Leadership In Law Podcast

S02E78 Financials That Achieve Your Goals with Leah Miller

• Marilyn Jenkins • Season 2 • Episode 78

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Financial management is often the most intimidating aspect of running a law firm, yet it's crucial for sustainable growth and success. In this illuminating conversation with fractional CFO Leah Miller, we explore how intentional financial planning can transform your law practice from surviving to thriving.

Leah shares her journey from paralegal to firm administrator, and then to founding her own financial services company, which helps law firms nationwide. Her approach begins not with spreadsheets but with understanding your personal and professional goals: "How much do you need to be bringing home to live the life you want to live?" By starting with this foundation, she creates financial strategies that support both business growth and the lifestyle you desire.

We dive deep into the challenging transition phase from $500,000 to $1 million in annual revenue, that uncomfortable period when "all you're doing is spending money" on marketing, talent, and infrastructure without seeing immediate returns. Leah provides practical guidance on navigating this growth stage with confidence, including how to set appropriate KPIs, maintain essential compensation for yourself, and communicate financial goals transparently with your team.

The conversation covers critical foundations every firm should establish, from proper accounting software setup to the distinction between "bookkeeping for tax purposes" and "bookkeeping for financial growth." Leah explains how categorizing expenses strategically can reveal operational inefficiencies and help you make smarter hiring decisions. You'll learn why your financial team should include bookkeepers, CPAs, and strategic advisors, each playing distinct roles in your firm's financial health.

Reach Leah here:

www.linkedin.com/in/leahlnmfinancial
https://www.instagram.com/leah_lnm_financial/
www.firmlyprofits.com

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Speaker 1:

Welcome to the Leadership in Law podcast with host Marilyn Jenkins. Cut through the noise, get actionable insights and inspiring stories delivered straight to your ears your ultimate podcast for navigating the ever-changing world of law firm ownership. In each episode, we dive deep into the critical topics that matter most to you, from unlocking explosive growth to building a thriving team. We connect you with successful firm leaders and industry experts who share their proven strategies and hard-won wisdom. So, whether you're a seasoned leader or just starting your journey as a law firm owner, the Leadership in Law podcast is here to equip you with the knowledge and tools you need to build a successful and fulfilling legal practice.

Speaker 2:

Welcome to another episode of the Leadership in Law podcast. I'm your host, Marilyn Jenkins. Please join me in welcoming my guest, Leah Miller, to the show today. After almost a decade as a firm administrator and CFO of a personal injury law firm, Leah understands the unique challenges law firms face when it comes to managing financials within the firm. In 2023, Leah decided to take this experience to help law firm owners across the country reach their growth goals. Through LNM Financial Services, Leah provides fractional CFO services to law firms that have growth goals and need extra help with financial analysis. I'm excited to have you here, Leah Welcome.

Speaker 3:

Thank you. I'm so excited to be here to talk to you today.

Speaker 2:

Absolutely Definitely. You know, being a CFO is a fractional CFO is a big thing right now, being able to go in and help firms as they are reaching a scale and a growth mode. I'm excited to talk to you about that. Tell us a bit about your leadership journey up to this point.

Speaker 3:

So I started out as a paralegal in a law firm in my early 20s and my goal was to one day manage a law firm and I thought it would be like in the future, you know, a couple decades or something like that. I was going to be a paralegal for a while and, through right place, right time and a lot of hard work, I was promoted to firm administrator of the law firm I worked in when I was 26, 27. My our administrator left and I looked at my boss and I was like I can run your law firm and he's like all right, here you go. And I got a crash course in how to run payroll and do all of those things and so, through my, I was at that firm for more than 10 years. I worked my way up, I went back to school, got my MBA and by the time I left, my title was firm administrator, cfo.

Speaker 3:

I was still doing paralegal work as well, and so I had started doing some bookkeeping and financial consulting on the side and saw that there was a need in the community for that kind of consulting and financial help for law firms. And so, in 2023, I took the leap and I left that law firm job that I thought was going to be my place forever, because I had reached my ultimate goal and I started my firm and through that the last two years I've been able to help a lot of law firm owners just feel more confident in their finances. Years I've been able to help a lot of law firm owners just feel more confident in their finances and I've realized that this is the place that I belong, where I can help law firms, but in my own way Fantastic.

Speaker 2:

I love that, yeah, because it's the thing about needing to know your numbers. That's super important and I think it's. You know, there's certain spaces and times in your growth journey that it's just, it's terrifying. You know what you're going to do with your money. How do I plan to bring on that next person that I know that I'm going to need?

