Episode 307 | Profits, Pricing, and the Power of Your Numbers with Ryan Kimler

In this episode of the Wealthy Woman Lawyer® podcast, I chat with Ryan Kimler—founder of Net Profit CFO, host of the Net Profit Podcast, and an international bestselling author. Ryan brings powerful financial insights and practical strategies to help law firm owners transform their finances—and their futures.

Listen in as Ryan and I explore:

• The biggest mistakes law firm owners make when it comes to pricing—and what it’s really costing them.
• Why your payroll ratio could be silently sabotaging your profitability.
• How to know if your next hire will make or break your bottom line.
• The surprising link between employee compensation, productivity, and pricing strategy.
• Why you need a financial dream team—and which four roles are non-negotiable.
• How to build a secure financial cushion without sacrificing growth.

LINKS TO LOVE:

Connect with Ryan at www.NetProfitCFO.com or on LinkedIn.

Imagine: scaling your law firm to multiple millions, working less, and enjoying the freedom and flexibility you deserve. It's possible, and I can show you how. For over a decade, I've helped hundreds of women law firm owners achieve this dream with my proven blueprint. Now, you can get your hands on this same blueprint for just $27. But don't wait, this offer won't last forever

If you enjoyed this episode, please leave us a review on Apple Podcasts!

Episode Transcript

Intro (00:01):
Welcome to the wealthy woman lawyer podcast. What

Davina (00:05):
if

Intro (00:05):
you could hang out with successful women lawyers, ask
them about growing their firms,managing resources like time,
team, and systems, masteringmoney issues, and more? Then
take an insight or two to helpyou build a wealth generating
law firm. Each week, your host,Devina Frederick, takes an
in-depth look at how to thinklike a CEO, attract clients who

(00:25):
you love to serve and will payyou on time, and create a
profitable, sustainable firm youlove. Devina is founder and CEO
of Wealthy Woman Lawyer, and hergoal is to give you the
information you need to scaleyour law firm business from 6 to
7 figures in gross annualrevenue so you can fully fund
and still have time to enjoy thelifestyle of your dreams. Now

(00:48):
here's Devina.

Davina (00:50):
Hello, and welcome to the Wealthy Woman Lawyer
podcast. I'm your host, DevinaFrederick, and my guest today is
Ryan Kimler. Ryan is the founderof Net Profit CFO, host of the
Net Profit podcast, andinternational bestselling
author. At Net Profit CFO, Ryanand his team use accounting and
finance to help law firm ownersdo one thing, have a growing and
more profitable business.Helping law firm owners have a

(01:13):
growing and more profitablebusiness produces two big
results.
One, your law firm has enoughcash to grow and maintain strong
financial health. And two, yourlaw firm produces enough cash
for you as the owner to fulfillyour wants and needs. Please
join me in welcoming Ryan to theshow as we discuss the ins and

(01:33):
outs of all things law firmfinance. This is an information
packed episode you don't want tomiss. Hi, Ryan.
It's good to see you today.

Ryan (01:42):
Yes. Thank you for having me. I am excited to be here and
excited for the show today.

Davina (01:46):
I'm good. We're going to have a good conversation. We
have a lot that we can talkabout today. I have introduced
you, but I would like for you totell us a little bit more about
how you made your way to beingthis CFO for law firm
businesses. You didn't grow upas a little boy saying, one day

(02:07):
I'm going to be a CFO.
So what happened along the

Ryan (02:10):
Absolutely. Yeah. So, obviously, I have a background
in accounting. I have a degreein finance as well and my
original plan was to sit for theCPA. I'll make this as quick as
possible here.
And that's why I got bothdegrees. So, I had one hundred
and fifty hours. Could sit forthe CPA and when you're going to
sit for the CPA out of school,what you do is you go and work
for a CPA firm and our CPA firmis doing the normal stuff,

(02:34):
bookkeeping, compliance, generalledger entries, tax, and we were
doing it for small businessowners and you know, this is
where I really fell in love withworking with small business
owners and really got asked thequestion, you know, it's great.
You guys produce our financialsbut what would be really helpful

(02:56):
would be if you would help usgrow our business and make our
financials better so that we canmake more money and keep more,
right? I'm kind of paraphrasingbut those are the kind of
questions that I got.
And I was very early in mycareer, did not have great
answers to that question at allbut definitely lighted a fire
inside of me and realized thatbusiness owners really need help

(03:19):
with their finances and reallyneed that accounting expertise
that can advise them that a lotof accountants got don't go into
and do. So, fast forward severalyears later, moved on from the
CPA firm, waited out my noncompete, went corporate, really
worked with the CEO very, veryclosely at a big company. We

(03:39):
were over $100,000,000 inrevenue and just they had more
resources. Things were easier.Didn't need the same help from
my experience that the smallbusiness owner needed.
I knew I wanted to launch my ownfirm and so, I got back into
working with small businessowners by launching my own firm.

(04:01):
Found a great CFO trainingorganization along the way. I
was always looking for mentorsto help me with answers to the
questions that I had that Ididn't have answers for and
launched my own firm and nowtoday, you know, exclusively
with small business owners astheir CFO and helping them with
their numbers. And it's workthat I love to do.

Davina (04:24):
Good. Good. I'm so and I and I love your story. I love
how you really found somethingthat ignited a passion in you,
because most people probablythink accounting is not
something that would ignite apassion. But definitely loving
if you have that entrepreneurialmindset, loving the small

(04:44):
business owners andunderstanding the help they
need.
One of the things, that I thinkis confusing for a lot of people
is that, well, I have a CPA andmy and then they get to the end
of the year, the CPA helps filetheir taxes and the c and then
they CPA says, you should havedone this, you should have done
that. And they're wondering whydidn't the CPA tell me this

(05:08):
before? Have you heard that?

