to you, what's your contingency plan for cash in the bank to survive that? And build a new and better team for yourself. So that's, that's huge. And we see a lot of that. And I'm with you, Lynda. I like to go more towards 6 months, especially with the little guys. It's like a little bit every month. Let's start putting it away.

But that can freak them out. They might have to get the line of credit if they have really nothing. They might have to get the line of credit.

Then you drive them to, you drive them to a bank. You encourage them to go to a bank that is smaller. That might loan money easier. Credit union or somebody that they have experience with. They don't always have to go to the great big Bank of America to get that money.

I have a question I'm dying to ask because I want to see what Kip and John think. So sometimes, John, you probably see this, you meet clients who are really deep into these coaches.

Ah, Sarah, I'm glad you brought that up.

Oh my God, you are literally using your entire credit line to pay this coach and I'm not seeing results. What do you, how do y'all feel about this? Because it, it's hard for us on this side when we're looking at your books and we're like, just stop for a minute, please.

Well, there are some really great coaches out there.

Yes, there are.

They are very effective. So I haven't run into a coach that is taking advantage of the client and just spending a bunch of money. The firms that I'm dealing where there's a coach, they really need the organizational help. And the coach is almost acting like a COO for a firm that doesn't have one.

Nice.

And it's really been effective. But I know there are examples out there where a coach is just, you know, there's another book and I have it in here somewhere. In fact, The 2 consultants I work with besides Kip on a, on a regular basis came from this other group that really was just interested in signing up firms at, you know, $15,000 a month and weren't really delivering anything. So these 2 broke away from them and said, hey, we only want to work with clients where we can actually help. We're not interested in this recurring revenue.

You want to make the impact, which, not to diminish, Kip, what you're probably going to do, honestly, as a As a consultant and, and being that you're in the same, that same line of field, it's when we see this other side that it kills us because we've said, could, could you just talk to us? I mean, Linda ended up helping a firm recently just in dialogue on the phone, and she's like, validate to me why you need this individual. Why do you need this coach? And there was no great validation she had, not that she had answers. But her responses were enough to make him go and say, okay, I think I should pause because we didn't see the money for it. And I would hate, and it hurts me to think that there are people out there and you're watching every credit card, every credit line get tapped, and we're not seeing any results. We didn't see the revenue needle move. We see the same flat line.

No strategy to it.

No strategy.

We ask because we want to know what are the plans? What are you doing so we could help?

Yeah.

And they don't know. They don't know. If they don't know the answer, that's not good coaching. Then if you don't even know what you're doing other than you need 18 reports and you don't know why you asked for these 18 reports, I'm like, why do you need this one? And they don't know. They were just told they needed it. And they get very excited in the process of signing up for the program, and then they get excited for all the extra webinars, and then they cost more for another webinar. It's $1,000 for each webinar, and then They get all involved and then, oh, there's this other service and it's constantly upselling. But if we don't see the results, you're just wasting your money. And if you're tapping into your line of credit to have a meeting with a client for a business meeting because you have no money left and you shouldn't be spending $30,000 on a coaching session.

Yeah, that's not—

And I think with attorneys, it's kind of a double-edged sword. I mean, one of the problems with attorneys is that we generally think we're the smartest person in the room. And when we look at anything around our practice, our first reaction is kind of the me-do. I can do it. I can do it. I can do it. And it's tough for an attorney to objectively look at their business and then say, hey, where do I need help? Is that in IT infrastructure? Is that in accounting and revenue management? Is that in You know, business development, process development, and it's hard for them to let go. And then once they let go, sometimes we follow the shiny thing, and and certainly we can find situations where we may be putting our money in the wrong place. And I think for people who advise attorneys, that's why it's very important to be very pragmatic, to come in and say, "Hey, what's going on?" What do we need to do to come up with some measurement of the effectiveness? And for anyone who's advising them, whether it's a human resources outsourcer, whether it is someone in John's position, whether it is someone in my position, to be able to say, hey, how have we moved the needle? Show what the value is and justify that on a regular basis. And it's so very difficult And I have seen not only in the legal profession, but in other businesses, because I interact with a lot of entrepreneurs. There's a lot of gleam and shine and excitement with coaches or other folks who have that next great thing, you know, the great book to read, the great this, the great talk. And sometimes you can get lost in it. And at times you have to get back to brass tacks. What's my product? How am I delivering it? What does it cost me to deliver it? What am I charging for it? How am I getting paid? How am I tracking that? And that's where folks in my world like John help keep you in line. Hey, Kip, no, stop.