Speaker 3:

Yeah, it really is, and I've found that you know the finance part of it is the not as exciting part of running a law firm. It's kind of the scary part of running a law firm. So a lot of times it's the last thing that's thought of in the journey and you know in the beginning you're doing everything that you need to do to get your law firm going. You're just making sure there's cash in the bank. But as you grow there's more that you can do with the finances to be more strategic and just help. You feel really good about making those decisions to hire that next associate, invest into the firm and all of that, and so making decisions with the finances really makes a difference as you continue to grow your firm.

Speaker 2:

Thanks, I agree. I mean it's better, it's more than realizing you have cash in the bank at the end of the month, especially if you want to, if you want to grow and scale. And so when it comes to you working with a firm, do you sit down and talk with them about what are your plans, what are your dreams, where do you want to go?

Speaker 3:

Yeah, so that's how I start all of my conversations with clients or potential clients. It's what are your goals? Where do you want to go? And we don't just talk about firm goals, we talk about what are your personal goals? How much do you actually need to be bringing home to live the life you want to live?

Speaker 3:

A lot of times I find you know we want to go out and start our business, especially as entrepreneurs. We get excited about, you know, the building part of it, but then I find that firm owners they're not even paying themselves when they get down the road. And so we sit down and we talk about where do you want to be? And not just five, 10 years from now. Where do you want to be right now? What do you want your life to look like? And let's work backwards from there. So if you know that you need a certain amount of money every month or you want to grow to a certain you know amount of people working for your firm or whatever you want to do, let's start with those goals and then set that roadmap, and so you know. Then we get into setting budgets and reviewing financials and really getting into the nitty gritty of things, but it always starts with that goal and where you want to go Excellent.

Speaker 2:

And do you. I guess the thing is is I noticed that a lot of small businesses when they start to actually make money, they tend to stop paying themselves so they can grow, and it's not a profit first kind of thing. And then suddenly they realize, wait a minute, this we can't keep doing. You just bought a job that's not paying you any money.

Speaker 3:

That's kind of what we look at, and I don't necessarily say this is how you have to do things. I say these are the options you know. If you, if you know that you need to take home fifteen thousand dollars a month, then this is what we have left to hire people, do marketing things like that. If you know that you can take a little bit less and you want to invest back into the firm and this is the time to invest in the firm, then let's do that right now and then that'll get to where we're going.

Speaker 3:

I find a lot of times firm owners especially the ones that are moving from $500,000 a year in revenue to a million, to get to that million point it all of a sudden feels like all they're doing is spending money.

Speaker 3:

Because you really are. You're investing in marketing, you're investing in your people, all you're doing is spending money and you feel like you're not getting any back. So first, we make it a priority to at least pay ourselves something every single month and not just the leftover, and second, I assure them you know, let's get through this growth period. And then I find, once you hit about a million in revenue, you have other problems to deal with, because there's always problems, but you feel a little bit more like you're. You're not putting out so much money and you're getting a little bit back, and so it's like it goes up a little bit and then obviously you invest again into the firm and then you have other growth journeys. But that's kind of where I come in, to sit down and just talk about it every single month and guide the firms through that uncomfortable feeling of we're spending money constantly. When is this going to pay off?

Speaker 2:

So you're giving them KPIs to watch so that you're seeing they're feeling a little more secure that we are on path. Yep.

Speaker 3:

Yeah, and that's what we do is we set the KPIs, we look at those, we actually look at the financials every month. I find a lot of firm owners. They get busy in one being a lawyer or two, running the firm, managing people, and they don't take the time to sit down and look at the financials. So they receive the financials from their bookkeepers and they probably glance at it. They know maybe what their revenue was, maybe what their net profit was, but they don't ever actually sit down and think about it because it's the last thing on their mind. And so when I work with firms, we have a set appointment where we have to sit down and meet and we actually just go through all of the financials, we reevaluate our goals, we look at our KPIs and we make sure we're on that path. Or, if we need to make you know, change the path a little bit, we do that as well.

Speaker 2:

Nice, I know it made a big difference for me. I got a new bookkeeper and literally getting those reports and going through them it's not just getting those bumping reports, but reading them and we found some wasted money. And it's like, yeah, there's that thing about we all have too many subscriptions we're not paying attention to. Well, some can grow into the thousands if you don't pay attention to them. So, having that moment, that time, to go through it and understand not only the top level numbers but where your money's going, yeah, and without you know, micromanaging it.