Ryan (05:11):
For sure. Or they go or my favorite also is, you know, you
go in, you meet with your CPA,and they're looking at the tax
return and they're like, oh, youhad a great year. You had this
in profits and you owe this intaxes and the business owner in
their mind is looking at theirbank balance like, where's all
the money from that though,right? Yeah. And then, you have

(05:32):
a tax bill and sometimes you'reprepared for it, sometimes
you're not.
If you're not, those can be someof your worst days in business,
I think but yes, I hear that alot for sure. Yeah.

Davina (05:43):
Yeah and so, really, what role you play in that is
not not, it's not specificallytax strategy but it is more
like, where is our money goingand what are we doing with it?
Is it going where we want sothat we're maximizing profits,
minimizing taxes, whatever it iswe're trying to do with our
business. Is it actually doingthat? And I think one of the

(06:05):
things I've encountered a lot,and I'm sure you have too, is
small business owners, and we'retalking specifically here about
law firm owners. There are a lotof us who don't know how to read
financial statements, even themost lawyers go through law
school, we learn, you know, howto be lawyers.
It's very detailed, challengingwork. And yet when it comes to

(06:28):
reading our own financials andinterpreting them with the,
viewpoint of growing ourbusiness, that's something
that's kind of foreign to us. Isthat something is that what you
encounter as well?

Ryan (06:41):
For sure. Yes. A lot of what I do, know, while I am
focused on helping businessowners really look forward and
plan for the future, A lot of italong the way is that education
piece and helping businessowners really understand like,
okay, if I pull this leverfinancially, how does it impact
my end results And that thoseend results really show up on

(07:06):
the financials that you'retalking about and really
educating them on the numbersthat are there, what they mean,
and how we can make thosenumbers stronger and have the
business be strongerfinancially. For sure. I spend a
lot of time doing that.

Davina (07:23):
Right. Because I think there's a, so I know so many
people I encounter, they don'teven want to look at it. They
don't really understand it. Theydon't want to look at it. They
just want to know that they canwrite themselves checks out when
they want to and do whatever itis they want, go on a trip or
whatever.
What do you think the number onemistake you see small business

(07:45):
owners, particularly law firmowners make when it comes to
their finances?

Ryan (07:51):
Yep. Number one for sure and the two are tied hand in
hand together. But number onefor sure is pricing and payroll.
Without question, you know, asyou go to hire and grow your
team, a lot of times, you don'traise your prices enough and you
know, for business owners, Ithink some of it is a mental

(08:13):
battle and confidence in if Iraise my prices, I'm not going
to lose all my clients. Some ofit is also just not knowing and
understanding how that flowsthrough and affects your payroll
and your hires.
There was a study Forbes SmallBusiness for '24 for the average
small business labor is 70% ofsales. 70% of expenses is labor

(08:39):
for on the average business.Huge, huge amount, you know,
ratios wise, right? If if we'resaying that sales is 100
percent, labor is 70, thatleaves 30% for you to pay
everything else.

Davina (08:53):
Right.

Ryan (08:54):
All of your overhead, market, and advertise, and have
profits, right? And so, youknow, for the business owners
that I work with, we aredefinitely targeting for way
less than 70% payroll and handsdown, those are the things that
business owners that I work withstruggle with and have

(09:14):
challenges with and especiallyin the marketplace today, where
hiring can be tough.

Davina (09:20):
Right, absolutely. I know there's like, you and I
talked about the, percentage of,of employment, the employment
rate in the legal industry. Iwould say it's less than 1%. And
you told me it was

Ryan (09:35):
Point 04% right now.

Davina (09:37):
Point 04%. So if you're having trouble hiring lawyers
right now, this may be why. Itmay not be a you thing. It may
be because the unemployment ratein the legal industry is 0.04%
right now. One of the things Ithink that makes law firms
unique is their ability to, andnot every law firm, obviously

(09:57):
there are some that work oncontingency and some do flat
fees, but the ability to,predict your profits based on
who you hire, hiring lawyers,hiring paralegals, because we
can directly bill them for thetime they work.
And there's a margin there forus, to make a really nice profit

(10:19):
if we do it correctly. Sohiring, while I think a lot of
people sort of focus on how muchthat payroll is, on the flip
side of that, oftentimes peopledon't look and go, well, how
much are these people making forme and where they miss out? I
and I'm shocked by this. I seethis a lot, with law firm owners

(10:42):
who are in the early stages oftheir business. They don't have
a good handle on how that lawyermakes them money, how many hours
they should be billing, what Ishould be charging them out out
at, and then also setting thatclear expectation for that
lawyer that it is their job tobill those hours.
What are you seeing when you'redealing with attorneys and and

(11:05):
and they're hiring andeverything? Are you seeing the
same sort of thing?

Ryan (11:08):
For sure. Yes. One of the big things that I help with is
staff productivity andefficiency. We're always looking
at, you know, what are theannual hours expectations that
you have of the lawyers andparalegals that you have on
staff and then, we've gotta havereporting that we can look at
and compare and see, well, who'shitting their numbers and who

(11:29):
isn't and if someone's nothitting their numbers, why are
they not hitting their numbers?Are there, is there not enough
work?
Are they not billing in theright ways? Are they not
capturing all of their time? Wedive into that extensively
because you're right. I mean, itis a very, very good opportunity
to be able to hire and then kindof forecast forward. Well, how

(11:51):
much work do I need to bring in?
And how much revenue is thatlawyer going to bring me in when
they're doing their workproperly and when they're doing
their hours properly. So, yeah,I mean, we spend a lot of time
reviewing attorney productivity.In some cases, I found some
firms where contract attorneysonly had utilizations of like