Yeah, yeah.

Let's figure out how much you're making and what are you doing. I do want to go back to one other thing because you are going to have attorneys looking at this.

Yeah.

You mentioned a smaller banking entity, and I think John discusses this. There could be an allure to a Chase, a Bank of America, or one of these entities, and they're great. They have phenomenal services. Many of them have been clients, but you also have local and regional banks. And I do think you can develop a relationship where they understand your practice, what you're doing, share your cash flow, and help you get better lines of credit. The other thing I think it's important to keep in mind is that as attorneys, we have trust accounts, IOLTA accounts. Now, it's not our money. It is our clients' money. We have an ethical obligation to do that, but we have to choose a provider. who we bank with that. So when we are choosing our provider, we could be putting tens to hundreds of thousands of dollars with them. And, and while we can't ever use that money, they can't go again.

You can't—

I mean, there's so many rules around it as attorneys. That is in fact an account that you can choose where to go. And I find that when you are taking your IOLTA account, your business accounts that are your money, that gives you some additional leverage, pull, influence in a smaller to medium-sized bank that's looking to up their funds on deposit, even if they know that that's never something that they can get at because it is not their money. It is money that they're holding in trust for clients. So do keep that in mind. I've found that our relationship with smaller to medium banks has been very beneficial to us.

Great advice.

It's great. And I also like to look at what are they doing for the bar, the state bar? What, what is the, what is the arrangement? Are they in a standard that the bar— like here in Oregon, we have certain standards, and some of them do give back a bit more on their percentage of interest, which helps a fund for multiple things. So I love that because it is the— it is oftentimes the smaller local ones. It's also nice. It's, it's a little bit harder for us on accounting, but you have 2 different banks for 2 different things. Sometimes that works out. But I kind of wanted to go back to something you mentioned as you're talking, which is the growth, looking at growing a law firm and looking at the advisory side that John, like the way that you two work and how this, you know, what we're looking at for growth right now, because we're at a big change with the political arena. There's a lot of change out there.

Did something happen?

Yeah, I know, right? And so what should we, I mean, for the attorneys and for the accountants, we've got some growth here in the next 2025? What should we be looking at in growing your law firm in a strategic way with the things that we worry about as accounting professionals? But between the two of you, what's— what thoughts do you have on that topic?

We focus on 4 areas. We preach about profit-focused accounting and looking at metrics, non-financial and financial metrics in 4 areas: cash, financial, production, and pipeline. So Cash. You need cash to grow. If you want to expand geographically or hire new people or adopt a new technology, you have to get cash for that. You can borrow some of it, especially if you're buying, you know, a big bunch of computers or expanding your footprint, but you need to have some equity in there so that you're not servicing debt just to service debt. And then on the production side, you need to know what your capacity is. And do I need to hire somebody, or do I have capacity within my current stable of people that, that can fill that? And this is where Kip comes in. How do I refine my processes to create that capacity? I don't want to overwork my staff, but if I can make their life easier and free up 5 hours a week per person, per full-time equivalent, I can still I can share that 5 hours with them, right? They can have a little bit of downtime and I can get 2.5 or 3 hours out of that. That's really impactful to be able to grow.