Speaker 3:

Yeah, and that's. I find that as well, where there's a lot of you know, we can find how to save some money in different areas, and I'm okay. A lot of times people think, oh my gosh, we're going to talk to Leah about a budget and she's going to tell us not to spend any money, or they feel like bad about spending money on something. And I'm like I don't judge anybody about how they spend their money, I just want to make sure we're spending it with intention. So if you tell me that this one expense is really important to you, I will OK, that's fine.

Speaker 3:

If we want to spend money on that, we may have to give it up here, that's fine, we can do that. Let's just be intentional about the way that we're spending the money, and I think that is what the monthly meetings and all of that really brings forward for firm owners is just the intention of this is how much we want to make in revenue a month, and so we set KPIs for employees as well. You know we need to send out so many demands, we need to build so much a month, and so those are the KPIs we look at, and then we're intentionally spending the money and intentionally paying ourselves every month as well.

Speaker 2:

Fantastic. I love that. So I love that you bring in the whole team. As far as, then, understanding everybody has KPIs and taking the time to understand your numbers each month, I think not forcing them, but a pre-scheduled appointment, yeah, you know, otherwise it's just going to get swept away as we get busy doing something else. And I think your numbers are incredibly important, especially if your goal is to grow and even distance yourself from the frontline tasks, and I think all of us, the reason we start a business is to have more quality time doing the things we want to do even if we love our job.

Speaker 3:

Yes, exactly, and as far as the team goes, I believe in transparency as much as possible with your team when it comes to the finances.

Speaker 3:

Obviously, there are certain things that we're not going to tell them.

Speaker 3:

You know you keep some things to yourselves, but I've had a lot of really good luck with clients who have been transparent in saying it costs us $150,000 a month just to keep this firm open, and so we need everybody to do their part.

Speaker 3:

Where you know our intake staff is bringing in new clients, we need to hit those KPIs, because if we don't hit those KPIs, our pipeline runs dry. Or you know we need to have so much billing done or we need to send out so many demand letters. We need to move cases in a certain way, and so I think it's really important to, one, understand the numbers so that you can be transparent with your team, and then, two, being transparent with your team in a thoughtful way, because, again, there's certain things that we don't want to tell them. You want to keep with your leadership team, but you need to be transparent so people understand like our, every single person in the firm is important and what they do is important to keep the firm running, to help our clients and everybody gets rewarded in the end, hopefully, when we're doing that.

Speaker 2:

Right, I love that Definitely. Speaking of when you come in like a tech stack and say do you recommend a certain software tech stack or do you look and see what they have and build on that?

Speaker 3:

As far as financials go like tech stack for financials. So I primarily work in quick. Most of my clients have QuickBooks and my firm does bookkeeping as well, so we have a bookkeeping side of it and we do QuickBooks. I'm open to other tech stacks. You know we work with all different kinds of practice management softwares that a lot of my clients are on Clio Filevine. You know different case management software I do recommend. Some of the case management softwares are coming out with their own accounting software and I do recommend keeping the operating accounting separate from that. So keeping in, you know, quickbooks or something like that, because you know if you leave your case management software then you're trying to move all that data and so I do. I am not a big fan of using the internal Now for trust accounting and things like that. We can do a combination of both, but for operating bookkeeping definitely I suggest keeping in QuickBooks.

Speaker 2:

I agree with that, not. You know, quickbooks is long and established. The new ones that are part of something else. You know it's like you wouldn't have any info to the pizza restaurant. So, yeah, yeah, you want to go with really specialized.

Speaker 3:

Yep, yep, and I suggest for people as well, when you're just starting your firm, get that accounting software set up day one. That is the first thing that you need to do. You should probably hire a bookkeeper early on, but there are instances where you can do it yourself for just a small amount of time. But QuickBooks is affordable. It's $25 a month if you get it through a QuickBooks ProAdvisor and then you can get a bookkeeper, and so that needs to be.

Speaker 3:

You need to start with that foundation so that when you do grow, we can do the fractional CFO work. You know, I have people reach out to me and they want me to do a budget and analyze their financials and do a cash flow forecast. But to do a budget and analyze their financials and do a cash flow forecast, but their books are set up in a way where I can't even get that information yet, and so we have to get their books fixed before we can even look forward into what we're doing there. And so that's really important to, when you're starting your firm, have that foundation set from day one so that you can grow and build on it and know what your finances look like.