(12:13):
50%. So, well, a firm thoughtthey were paying a contract
attorney one hundred dollars anhour. Really, you're paying them
$200 an hour because theirutilization rate is so low that
they're billing you for twohours for every hour that they
actually gets on a client bill.
So looking at things like that,super, super important for

(12:33):
profitability andsustainability. Right,

Davina (12:36):
right. Growth for growth as well. Because it can be very
limiting if you're paying waymore. If you're not making a
profit on somebody, then what isthe point, Right? Because that
is what we're that's what we'redoing.
And this does apply to peoplewho charge flat fees as well.
For those of you flat fearersout there who feel left out, one
of the biggest mistakes I seewith people who charge flat fees
is they haven't done the math.Yep. To see if I my flat fee is

(13:01):
going to be significant enoughto make us a profit if somebody
on my team does somethinginstead of me. Or if I'm doing
it, what is that flat fee gonnalook like?
A lot of people who, get intoflat fees kind of says, this is
sort of what the market willbear. This is sort of what's
going on in the market. It's afeeling rather than an actual

(13:24):
fact. When you're helpingclients with that, what are some
of the challenges you'reencountering around that and
some of the solutions you'rehelping them with?

Ryan (13:33):
Yep. So, I actually think working on the flat fee side is
probably easier to project,right? So, my first question is,
okay, if you hired a lawyer, howmany flat fee cases can they
complete in one month? Right?And we we look at what that
number is and I'm just gonnathrow out a service that's
commonly flat rate.
I'm just gonna say estate plansbecause those are commonly flat

(13:55):
rated. Okay, let's say, youknow, lawyer that you bring in,
they're a little bit lessexperienced as you as the
owners. We know they're not beas efficient as you but they
crank out. I'm just gonna throwout round easy numbers. 10
estate plans in a month, right?
That helps us get down to, well,how much revenue are they really
accounting for and generating?Now, a lot of times in an estate

(14:17):
plan, there's probably aparalegal that does some work as
well. So, we've gotta kind offactor that in but if you can
get down to what's a grossnumber, right? 10 estate plans
at $5.00 a piece. It's $50 ofrevenue, right?
Contributed to the business,then, we can start to look at
what you're paying that attorneyand what percentage your labor

(14:40):
cost is on those flat fees andso, I think flat fees can be
easier to calculate from thatstandpoint, the hiring
standpoint. I still think it'simportant to track hours even if
you're doing flat fee work froma management standpoint, it
really helps you seeinefficiencies in the staff that

(15:00):
you've got like why is anattorney, you know, maybe a
standard estate plan takes fourhours and you see that one
attorney that you've got isalways putting seven hours down.
Well, why is there that gap,right? Being able to see things
like that is really going tohelp you with productivity even
if you're just billing on a flatrate and so, we definitely work

(15:22):
on those kind of things for thefirms that I work with that are
doing flat rate billing but theother thing that's really nice
about the flat rate billingfirms usually they have those
flat rates sitting in theirtrust account and so we can
always look at their trustaccount balance We can look at
how much they're transferringevery month and we can kind of

(15:42):
see in the future like, ifyou're making consistent trust
transfers and let's just say,again, easy round numbers, it's
100 ks a month.
You know, and then your trustbalance right now is sitting at
$50. We know that you better gogenerate some work, right?
Because there's no way you'retransferring 100 ks next month,
right? Yeah. So, being able totrack that and what your work in

(16:04):
progress is going to be can bereally helpful.
And that really goes for thehourly and the flat fee side as
well, but more so for the flatfee side.

Davina (16:12):
Right. It really is, your numbers are really telling
a story and I don't think enoughpeople are looking at them,
trying to hear the story thatthey're telling, you know, until
they get in sort of a crisissituation. And they're like, Oh
crap, we just realized we have aproblem. I want to talk about
your, you, it's reallyinteresting to me that you said

(16:34):
pricing and hiring together.It's a, like they go like salt
and pepper, they go togetherpricing and hiring.
Because I think most lawyers Italk to, they don't think in
terms of pricing and hiring.They think I charge this because
I think this is what somebodywith my years of experience can

(16:55):
charge. And when I hire this newlawyer, I, I don't want to set
them at my same high rate. Iwant to set them at a lower
rate. And, and I think abouttheir number of years experience
and I sort of attach this valueto it.
And there's not a lot of thoughtbeyond that. And and it's
certainly no people, generallyspeaking, aren't connecting

(17:17):
those two that high pricing andhiring together. Why do you
think that is important for usto start looking at it that way?

Ryan (17:26):
Yes. So, number one, if you're not priced right and
you're not going to make enoughmargin on the people that you're
going to bring in, it limitswhat you can offer people salary
wise, right? So, you know, I'llgive an example. Let's say that
you are at an hourly bill firmand let's just say, you know,

(17:46):
around easy number that's prettystandard in the industry is
let's say, you expect yourattorneys to bill fifteen
hundred hours a year. A $10price change is $15.
Up or down, right? For the year.So, you know, I want to give
your audience just a few secondsto think about that, right? And

(18:08):
and let's just say, let's justsay that we're shooting for
payroll to be 33 right? There'sthat old school rule in legal
like a third goes to payroll, athird goes to overhead, and a
third goes to profits, right?
So, a change in price by $10which changes $15 over the

(18:29):
course of the year is adifference of $5 up or down on
what you can pay your attorneysand your people, right? And so,
you know, that's, again, and Ithink to me, a $10 price change
is small. Right. I think, Ithink most likely, you know,
probably every law firmlistening to this podcast, you

(18:50):
could raise your prices today$10 and I would about bet you,
you're going to see zero changein the number of cases that
you're sizing, signing.