So, how do you approach law firms nowadays with Gen Z, Gen X, Gen whatever out there who is maybe not as motivated as the baby boomers were? And they come out of law school and the law firm says, you're going to bill 2,000 hours and it's going to, you know, you're going to work 6 days, 7 days a week and blah, blah. And these people don't want to do that. How do you address that in the eat what you kill environment and just cranking out the work?

Well, those are the folks that went to big law, and in a few years, they're going to go, I don't want to do this, and they're going to go out with a few of their buddies and create their own firm.

Right, right.

And, you know, I'm fortunate that we've hired a lot of folks in the millennial, Gen X, Gen Z arena. And I think what John talks about in understanding what a matter takes to do, what's involved, the processes, and, and how much we're going to spend on it, you're able to get a framework that allows you to know what this extra FTE can do for you, whether it's a paralegal, an attorney, or anyone else. And by having that data And knowing those costs, I think you can do a few things. I think you can accommodate the gunners, the people who want to bill 2,000 hours a year and give them some opportunities. I think you can also accommodate the people who say, hey, I want to work 8 hours a day, 5 days a week. I want to shut my computer and go home or any kind of in-between on an overall basis, but on a case-by-case basis to the extent that you can get away with it. Because you can measure what they're doing, how they're doing it, everything else, share it with them in a transparent fashion, compensate them in a way that's fair for what they're doing, and allow them to have that, that the lifestyle they choose. Or better understand that, you know, you don't want to hire the person who wants to come in 6 to 8 hours a day, that you need to only hire the people who are going to be gunners. And then you're also going to be able to measure those folks better. And I think that, that having a real understanding of your processes, a real understanding of your finances, real understanding of your cash flow allows you to accommodate any type of worker and broadens your employee base.

And you had a key word in there, transparency.

Yes.

That's huge. That's huge. Share the information, bring everybody along together, have everybody pulling in the same direction.

That resonates with the younger generation. They were not transparent when I was coming up in this world. In this profession.

And, and I think you can modify what transparency looks like for you. I, I know plenty of attorneys who do not want, um, their people to understand the overall huge financial picture. They go, I don't want them to see what I'm bringing home out of this firm. Um, I've got other people who say, I want my people to know what I'm bringing home out of this firm. So there's a whole gamut, and I think you can share pieces of that And I think the important pieces to share are people's impacts on what they're creating. I think you can also be very clear on what overhead looks like. I don't think people think about what it costs. You know, they have to have a phone, they have to have a computer, they have to have a roof over their head, they have to have malpractice insurance. And if you can track that and break it down, you can share that. You can share success as, as a concept or a percentage, even if you don't share the overall 100%. So again, with the right data, there's an ability to share things in a, in a transparent but selective manner as well.

You know, and I think it comes down to leverage and training your staff so that you can push down work and trust. The senior attorney is always going to be responsible for the work product, just as we are in the accounting world. But the more you can push down, the better professionals you're creating in your firm. And guess what? AI is coming. I'm not worried about it. In the accounting world, we used to deal with VisiCalc and Lotus 1-2-3 and Excel. We used to do amortization schedules by hand.

Yes.

You know, random numbers came from the back of a textbook. All that's been automated and we can do so much more and our quality of life is better. This is if we go about this the right way and put guardrails on our AI and have best practices. This is going to make our lives much more efficient. We're going to be much more productive and get—

I still, a little bit of me still needs this. I bring this up.

I got one too, but I don't have an abacus anymore. I mean, the abacus is gone.

Yeah, but I agree with you and I feel that, and Linda knows this, I'm a firm believer of this, that in the, to Kip, what you were saying, Kip, and I feel like this is so true of this next generation. I really want to change the pay stub. To show all the burden stuff that goes behind this. Like, because I feel like the continuing education, the— what we'd like to encourage for ourselves, our own side, our own firm, and we see this with a firm owner that we love dearly, he encourages so much of the autonomy, research, continuing education help you. There's such a cost to that. And then the grass is greener on the other side. It might be a higher salary or extra promise, but it's not as green. Because it doesn't have all the enriched benefits. It doesn't have all of the things. And what I find sometimes, and I think, John, you're kind of saying this, is when you're training, it's also what's measured. Because when you're doing this fixed fee billing, some people don't institute a simple metric of measuring the time against it. How do you know you're doing well? And so that's hard.