Speaker 2:

And I definitely agree with you. I recommend hiring a bookkeeper to set it up Like QuickBooks, originally, years ago, was set up incorrectly and I had no clue until a couple of years later and just now. Now someone had to go in and fix everything.

Speaker 3:

And it's very expensive to get it fixed. It is, it is.

Speaker 2:

And on top of that the amended tax returns to fix the things. It was not pretty.

Speaker 3:

Yeah, and you want to make sure that your revenue is being captured the right way, especially if you have a trust account. It's easy for it to get messed up in QuickBooks and I've had to fix a couple of them recently where income was overstated or income was understated due to the way that their bookkeeping was set up. So the whole financial picture needs to be something that is looked at. A lot of times people they have a CPA, so they think everything the whole financial picture is taken care of because they have a CPA. Well, you really want a whole financial team, starting with the bookkeeper, who's going to make sure that your profit and loss is accurate, all your financials and your accounting is accurate. Then you're going to have your CPA who's going to do your tax returns.

Speaker 3:

A lot of times, cpas are really busy with the tax part of things and so they're not necessarily forward thinking, where they're not looking at your taxes or the information you give them and thinking, oh, this firm could do this to save money. It's just not part of their scope a lot of times. But people assume it is. They're like, oh, my CPA is going to look at my financials and so that's where the fractional CFO services come in, where we're forward thinking and we are going to do more strategy and not just tax strategy. There's a huge difference between tax strategy and cash flow strategy, so it's really important to have the whole team to help you with your firm.

Speaker 2:

I see, yeah, and I also I think it's incredibly important that you understand the categories that you're putting things in. So that was one of the things that got messed up with me and it it makes a big difference in your taxes and your growth down the line. So, having it you know, set it correctly and and then understanding that instead of correctly.

Speaker 3:

Well, I tell people that there's a bookkeeping for tax purposes and there's bookkeeping for financial growth.

Speaker 3:

So when we do bookkeeping, when my team team does I have a team that does the bookkeeping when we do it it's set up in a way where we can look at it and make financial decisions for the future. So, for example, wages you can technically put everybody's wages into one category for tax purposes. I like to split it out so we know how much are we spending on our associate attorneys? How much are we spending on operations? How much are we spending on our associate attorneys? How much are we spending on operations? How much are we spending on marketing associates? How much are we paying ourselves?

Speaker 3:

And so we break that out so we can run reports and very quickly and easily see okay, we are way overstaffed in this one area and these people are telling us that they're busy. But there's so many people, there's got to be an operational issue here, and so when you start breaking the financials out in that way, you can kind of see like where do we need to make changes operationally to be more efficient, as opposed to let's just throw more people at the problem.

Speaker 2:

Right, and when you get to that point, I mean I love that you do that. And then you can also see capacity wise, where you know because I think that one of the most terrifying like I said earlier, the thing is whenever is to know when am I ready to hire? You know, I feel like you know we're at capacity or pushing that I feel like we need another person to be able to move forward. But being able to look at your numbers and I love the idea that categorizing your people and then can see where's the money going Then you can't possibly need another person because we're overspending here.

Speaker 3:

Yes.

Speaker 2:

So something's wrong with the system.

Speaker 3:

Yes, and a lot of times I would say probably 50% of the time when people reach out to me, initially it's I need to hire somebody and I don't even know how much money I have to pay somebody. What can we even pay somebody? And so that's where we, you know, look at the budget, we break things down and we can see where our breakeven point is every month. So how much do we have to generate just to break even every month? And that is either, you know, with contingency firms, we have to settle a certain amount of cases With billable firms that bill by the firms. We have to settle a certain amount of cases with billable firms that bill by the hour. We need to bill a certain amount of hours. And so, as we hire people, you know, if we hire an attorney, they're not necessarily going to generate revenue within the first month. So we have to think okay, we have three to six months before this attorney is actually going to be generating revenue, and in the case of a contingency fee firm, it may be even longer before they're generating their own revenue. And so how much do we either need to make up on the other side of things or how much do we have to have in savings to help us get through this. And so that's something that we kind of map out all the different scenarios and see, you know, what cases do we have coming down the pipeline? How much do we need to bring in every month so that the attorney can feel comfortable?

Speaker 3:

And again, in those growth situations, you feel like you're paying out more money than you're bringing in, and those first couple of months that's what it is. You're just paying everybody and no money is coming in. And so we can map it out and see, okay, we've got six months of reserves. We know that we can do this. We have to give our team something to work towards. And that's where you come into your team and you say, hey, we need to make this work, and so we need to be doing this monthly. And then it just gives you that confidence. Obviously, things change and we have to kind of, you know, pivot sometimes, but that's where those monthly meetings come in.