Davina (18:58):
Right. Right.

Ryan (18:59):
And probably zero change in conversion rate, most likely,
right? I mean, I could be wrongbut it's so small.

Davina (19:07):
Why not try it and see, right? I think you're, well, and
I will tell you as a perspectiveof a client, I've hired many
attorneys through the years. Ithink I've hired more attorneys
since I've been an attorney,because I know now what I don't
know. But it there when if youhave a a sophisticated client
who's paying you, who's payingyou your rates and that kind of

(19:28):
thing, they're they're expectingthat there will be some sort of,
fluctuation in in prices overtime or or whatever if you're
dealing with people that arerepeat sort of businesses. And
then if you're just saying,okay, I have a contract for
this, I can't change thesecurrent clients.
What I can do is with the nextnew person that walks in the
door, this is now my rate. I'vehad a lot of my clients do that.

(19:52):
I just say, the nextconversation you have, this is
now your rate. And it like,they're just flummoxed and
shocked that it's so easy to dothat, but you really literally
can do that. And it's a, andthey don't even respond to it.
It's not even a bump in theroad. Like we think we build it
up into our mind, but that wholeidea of being able to pay your

(20:14):
people more, get better qualitypeople, give the people who work
for you a better quality oflife, all of that tied to just a
little bump in rates. And also,you also can put a little more
in your pocket that way. It's ahuge, huge driver of revenue and
profitability is like, you justcan make that tweak in your, in

(20:35):
your pricing. And I think that'sa, a lot of women law firm
owners sort of say stuck aroundthat with a lot of beliefs
around what you talked about.
Won't be able to get clients.You'll actually, I argue, you
actually get better clients. Youget better clients. I don't know
if you've ever had theexperience yourself, but I've
had the experience in both mylaw firm and other businesses
that sometimes the one thatyou're doing the biggest favor

(20:57):
for is the one that is mostdifficult to work with, most
challenging. Whereas the oneswho like, this is a business
arrangement, I'm paying you X todo Y, not as demanding.
So I think you get betterclients if you make those
tweaks.

Ryan (21:13):
I agree with

Davina (21:13):
When you're making those decisions, when you're helping
clients make those decisions,what kinds of things are you
basing fees on? Because are youdoing it based on a feeling?

Ryan (21:28):
Nope, I am not. I have a mathematical equation that I
use. So best and easiest placeto start is going to be because
everybody can relate to this.It's going to be hiring an
attorney brand new out ofschool. So, very, I'll say very
little experience.
I'll say zero to two years. Onthis type of an attorney, we

(21:50):
should expect in billings five Xof what their salary is. So,
I'll give you, again, example,round easy numbers. Let's just
say salary in your area for abrand new attorney like that is
100. Our expectation should bethat they should bill 500.
So, then, I dive into, well, isthat even reasonable at our

(22:12):
current rates? So, I typicallystart, you know, and I divide by
forty nine weeks. Okay, thatmeans $10,204 a week. If we're
billing at $400 that meanstwenty five hour, twenty five
and a half hours a week. Canthey bill twenty five and a half
hours a week?
I would say, yes, that'sreasonable. So, 400 is, you
know, probably good enough that,you know, could it be raised

(22:34):
some maybe but twenty five and ahalf hours a week is doable,
right? The reason why I startwith five X with the brand new
attorneys is as an attorney getsmore experience, you're going to
raise their salary and they'realso going to start probably
spending time generating casesand so the number of hours that

(22:57):
they can spend actually billingis probably going to decline
along with you're paying themmore in salary and so a five X
return on a brand new attorneyis going to be your strongest
return that you're ever going toget and then from there, I kind
of have a sliding scale thatgoes down to three and two X
returns. You know, if you havemore of a partner type attorney

(23:18):
that's generating a lot of workfor the firm, they're probably
more of a two X because they'respending a lot of time client
facing consultations, generatingbusiness, that means they have
less hours to bill and you'realso going to pay that attorney
a much higher rate, right?
So, attorney like that, maybetheir 200 ks base salary a year,

(23:40):
it would be really hard for themto bill a million dollars,
right? And get that five Xreturn on that 200 ks and so.
Right. You've got it now and so,you know, that's kind of the
pricing side of it and how Ikind of set it up and kind of
the structure and then, you'vegotta have good balance, right?
If you've got a firm that's fullof partner like attorneys and

(24:01):
you're only getting two Xreturns, your profits are going
to suffer.
That means, payrolls, if you'regetting two X returns, that
means payrolls probablyapproaching 50 or better of the
revenue that you're bringing in.So, there's gotta be a good
balance between the folks thatyou have on staff that are two X
that are generating business andthe newer attorneys that you've,

(24:22):
you know, got on staff thatyou're just bringing on that are
producing more of like a five Xthen you've got a place in the
middle that's your experiencedattorneys that aren't generating
work yet and they're like yourthree and threes and fours
return. So, there's gotta begood balance. You can't have too
much of one position in the firmor it'll affect profitability or
work product.

Davina (24:43):
Yeah, yeah. I think one of the challenges with new
lawyers though, with babylawyers, we'll call them that.
Yep. Is that a lot of clientswhen they first start hiring
lawyers, the reason they'redoing it is because they don't
have time. And so hiring a babylawyer is not going to fix that
problem, it's going to increasethat problem.