There's a subscription-based attorney I think he's in Chicago, and I saw him speak in, in Chicago at ABA Tech Week. And I went up to him afterwards because he was espousing how great this subscription fee is. And we're believers in it. We use it in our BCFO practice. And I said, do you charge time? And he said, no. I go, well, how do you job cost it? How do you know if you're charging the right amount? He goes, it's just a gut feeling. I'm like, oh. there's no way you can be right on that.

Yeah. Well, we, we see it. We heard it a lot. We, uh, Lynda and I just spoke at Intuit Connect and we hear, we're hearing it a lot where our profession in the accounting world is, is strappling with the same thing of like, we've got subscription or fixed fee value, whatever you want to call it. But we do want to track time and we have those people that say that don't, but we're seeing people wanting to come back to it.

Yeah. That kind of blew my mind because the thought of having to do that again and having to track and a clock and all that to me is like, ugh. We got away from that and now we're going back to that. But it was something we heard over and over again in the different sessions we went back to that they were like, we need to go back to tracking our time. And I'm like, oh my goodness.

And we're hearing that when we were with— we went to ClioCon and we were hearing a mixed bag of the same thing, like what you both are saying. And it is interesting and also kind of where the market's going to go for growth. Because of AI. So, I mean, it's— it is— there are things that are going to get faster and better for, for many reasons. It needed to. And then for other reasons, you still need that expert person to— what you brought up, Kip, and, and your relationship with John is you still need that expert to be able to see the things that you cannot see. Because law firm, you know, being in the law firm practice as an owner, you did not go to school and get all of this accounting knowledge that we have. And we always ask that you do what you do best, practice what you do best. When we're speaking, we're all business owners here. However, we just happen to be better at the accounting side of it to guide you, and you're really better— I will not walk into a courtroom and try and pretend to do anything of the like, right? Like, so it's getting real with what you're good at. And I think you both were saying that earlier, is like, You got to trust to delegate. But also, it's, it's— I think you said this, John, in a past interview. It's like you always got to be hiring. And I'm thinking to myself, that's a lot of work. Because when you put out an ad, sometimes it's like you get overwhelmed just on that side. Do you have a process for that, you know, kind of thing?

So you get the plumber who's tired of plumbing. I'm like, really? No, you're not qualified.

Stop.

And then you've got the segments of who they are in a law firm because you've got multiple partners. So one's a rainmaker, one's a manager, one's an operator, you know, like all of these different things. And does everyone—

Are they in a niche or are they, are they, you know, working on several different types of law? What are they, you know?

Yeah.

The interesting thing about that is I'm seeing roll-ups in the law practice. We used to be a lot more smaller, medium firms and you'd hear about one or two big big firms, and I see a lot of smaller firms becoming medium firms becoming regional firms. And what I'm seeing in some of the colleagues that I have a lot of respect for is they are finding ways to properly quantify the capacity and usefulness of partners. How do you treat a Rainmaker? How do you treat a Minder? How do you treat someone who is more of a manager. And I think we're going to see an increasing sophistication in how that's addressed on a firm level, because that does create a fair amount of conflict as firms grow and certainly as firms merge. So I'll be curious how that plays out. And I'd be curious when you have worked with law firms who have all of these different characteristics, what do you find are some of the best practices in keeping all that in line as you're herding the partner cats?

Lynda. You haven't talked about this yet.

That was passing of a hot potato.

You talk about this often.

Well, yeah, you had cut me off.