Speaker 2:

I love that and keeping your team on board with what's going on, what they need to shoot for Otherwise I mean they the things that need to be worked on, necessarily, and they don't know that unless you tell them, hey, you're doing a lot of this non-billable work.

Speaker 3:

Is there a software we can get that'll help you? Do you need help from somebody else in the office to make this a more efficient process, so that we can get more billable time in or so that we can get these demand letters out quicker? And so that's where operations and finances really work together, so that you can be as efficient as possible and help your clients as much as possible.

Speaker 2:

I love that when you talk about the savings, so that's going to be your run rate, your burn rate, how much do you anticipate or do you suggest a firm have in savings?

Speaker 3:

So this is I'm going to give the legal answer of it depends. So I and a lot of times this goes back to. Something I'm asked about often is benchmarks. So what are the benchmarks? What should we be spending on this? And I can give you benchmarks all day long and we can talk about. You know we need to spend 10 to 15% on marketing and 30 to 40% on wages and things like that. But that's where I go back to what are the goals and also what's the comfort level of the firm owner.

Speaker 3:

I have clients who we have six months worth of savings put into a savings account and we could go six months with no revenue and be just fine, because that attorney feels more comfortable with the six month savings. I have other ones who we have two to three months, but we know that we can generate revenue quicker and so we are, you know, being more aggressive in investing into the marketing and not necessarily keeping all of that savings, and that is their comfort level. So I like to see two to three months at the least when we're talking about savings. But sometimes, you know, we get a little bit lower than that just because we're investing in it and we know, you know we can bill clients, you know, every other month.

Speaker 3:

It also depends on the practice area. So you know we're in in a contingency fee firm cases are six to 18 months out. We're at the mercy of the court deciding when things happen a lot of times. So we want a little bit more savings there, whereas if it's, you know, a family law firm, we're billing clients monthly. We have everybody on retainer. We can kind of generate cash a little faster if needed. So we can be a little bit more aggressive in certain areas.

Speaker 2:

Excellent, I love that. Well, I think this has been a really great conversation to have. I love the information you've given us and how you go in and help firms pick the time to grow based on the goals of the attorney. That's just invaluable advice. If any audience just want to connect with you or follow you, where would they do that?

Speaker 3:

So my website is firmlyprofitscom. I rebranded last year to firmlyprofitscom. I'm also on LinkedIn a lot. I post a lot of just helpful information on there. I will chat with people in DMs on LinkedIn if they ever have any questions or anything like that. I offer an initial consultation. So if you're just not sure where you are in the process and you're not sure if your bookkeeping is where it needs to be or you're not sure if you're ready for a fractional CFO, I offer a free initial consultation and I love to just learn about your firm and what you're doing and then I can let you know. Okay, this is how my team can help you in that growth journey.

Speaker 2:

I love that. So if any of the listeners don't have a firm grip on their financials or where they want to go, you definitely want to reach out to Leah. I will make sure that all the URLs are in the show notes so they can reach out to you and catch you and connect with you on LinkedIn as well. Perfect, thank you. I appreciate your time. Thank you so much for the conversation. There's a lot to learn here and a lot to unpack for law firms. Thank you.

Speaker 4:

Thanks for joining me today for this episode. As we wrap up, I'd love for you to do two things. First, subscribe to this podcast so you don't miss an episode, and if you find value here, I'd love it if you would rate it and review it. That really does make a difference in helping other people to discover this podcast. Second, you can connect with me on LinkedIn to keep up with what I'm currently learning and thinking about. And if you're ready to take the next step with a digital strategist to help you grow your law firm, I'd be honored to help you. Just go to lawmarketingzonecom to book a call with me. Stay tuned for our next episode next week. Until then, as always, thanks for listening to Leadership in Law podcast and be sure to subscribe wherever you listen to podcasts so you don't miss the next episode.

Speaker 1:

Thanks for joining us on another episode of the Leadership in Law podcast. Remember you're not alone on this journey. There's a whole community of law firm owners out there facing similar challenges and striving for the same success. Head over to our website at lawmarketingzonecom. From there, connect with other listeners, access valuable resources and stay up to date on the latest episodes. Don't forget to subscribe and leave us a review on your favorite podcast platform. Until next time, keep leading with vision and keep growing your firm.

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Marilyn Jenkins

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