(25:04):
They're going to wind up workingmore. I kind of generally
recommend that three to fiveyears as a sweet spot. Yep. Or
if that is your problem. Now, ifyou've already hired and you
have some attorneys, otherattorneys who can help with the
training and take some of thatoff of you, And that then that
starts to make sense to say,okay, we can stack up some baby
lawyers and we can pair them upwith people with a little more

(25:26):
experience to transpose a lot ofconsiderations in that.
But I love the numbers. I loveyou sort of breaking down the
numbers for us because I thinkthat's something that, often
we're not doing. We might, youknow, we're just not sitting and
thinking with that math hat onbecause most lawyers will tell
you they became lawyers becausethey don't do math. But I might,

(25:47):
you'll always hear me say, it'sbusiness math. You can learn to
count your coins.
You can learn business math. Ifyou went to law school, you
passed the bar, you can learnbusiness math and you hire a
good financial team. So tell us,we're gonna segue a little bit
here and talk about who thefinancial players are that we
should be thinking about hiringand in what order. Like, who

(26:09):
should we have on our team, onour financial team, first and
foremost? And I'm talking hereprobably vendors.
Right? We're not hiring thesepeople in our law If we're small
law firms trying to get over themillion, get into the multiple
million part. So who's on ourfinancial team and who should we
hire first?

Ryan (26:30):
Yep. So, in my book, I talk about four financial
positions that you should haveon your team. First one, I'll
talk about because I thinkeverybody knows what they do is
you should have a bookkeeper.Your bookkeeper tracks all of
the transactions that happens inyour business. So, all the money
is coming in, all the paymentsthat are going out, and when
they get done, you should kindof have like some draft

(26:51):
financial statements from them.
Again, I I I agree with you. Ithink that's a vendor, right?
Probably outsourced. Look for afirm that specializes in legal.
They're definitely out there.
There's a lot of them. That'sthe the beauty of COVID and
remote these days, right? So,that's probably the first
position and I would say, ifyou're doing 6 figures a year,

(27:12):
if you're a solo out there andyou're 100 ks plus, go hire a
bookkeeping firm, right? Takethose hours off of your plate.
Take that stress off of yourplate.
It's not in your wheelhouse. Youprobably dread doing it and
there's also opportunity cost toit, right? What, how many new
cases could you go out and signif you weren't doing your
bookkeeping, alright? So, that'sposition one. You should have

(27:33):
and you should have them veryvery early.
Position two should also behappen very early. You should
have someone to do your taxes.That could be a CPA. It could be
an EA. They don't evennecessarily have to have a
designation.
They obviously need anaccounting background but
someone to do your taxes, keepyou compliant, that should be on
your team. It would be really,really great if you had somebody

(27:56):
to work with you on some taxstrategy to help you, you know,
reduce the amount that you'repaying in taxes but don't
necessarily have to have thatperson from the start. That's
probably later down the road asyour business really grows and
your income grows and it reallybecomes a problem. When you get
into higher tax brackets of 35%,that's where you can really see

(28:19):
some savings. Third positionthat I'll go to and this is one
that most attorneys and lawfirms and most business owners
really miss is you should havesomeone to help you with
retirement.
Doesn't have to be an officiallike financial adviser. There's
a few criteria that I always putout that I call for a retirement
adviser. It's not someone thatjust pushes one product. I think

(28:42):
we all have met somebody thatjust pushes life insurance. They
can, that can be a great vehiclebut that doesn't fit everybody.
So, retirement adviser issomeone that you trust that is
going to help you retire in theway that you want to retire,
right? And and I would bringthis person on sooner rather
than later, okay? A lot ofbusiness owners, again, miss it

(29:05):
and I wouldn't be banking on abig, massive exit from your
company. That doesn't alwayshappen and that's not always
going to be where yourretirement is funded through and
so, I would say, as you startbuilding that team, you start
reaching that half milliondollar mark towards a million
dollar mark, you should startbringing in that retirement
adviser and really getting theiradvice and you know, have a plan

(29:28):
for you, for yourself as abusiness owner and what does it
look like to start setting asidesome money and things like that.
And then the last position isreally a part time CFO, really
like myself or my firm, and youshould again probably look to
hire us as on a fractional basisor a part time basis as you pass

(29:51):
that half million dollar marktrending towards a million and
beyond and you know, our job isreally to help you be strategic
with your firm and with yourfinances, help you forecast
forward so you can see wherewe're going, right?
Help you analyze your hires,making sure you're priced right,
making sure you have strongprofits, strong cash flow,

(30:16):
making sure your business ishealthy. Those are really the
four positions that that I talkabout in my book that I think
you need on your financial teamat a minimum. You know, you can
add more to that later, butthose are the four core
positions that you really need.

Davina (30:32):
Yeah. Yeah. I wanna talk about the retirement because I
actually did a podcast episode,something like the people that,
the dirty word that no attorneywants to talk about, it was
retirement. Because I have a lotof people who are sort of a
little bit younger that sayretirement, I'm not ever
planning on retiring. I'm gonnabe a lawyer.

(30:53):
The joke is lawyers don'tretire, they just die at your
desk. But a lot of people havethis idea that I'm not going to
retire. I'm always going to keepmy finger in the pot up. I was
going to work. And to that, Ialways say, when you get to be
in your 50s, you're going tolook at that very differently.
And when you get to be, youknow, my parents are in their
eighties and I see theirinability to come anywhere close

(31:16):
to the things that I can do,right? At my age and people who
are doing things at 30 that atthis age, I'm like not
interested in, right? So eventhough you may not think it will
ever happen to you, that youwill ever need money for the
future, that you should not putoff to tomorrow, which you can
do today, like travelinternationally, there you need

(31:38):
to also be balancing that outwith thinking of your future
self. What does my future selfneed? When I may not be able to
work at the, or may not want towork at the pace that I am now.
Right? So let's just protectyour future self. Then we got
some people who will tell me,well, I'm 30 and I wanna retire