We have one that It's hard. Like, the managing partner, we really, really truly, our heart goes out and supports a lot, and we are a lifeline to that individual. We may not do every component. Let's say we're not doing the payroll section of it. They do that. There's peace of mind for that individual to do that, just that pushing that button. Okay, that's fine. But all the other issues that come out of it, that's my knowledge, right? Or that's the task tax side's knowledge. And it's hard because we've had firms grow from entity structure changes and not listen and heed the advice correctly, and now paying for the price of that because of an EIN switch. And boy, do you not want to do that ever on a legacy firm that had— like, it's just a mad hot potato right there. And then looking at inside of that, and you've got 2 rainmakers. On 2 different segments because their practice areas are diverse— diversely different, but yet it's one firm. So how do you honor that and how do you meet their needs? Because you can—

I—

we can easily see them. So at one point, and I looked at the numbers, I was like, oh, it wasn't like— the numbers obviously tell us the story. The personalities, I'm not— I wasn't— I wouldn't even think like that would be the case, but Boy, is that pretty neat to see. And then how you engage with them is very different than how you engage with the other partners in the firm. And then trying to collect everybody together and make sure you're rowing in the same boat, that's not easy. You have to have a strong personality to help that along or have some real honest conversations, as we were kind of talking about earlier. It's, you get the windfall. Okay, well, one person's ready to spend the windfall. The other person's like, whoa, whoa, whoa. Oh, you've got— it's a lot of personality management. And then by nature, I feel like we have always had to be in a place of you better be, you better have the answers, or at least say that you're not, not that you're not uncertain, but you just need more background information to be able to present the facts better. Because to me, it comes down to the facts. And it's by nature, you're going to get drilled. Don't take offense. It's not personal. It's just the way that you all are taught. And you're investigating a lot of things and you want to find the truth. And how do you know what's being presented to you is factual? So it's interesting.

It is a lot of personality juggling. And Sarah and I have been on meetings together where I'm in the background texting her in Zoom going, are we on the stand right now? Like, I feel like we're on the stand and we're being— I want to go, I promise to tell the truth, the whole truth, because it's like we're getting attacked about the data and we're just here to present the data. give you advice as we go along. But it is a lot of that, and you have to kind of figure out who is the person that is going to make the ultimate decision if there's multiple partners. And hopefully there's a managing partner that you can work with, but sometimes the managing partner isn't always the one that wants to talk about the finances. You have to go with the one that's interested in the finances. You have to figure that out really quickly.

And they don't want to look at numbers. They want to look at charts, Michael.

They don't. Yeah, they don't. The numbers freak me out. I was told I live in a verbal world. Numbers freak me out. I want to see these pictures. This helps me. So fine, we'll put it in Fathom or dashboards. That's fine.

It is important to tell the story of the financials and not just present the financials.

Yeah, you don't want to just go, here's your numbers, there you go.

Sometimes the managing partner is not the decision maker. Sometimes you say, oh, you do this, you be the managing partner, and then the rainmaker is Is the decision maker. Right.

Yeah.

And the rainmaker always has a side spreadsheet. Let's be real. I know it's there. I've seen it.

Well, we've had it a couple of times. We forgot to ask, and then all of a sudden, like, oh, you have a spreadsheet? We didn't know that. Can you share that with us? The little side hidden spreadsheet.

Yeah, it's true. I don't know, John, what is your experience? How do you navigate this? Sharkwater World.

You know, it's— I used to coach a controller. He was a good controller, was not a CFO, and he had a very demanding law firm managing partner. And we would meet before the finance meeting. And his biggest issue was he was a little bit nervous around this owner. And I said, look, whatever you do, you know your numbers. Just be comfortable and confident with that. And when you get those questions, because this guy's a trained litigator, you're You're going to be screwed with your own words here. Okay? They are the smartest people, but they've also been trained to box you into a corner.

Yes.

When you get to a point where you don't know something, don't fudge it. Just say, I don't know. That's a great question. I will get back to you.

There's nothing wrong with that.

Right.

I'll get back to you.

And they, they can't box you in then and say, well, you said this.

Yeah.

Just be honest.

