In this solo presentation, Linda Artesani of Artesani Accounting and The Proper Trust guides solo, solo‑plus, and mid‑market law firms through the fundamentals of financial management to achieve profitability. She emphasizes the necessity of understanding where revenue originates, evaluating the profitability of each legal service, and selecting appropriate pricing models (hourly, fixed‑fee, hybrid). Artesani highlights the importance of monitoring accounts receivable, conducting cost‑per‑matter analyses that include staffing and advanced client costs, and comprehensively tracking operating expenses such as rent, software, insurance, salaries, and marketing. She walks viewers through reading profit‑and‑loss statements, setting revenue goals, budgeting, and deciding when to hire or outsource accounting support. Throughout, she shares practical tips—like gradually transitioning to fixed‑fee structures—to improve cash flow, reduce collection headaches, and ultimately create a sustainable, profitable law practice.
Chapters
Hi there. Linda Artesani, Artesani Accounting and The Proper Trust. Today we're going to dive into working with the financial structure of your law firm and really looking at how you can comprehend the finances at your law firm to help bring you to a beautiful trajectory of a profitable law firm. That's the end game, the end goal. So before we get too far here, if you're interested in this kind of topic, please hit the subscribe button so you won't miss any of the future content. So law firms need to be profitable because if they're not, obviously they're not going to survive. They need enough revenue to pay their staff, cover their costs, and really you want to see at the end of the day there's some money left over maybe to bonus you out at the end of the day, or at least have some profitability, have some money in the bank. for that rainy day fund, for sure. So if you're that person that's a solo or solo plus lawyer, even a mid-market firm that's working so hard to do, you know, run the practice, run the staff, do the marketing, handle the onboarding of a new client, really overseeing the entire workflow of the firm, and you're just saying, oh, I'm going to kick that can down the road when it comes to finances. I'm here to tell you, you really shouldn't do that, and maybe it's time to hire somebody to help you. So I'm here to help you with just a little bit of content to help you start to lay the ground rules down and start to think of your practice in a way that will help you kind of break it down simply so you can start to plan your own law firm's profitable future. So it really comes down to the first step is to figuring out where the money is coming in from, and I don't mean obviously clients are paying you, but for cash flow, you want to look at your revenue streams. What items are— what services that you're selling are profitable? Which services do you provide that really aren't profitable? Which maybe can you let go of, and which maybe lead into others so you want to keep? And how do you make them profitable? So really analyzing the profitability of all of the things, all of the services you provide. If you're a family lawyer, you know, child custody, divorce, look at how many items— I call them items, but they're really services that you provide, legal services. You want to really know per service. If you have multiple practice areas, you want to know per practice area where your funds are and what is bringing in more revenue, what's generating more money for you. And then as you start to figure that out, you want to really know what the bottom line is. You want to know how much does it cost to run my law firm? What expenses are involved in operating overhead that I have to cover minimally just to survive and break So let's break this down really simply. We'll start right off with talking about— we'll go right into the profit and loss. We're gonna look at income and revenue. And really looking at your income, what's your pricing model? Are you using hourly billing? Are you using fixed fee billing? Are you using evergreen billing? And maybe you're using a hybrid of more than one. So what is the type of pricing model that you're using. And then, and, you know, look at how you're charging your clients. Take a look at your accounts receivable, how much money is just sitting there not collected. You definitely want to look there as well. We see that a lot of times with law firms, they kind of let that sit and they really don't want to deal with bothering clients for money that they've earned. By the way, they've earned it. Nobody likes that job. It's a good job to outsource if you can find a good accounting firm that will do that for you. That gets you kind of out of the picture of making that phone call. Also, if you are doing hourly billing, start to look at the cost per matter. What is it? What is the amount of wages and staffing hours that are required to complete the task at hand? This is a place where you really want to analyze. You want to look at the income coming in. You want to look at the hours being spent to create the a client experience at the end of the day. So if you're looking at a divorce, you want to look at the amount of money that you're— the law firm's fronting in the front to pay for expenses. You will get back in a retainer, but you want to look at that too because you're making these mini loans, advanced client costs to clients. You want to have that capital available to do that. And then you also want to look at the time spent and are you writing time down? It's important to know that if you're starting to write a lot of the hours down because you think the customer will never pay for it, Maybe you want to look towards switching up your pricing model over to fixed fee. So it's a scary thing to do. I'll admit it. I did it with my own firm, and it was really scary to start to do it. And I started with new customers. I started to create a fixed fee structure of services I provided, and I put a number on it, and I kind of worked it until I figured it out along the way. It's probably the best method to do it. So you're not diving in headfirst, and then you've got a complete disaster where you're not making money. Start to sprinkle it in with new clients. I found that once I freed up the hourly rate, I had a better, better communication flow with my clients. They weren't fearful of every time they talked to me, the clock was ticking. So you might find that it's better and you get a better result from that. And of course you get prepaid for it. So you're gonna get that upfront retainer. So you're not really extending credit when it comes to that. Many, many attorneys find when they start to change their fee structure, they're much happier. So you're charging a flat rate fee for each service provided, and it really will clarify the whole engagement with the client. You'll have less collections, and it gives peace of mind to the law firm's client as well. The size of your practice is going to dictate how much time you spend on each case. Obviously, the bigger the firm and the least— the lesser amount of attorneys on staff, the more time it's going to need from you. Start to look at that and see how much, how much are you working? I find sometimes we really dig down and analyze this with our clients. They're really surprised at how many hours that they're working. in a week trying to do all these things and how much profit they're making. And if maybe they changed and shifted the way they worked, that they could take less cases but make more money. So it depends on the firm, obviously, but you want to start to look at that as well. And then you want to look at your, you know, the operating expenses, and you want to look at the legal services. What's it costing you to provide this service? So Is there any advanced client costs that you have? If you're doing fixed fee, you've got to factor that in because it's kind of all lumped in together. But you want to look at it unless you add it on separately. You want to look at exactly what are the fees involved? What is the money that you're out, out putting out for a client ahead of time before you're reimbursed? You want to look at that. And then you also want to look at operating expenses. Every attorney or business owner should know the cost of running their law firm. They should know what's that net-net. What is the amount that they need to bring in to generate for sales legal income? And what is the amount of the expenses to net it to zero? So I'm talking like big fixed expenses. Rent is one. Software can be one. Insurance, your salaries. What is your marketing costs? And that could fluctuate. But you want to know, as a general rule, especially if you start to look at budgeting, how much money does it cost to run the firm? You should know that number as a business owner. You should know that number. What does it cost for me to run my firm? So if you're really— if you're listening to me and listening to me talk about these different things, and you're like, I really need to do this, but I really don't have the time to do this. I'm really good at what I do, but I don't really want to get into the minutia of this. This is where we can help. So please feel free to reach out to us. Any questions or comments, I'd love to see them. You can write your comments right here in, in with the video, or just reach out and ask. I'm on a lot of social media places, so you can find me. I'd love to help you, help you get started. And nothing makes me feel better to help a client that's, that's having a problem really getting to start to look at the figures and deep dive into the numbers. And, you know, it's just like the first step. But remember, you want to look at your profit and loss statement. Start to look at what your income is, look at what your expenses are, find out that net number, and then maybe pick a number that you want to say, this is my revenue goal, and then work your way towards it. On that note, I hope you all have a wonderful, wonderful day. Bye now.