(32:00):
at 40. That's a whole differentballgame. Right?
It's a you really need adifferent you need a much more
aggressive financial plan ifthat is your plan. Because you
think about it, if you retireat, let's say, you know, 60 and
you live to 90, which manypeople are doing, that's thirty
years that you've got to havesome, you know, income and
what's that gonna look like. Andwe think we'll be able to work

(32:23):
part time, but we might live ina world where, you know, nobody
hires us at that age, especiallywith the way things are
changing. So I echo what you'resaying and support what you're
saying. That is definitelysomebody that we need to have on
our team.
One of the things I look back onit with the hindsight of
somebody who's in my 50s andsay, Man, I wish I had listened

(32:44):
to all those people who talkedto when I was in my 20s and
said, if you would put away thisper week or per month. So very,
very important. So tell me whatindicators other than where we
are revenue wise should bewaving a flag that a CFO might,

(33:09):
it might be a good time toinvite a fractional CFO or part
time CFO to help us. What aresome of the things that like
when we start seeing these sortof indicators that we should
consider that?

Ryan (33:21):
Yep. So, some other indicators, I would say,
probably for your next hire,right? Let's make sure that
that's priced right. Let's makesure that you can give a good
offer especially in themarketplace that we're at today.
I would say, if you're, youknow, leaving your CPA's office
and wondering like, where is allthe money, right?

(33:42):
And and why didn't I make somechanges sooner? Those are
definitely triggers for CFO andand I would say, you know, if
you're in charge of a smallteam, right? Like, you're in
charge of their job, they'reproviding for their family. You
know, that that's also a goodtime to, you know, really be
triggered and and bring on a CFOso that you've got that

(34:03):
financial stability and you knowthat, you know, you're not going
to have to lay anybody off. Youknow that, you know, you've got
a good plan moving forward.
If you don't sit down and do astrategic plan every year and
really look beyond sales. It'snot just about cases and sales.
It's about, you know, what is mytotal budget next year for

(34:23):
marketing and advertising? Whatare my total profits next year
going to be? If you're notgetting down to that level and
having that sit down with afinancial professional or even
just by yourself to go throughand or with a coach, right?
And and go through and gothrough those numbers. Those are
red flags that I would say, youknow, it's it's time to start

(34:45):
looking at bringing someone intoyour life that can help you with
those things because I thinkit's important to have a plan
and be prepared, right? And whoknows what could happen? I think
COVID just a few years ago ismore evidence for that than
anything.

Davina (35:04):
Right, being prepared for something that you didn't
even know you would ever have toexperience. You can also help
people, so you kind of hinted atthis, but I'd like to talk about
it a little bit more. I thinkgenerally when people think CFO,
they think, or fractional CFO,they think, oh, here's a
retainer I have to pay everymonth. But you actually have,

(35:26):
for smaller firms, you actuallyhave some sort of way of working
with them for projects, like youmentioned planning or something
like that. Can you tell us alittle bit more about that?

Ryan (35:39):
For sure. Yeah. So, I do a lot of compensation plans, put
helping attorneys put thosetogether. Again, in a way that's
really profitable for the firmand also reviewing and looking
at, you know, is this going tobe competitive in your market
space? Is this really going togive you traction when you go to
hire, right?
And then, you know, so that'sreally going to help. Again,

(36:02):
that's kind of more of a projectbased thing but at least, you
know, while we do that, you'vegot some guidance and you know,
from a numbers perspective, itshould work out for you so that
it's a financially strong hirethat works out and you can keep
long term. So, that's one thingthat's that's really helpful
that I do. The other thing isI've got a financial assessment

(36:22):
tool that I will use on aproject basis and that's more of
like what a CPA does in review.It's a it's a look back at the
last couple of years.
Look at your trends in a littlemore in-depth way looking at
your profitability and your cashflow and you know, giving you
some changes that you can makeout of that. So, that's again,

(36:42):
more of a couple project basedthings that I do with some
smaller firms as they're growingand kind of getting to that
million dollar mark for sure.

Davina (36:50):
Yeah. Yeah. When you're talking about marketing, can you
give me some idea of what yougenerally see percentage wise
that successful firms areinvesting in their marketing,
because this is an area where Ithink a lot of us, by and large,

(37:13):
I think attorneys bootstrap,like we start out bootstrapping,
we pay for it all along the way.And there's no VC funding here.
Right?
And so one of the things that Ihear a lot of lawyers say is,
well, I get a lot of referrals.Right? After they've been in
business for a few years,they're getting a lot of
referrals. And they might not bethinking that they need a

(37:35):
marketing system that isindependent of them as an
individual person if they'rewanting to grow a larger law
firm. And and some of them, youknow, we start looking at the
marketing numbers and they'relike, oh, I'm not even spending
5% on marketing.
Right? Yeah. So what are thekinds of numbers are you seeing
for successful firms thatthey're investing in marketing?

Ryan (37:58):
Yep. So, I would say it does really depend on your
practice area. I think somepractice areas are more
competitive than othersspecifically probably talking
about personal injury andcontingency cases but let's set
those aside for a minute. Let'stalk about, you know, more
general areas of practice. Ithink for firms that really want
to grow and gain some traction,again, that are probably in

(38:22):
that, you know, 6 figures, 5hundred ks to 5,000,000, let's
call it.
10 to 15 percent typically ofsales to a mark of you know,
planned out marketing budget.It's not, you know, oh I'm going
to randomly sponsor this thing,right? It's, you know, planned
out marketing activities thatwe're tracking. We're making

(38:43):
sure we're getting a good returnon. Maybe that's an agency or a
part time marketing officer tocome in and help us when you get
a little bit bigger.
1,000,000, 2 million, dollars 3million plus. But typically, if
you really, really want to grow,I'm seeing, you know, 10 to 15%
marketing expenses. That'sreally what it takes.