Yeah.

When, you know, the Rainmaker name keeps coming up, and I think that that's a position that really should be looked at and gauged on KPIs. What is the, what is the result of their work? And, you know, if a firm doesn't feel like the rainmaker is generating enough revenue for the firm, well, why not? Are they being sucked back into the production side a lot? You know, what's going on?

It's not their highest and best use.

Oh, that's the worst part for that. Yeah, yeah, the managing of that. You try so hard to not have Yeah, agreed. Yeah.

And to your point, you know, when you're presenting the financial numbers and they're, they're in their eyes, they're perceiving some sort of error has been made. And I love this with attorneys because this is how they're trained, is to unearth everything. They'll go, well, what else is wrong? You know, you're like, nothing else is wrong. This can— this number can be moved, you know.

Well, one thing that I think is really interesting too on a growth of a firm is looking at their current systems, their current processes, and, and saying, okay, what would be better? And versus the shiny object, or my friend down the street told me to use this software. It doesn't even fit your practice area. I'm sorry, you should not be using this software. Um, and how to, how to help divide that to keep people in the honest spaces of Okay, if the firm is going to move from a legacy firm into a new side, how much training needs to happen? How much— what is the capacity needs right there just in that front end of it? And then how to support it. Do you have the right people in the right place to support that? Or does your model even stay with the current times? If the current times change so much that you have to— and you sometimes I feel like you don't know these things until you kind of delve deeper into both sides. Financial and processes. Then you realize who picks up the phone to who handles, who starts the case to all the way through, there's something amiss, right? I mean, I don't— what do you guys think?

Well, I think that process evaluation is so important from the first phone call to intake to finalization of the case and then billing and collection. And you're going to find out a lot about a firm if you have multiple partners, 2 rainmakers, some grinders, some minders. If they're not all doing things the same way, they're fighting and pulling against each other.

Right.

So getting that in alignment is beyond the scope of what we do, but it's in Kip's wheelhouse and it's in these other consultants who really do a good job for their clients because otherwise, why are we a firm if we've got 3 different processes and 2 people are really strong-minded and strong-willed and fighting against each other.

And I think one of the easiest examples of this for lawyers are engagement letters. How many different engagement letters do you use? Are you using 5, 1, 3? Does each partner have a different engagement letter? And then who knows how to fill them out correctly?

And what's in them? Do they even know what's in them?

And do they know what's in them? And how beneficial would it be to come together, create one letter, maybe with some variable language depending on the case, that every single person who works knows where it is, how to do it? Oh wait, and can you track the data you're putting into it and use it in your case management system and then use it for other things later? Oh my, that's fantastic. But just that one thing saves you time, saves you resources, and from a quality of service liability standpoint, you know what you're getting into. You're not looking at something 2 years into representation going, we said this in the engagement. Oh darn, when you're facing, you know, some kind of liability suit or other action. And that's just one piece. And you can go miles and miles deeper than that.

Looking at the productivity of the paralegals. You know, sometimes a paralegal is assigned to an attorney or sometimes they're shared. And if you've got a paralegal sitting over here that doesn't have very high productivity, then why? And can they help in this workload over here to help pull everybody along in the same direction? Because that's often a missed thing. You know, we've got the paralegals, as long as they're cranking their work out, we're fine. Well, that's, that's not the whole ball of wax there. No.

You have to measure it. You have to figure out how many available hours do they have? Because sometimes we ask paralegals to do non-legal things.

That's right.

Bookkeeping, answer the phone. And so when we look at their available hours to do legal work, and then what do we expect of that available time to be charged at what rate? And I'd love to push that rate and start pushing work down to them, right?

And more productive and free up And the other piece of that is, like where I live, I'm in Denver, in the Denver area. We have 2 great law schools here in Colorado. And I always ask the attorneys, are you using interns? Are you going out and being part of that educational process and pulling interns out of law school, bringing them into your firm, teaching them how to be? Because then that forces them to think about their procedures and their processes and their processes. And all of a sudden get on board with documenting everything and, and, and having processes. And they all, they, I've never had anybody push back on that. They're like, a lot of them are like, can I do that? And I'm like, you bet you can, you know.