Davina (39:05):
Yeah. Yeah. So key performance indicators are
something that we often talkabout, in growing our business.
And I have my favorite, but tellme your top three, let's say,
key performance indicators thatyou're like, the very things
that you're gonna zero in rightaway and look at. What are

(39:29):
those?

Ryan (39:30):
So it's probably not a shock to you, but pricing and
payroll obviously are are in thetop two there of the three,
right? So, from a payrollperspective, here's what I
always tell my firms to look at.If you take your total payroll
cost. So, this is adding inwages, taxes, four zero one ks,
and retirement benefits that youhave at your farm, health

(39:51):
insurance, workers' compinsurance as well, right? And
and you're, if you ask yourbookkeeper and you list those
categories, they can probablyhelp you group those together so
that, you know, in your profitand loss, it sums up those
numbers for you so that youdon't have to do the math.
You get down to a total payrollnumber. I divide that by revenue

(40:15):
and my I and this is this iswith the owner on payroll at a
at a reasonable salary. Youshould be around 40 to 45%
payroll cost. So, that's one keyperformance indicator that I
always look at. If you're higherthan that, you probably have an

(40:36):
imbalance of employees, meaning,too many people giving you a two
extra turn instead of a four orfive or you're priced wrong.
And so then second keyperformance indicator is
definitely ties the pricing,right? And again, kind of the
math we talked about earlier.Can we achieve a five x return
on a new lawyer, right? Andthen, doing the math the rest of

(40:59):
the way through, right? Andthen, third key performance
indicator for me is probablywhere your bank balance is,
right?
I think if you set things upcorrectly as far as on the
pricing and payroll, you shouldbe able to produce strong
profits and from that, then,let's look at what is your net

(41:22):
cash flow every month. So, ifyou have debts that you're
paying on a regular basis, ifyou have uncollectible accounts
that you've build and you're notbringing in, let's take those
out, right? If you have clientcosts that you're paying for,
let's take those out but let'sand let's really look at every
single month. Are we producingpositive cash? Because if you

(41:43):
are, that helps you avoid a lotof problems.
If you're not and you'restarting to eat into those cash
reserves, why is that happening?Are we inefficient and we don't
have enough profits? Do we havetoo much debt and we're sucking
up too much cash? I mean,there's a lot of problems that
could go into it but I reallywant to look at, you know, what

(42:05):
are we doing month over month?Are we growing the bank balance?
Cause that's going to give yousecurity, that's going to help
you give a longer runway that ifsales stopped today, you could
pay your bills for a longerperiod of time. Right.

Davina (42:18):
And really be having, what should we have in retained
earnings? Like what should wehave in a cushion?

Ryan (42:24):
Yep. So, I

Davina (42:26):
The formula for that?

Ryan (42:28):
Yes. So, for starters, I love to build law firms to three
months and I and I think that'sa good minimum number. I
understand, you know, in in morerecent, like, you know, if you
would have asked me that in2020, '20 '20 '1 when we had
really low interest rates andyou know, you couldn't go out
and and get some low riskinvestments at high interest

(42:50):
rates like a municipal bond orsomething like that. I would
have said, shoot, build it tosix and let it sit there, right?
You're not hurting anything.
You're missing out on 2%interest, right? Now, the last
couple of years, while we've hadhigher interest rates, I do cut
that number back a little bitbecause I understand that
hopefully, you know, if you'vegot, if you go out and invest in

(43:11):
like a mutual bond or somethinglike that, maybe you're making,
I'm just going to throw out 8%on your money. That's better
than having it sit in a bankaccount probably and make three,
okay? So, I can live with thatand if you've got it invested in
something that's tradable likethat, then, if you needed it,
you could probably get to it.You might take a little bit of a

(43:31):
loss on the interest but so forthat reason, the last couple of
years, I've cut it back to threebut that's where I love to get
law firms is three months andthat could be sitting in the
bank.
I'm also not opposed to using aline of credit, you know, to get
us there as well. I mean,hopefully, we can go out and get
that and have it sit at a zerobalance, you know, and not use

(43:54):
it but at least if you have thatcushion there and you have to
use it, much better to use on aline of credit than go out of
business. So.

Davina (44:02):
Yeah. I always tell people it's a psychological
safety net. It's psychologicalsafety net to know because a lot
of people get are reluctant,especially when they first start
hiring lawyers, they'rereluctant to hire because they
have fear around will I be ableto make payroll? And there's all
kinds of little tricks that Isort of share with how to deal
with that mindset issue. But oneof them is having that
psychological safety net ofknowing it's there.

(44:25):
So you won't be embarrassed,you'll have enough time to make
it action plan, or whatever. SoI think that is very helpful.
The last sort of thing I want totalk about is owner
compensation. Because this isanother place that I see as a
sticky wicket for people. Somany people are just taking
money out of their business likeit's their open season on their

(44:48):
bank account, right?
And they're, they're, takingthat money out, maybe not in the
way that they should be. So it'svery common for lawyers to say,
well, I take distributions, butthen there's no, rhyme or reason
to it. It's kind of, I've justtaken money out when I need it.

(45:09):
And one of the mistakes that Isee more frequently than I would
expect is a CPA is not tellingsomebody that you're being taxed
as an s corp, and therefore youmust pay yourself a reasonable
salary. And if you're makingover $50,000, likely your CPA is
saying you need to be taxed asan s corp.
And that means you need to payyourself a reasonable salary. By

(45:32):
that, I mean w two. What kindsof things are you seeing with
regard to, owner compensation,how people are doing it, and
maybe some little things thatthey need to be thinking about
that is a mistakes you're seeingpeople make.