And guess what? Charge something for them too and train.

Yes.

Train your next hire.

Yes.

Yeah.

You get to shop while they're, while they're working.

Yeah.

Oh yes. And going through that, if you get the younger generation, They're already in AI. And the key is not what AI can do. It's the key is how people program, for lack of a better word, ask the questions, build the queries to get the AI to do what you need it to do. And if you're already entertaining training, bringing these folks in, you can have them help you utilize that piece to your benefit.

So true. So the one thing, having a freshman in college right now, and this individual has a very— it's a very fascinating mindset. Uh, it challenges me in multiple ways, so I'm prepared to be challenged by this younger generation. And also, it, it's— they want to do it differently, and they're not looking to sit in an office Sometimes they are. And what type of office environment is that? And they're not— they are not the paper. This checking emails is not even a thing. Like, I have to beg to check the email. So we—

I— the—

what's on the horizon is really going to change. So embracing this next level to, to what you were saying, Kip, is like the AI there. That's where they are. There's a whole suite of things that they're not going to do. Because that's not, that's not them, you know. And I feel like this next generation is going to change a lot of that for us because we're going to have to communicate differently. That's why some of these tools that offer in-messaging and questionnaires and stuff that go on inside products and speed up the efficiency, it is nice because it's funneled into the same space. You, you, you're looking at the notes that are dictated to that client. You're not hand typing them in and then putting them in on— you have to go find the folder. There's a lot. Um, but I agree.

What is your freshman studying and where do they go?

Uh, U of O, and right now it's business. Um, I was hoping for the legal side, but there's a roommate in the room that has the legal side. So, um, and my— and a lot of my friends are attorneys here in Oregon, so they're— they've been adjunct professors there, and that's one way that they've cherry-picked And kind of looked to see, you know, because they're, they're going down there and looking. But yeah, business, I was, it was either accounting or legal is what I was hoping for. But right now business, and we'll see what flavor he goes for because language is also in that. He's a native French speaker. So yeah, we'll see.

But John, are you recruiting? Are you already gonna keep an eye on for your firm?

So the pandemic and acquiring some Yeah. Which was fully distributed has taught us, and I'm sure you all are aware because I assume you work remotely as well. We don't need to find talent that's here in St. Louis.

Exactly.

The talent can be anywhere. I prefer it not be California or New York. That's for tax reasons.

Washington too. You can add that to the list.

Washington State.

Add that to your list.

Yeah.

They can be anywhere. And what we do to combat the culture piece of that is twice a year we have a retreat and we bring them all in. We get together. There's, there's some business that goes on, but it's really about having dinner with people that you've been on Zoom meetings with. Once a year they come to St. Louis. So the whole firm is involved in that and you get to meet people that you've been on a call with, but you've never spent any connectable time with.

Exactly.

And I think in this, texting, new environment that we're in with Zoom and Teams meetings, those connections are so important that you can learn about their families so that when you're, when you're on a call again, you care about this person. They understand that you care about them.

So true. It is so true. That's how I feel like right now. I mean, if you think about it, I mean, I ended up going back to Apple so I could FaceTime my child because Yes. I wasn't— that's not the product I wanted to use, but I did it for convenience. And that's what these kids are doing, right? They do these types of things. And the human connection is— they, face it, they grew up in a terrible moment of life where starting school, ending school, all of these things that are critical to that age group. And we're going to see that impact us. And I love what you just said, John, because we— Lynda and I feel that same way. She's in Florida and I'm in Oregon.

We're—

and, and then our buddy Steve here is in Denver, or in Colorado.

But across this—

yeah, across the country, across the states. But yeah, I mean, it is. And we've had, uh, same thing. We've had firms that are, you know, California-based, but the owners are in different areas. Um, we've had— we, we deal with a whole myriad of different things, um, clientele-wise. And that's fine too. We're excited about that. It's exciting to kind of deepen, understand the bar rules, understand the accounting and the IOLTA needs. And New York is very wildly different in that space, but everybody else seems to be okay.

You're right about the New York IOLTA rules. I mean, they're very different to a firm up in Albany, and they, uh, they, uh, retainer operating, or operating retainer. They seem to literally use that, and they had about 700,000 hours of work that needed to be done, of money that was already taken and spent. I'm like, oh, I know, right? Quite a hole you're in here.

Yeah, I've taught— I'm working with a firm that I'm teaching on how to account for it appropriately so we don't do exactly what you just said. So we have like a trust but not a trust. Anything to do to get away from trust. Sorry, Kip, but some people do, like, literally, they— and we've heard this come up actually where the overarching bars are going to start looking at how people are billing, how firms are billing, because there's this idea that you're going to get out of the IOLTA needs. And California made this big shift, and now these other jurisdictions are looking at it differently and saying, well, we might want to change that. Just because you do fixed billing doesn't mean you're going to get out of having retainers. So it's interesting what we're going to face, I think, on the horizon. And I prefer— Lynda and I love this niche. We've doubled down in it. We've been together for 5 years. And I mean, it's just something we do, we enjoy doing, um, in this section. So it's different than a generalist, and it's not easy sometimes. Um, well, this has been— it's just been an honor to meet you both and spend time with you and Having this conversation, I I really truly appreciate. I don't know how you both feel, but I've enjoyed it.

It's absolutely.

Thank you.

Yeah.

Hey, I would like to plug my book.

Absolutely.

Yes.

It's called Judicial Dollars and Cents.

Oh, wonderful. Okay.

You can find it on Amazon, and I'll have Christine Cruz also send a QR code or a link for the show notes.

Yeah, because Tira will put it right in the show notes too. So.

Yeah.

Yeah.

Kip, do you have a book coming out soon?

I do not have a book coming out soon.

He's quoted in this book.

Awesome.

I'm quoted in this book, and I'm still waiting for my autographed copy, John.

The US mail is horrible these days.

I will be honest, John. I did the same thing to my business partner. I did not buy her book. I waited for my autographed Coffee. She was like, do you have my book? I said, no, I'm waiting. I'm like Kip. I'm waiting.

I had to give it to her and I had to sign it. So I didn't trust the US Postal Service.

Is that the book that I'm quoted in?

Oh, yeah. I haven't given you one yet.

I don't have one.

That's okay. Well, we're in the Kip camp over here.

Kip camp.

Oh, I like that.

But I'm happy. Yeah, John, this is— I actually can't wait to read your book. I'd like to read So I've read Lynda's book. I had to.

My favorite line Sarah had was when somebody asked her about a book and she said it was How to Get Things Done. And she goes—

No, Atomic Habits, I think it was.

No, it was How to Get Things Done. She goes, but I haven't finished the book yet.

I'm busy. I'm running 3 firms now.

Hey, would one of you guys send me the name of the book? And I want to take a look at it as well.

Absolutely. Yeah, definitely. Well, yes. So, Tiara?

To support the Accountants Law Pod, don't forget to like, share, and leave a review. And if you haven't already, hit that subscribe button on YouTube or wherever you enjoy your favorite podcasts. If you have questions or topic requests, shoot us an email at info@accountantslawpod.com or send us a message through our website, accountantslawpod.com. Want to connect with the brightest minds in legal accounting? Join our weekly Accountants Law Lab mastermind sessions every Friday. Head over to accountantslawlab.com to sign up. And if you need help modernizing your law firm, pick up Lynda's book linked in the show notes. And to learn more about Jon and Kipp and pick up your copy of Jon's book, follow the links in the show notes below.

Thank you everyone.

Bye-bye.

Thank you.

Thank you.