Ryan (45:46):
For sure. Yep. So, I'll tell you the best system that I
love to put people on. Numberone, I will tell you, I do not
like the Profit First system butthere is one thing from it that
I do really like and that issetting aside about 15% of sales
for taxes. I do really likethat.
You know, have a bank accountwhere you're stashing some

(46:09):
money. For to pay your tax billbecause that is gonna come and
one of the worst problems youcan run into is a business owner
that's not prepared to pay theirtax bill and the IRS is probably
the last organization that youwanna owe money to, Alright?

Davina (46:23):
Well, I would say to you too, I mean, well, like one of
the things that you can just logon to the IRS website and just
prepay sub like so itincrements. You can just go
there and say, I know I I knowkind of like where I'm going to
be. So I'm just gonna go in thefirst quarter and pay some
money. Second quarter, pay somemoney. I mean, it's super easy

(46:45):
to do now.
They're always a little behindin updating things, but the
money's there. They know it'sthere. So you don't even have to
separate it, like the ProfitFirst. You don't even have to
separate it in a bank account,bring it back. I tried Profit
First.
And I, I understand like, likehis, you know, his way of he
he's taken something that peoplehave been doing for years, like

(47:05):
putting things in an envelope,sort of parsing out, but he's
using bank accounts to do it.But I found for me that really
most of the things that he'stalking about really kinda need
to come if you're a pastor,like, they really need to come
out of your your personalincome. And so that I wound up
moving a lot of things andcreating different accounts

(47:26):
through my personal more so thanthrough my business. To me, it
was and you also had to pay theaccountant a lot more money
because the accountant had tobalance each one of those
accounts. Yep.
So, not to throw shade on him,but I do think there's better
ways to do things. So, anyway,you

Ryan (47:44):
were So, yes. So, do that, right? Pay pay your taxes. But
the best thing that I love to dois put the owner on a salary
that covers their livingexpenses and gives them a little
bit of a cushion, right? Becausewe all are going to have those
things where I got a flat tire,I need a new battery, I need a

(48:06):
new set of tires for my car,right?
Or my air conditioning went outof my house, right? We're all
going to have those things andso, I love to put business
owners on a reasonable salarythat they can pay their bills
and have a little bit extra andthen, as the business does well,
let's set goals and let's payout bonuses for hitting those

(48:28):
goals and as the business doesbetter, obviously, you can pay
yourself more money because Iwill say if you don't have your
personal finances in order, itcan absolutely wreck your
business and so, that's thesystem that I love to set owners
up on and then, you know, whenit's bonus day, that that's a
fun day and.

Davina (48:49):
It is a fun day.

Ryan (48:50):
You know, when you when you live life at, you know,
because again, you know, ifyou're taking a higher salary,
you will find a way to use themoney and it'll be gone and you
know, you'll look up and like, Idon't have any extra money to go
on vacation, right? Versus, ifyou, you know, live on your
means with a little extra moneyfor emergencies, then, when

(49:14):
bonus day hits, it's like, thisis an extra lump sum payment.
Now, I can take it and go dosomething fun. I can go on
vacation or maybe you're lookingto upgrade your car and you can
use that as a down payment toupgrade your car, right?
Whatever the case may be Butthat's the system that I like to
use.
And then obviously, you'rerewarded when you perform. And

(49:36):
as an owner, you get to cutyourself a bigger bonus payment.

Davina (49:40):
Right, right. Lastly, I want to just hop back to
something you said earlier, whenwe're talking about retirement.
And you said not counting onhaving a big payout at the end.
Tell me a little bit more aboutthat.

Ryan (49:56):
Sure. So I think from my experience, and this is not just
lawyers and owners, this is allbusiness owners. When we build a
business, and this includesmyself, right? Our business is
our baby, right? Right.
For a lot of us. And we thinkthe world of

Davina (50:11):
it.

Ryan (50:11):
And you know, we think that it's worth X dollars and
you know, it doesn't matter whatthat number is but a lot of
times, we think that it's worthmore than it actually is versus
if you, you know, went to abroker or went to sell your
business, the dollar figure thatyou're actually going to get for

(50:32):
it, what it's worth on paper isa different number than what we
believe that it's worth becausewe have, you know, our heart,
sweat, and tears into it, right?And so, you know, I just like to
prepare owners for the numberthat you think like if you're,
you know, building a businessand the number that you think
you might get and then you'regoing to sell it, you're gonna

(50:54):
get that number and sail offinto the sunset and live happily
ever after might not actuallyhappen, right? And I think just
being prepared for that, right?And and really knowing what it's
worth and knowing, you know,some businesses don't transition
at all, right? And there is nolump sum payment or there is no

(51:17):
buyout.
You know, you really have tobuild the plan for new partners
to come on and kind of, youknow, take it over or maybe you
get an external sale done butthere again, like with a lot of
law firms, naming and brandingwise, sometimes that doesn't
always work especially if it'syour name on the door. So, you

(51:38):
know, it's just, you know, beprepared for not getting the
number that you think and don't.

Davina (51:44):
And then if you do, that's a bonus, right?

Ryan (51:47):
Exactly. But don't bank on it.

Davina (51:49):
Yeah. Well, and especially that's especially the
case if you stay solo. I'msorry, but if you stay solo,
it's there's there is there's itis your baby. It's not a
business entity. Right?
So there's that factor thatfactors into it unless you build
some very powerful brandintellectual property.
Intellectual property lawyerswill tell you that, oh, well, if

(52:09):
you build a powerful brand, buteven that, what may be a
powerful brand to you, othersmay not be interested in when it
comes time to sell it. All youhave to do is go on to business
broker websites and see thebusinesses that sit there with
no buyers of all kinds, lawfirms and other businesses.

(52:30):
Explore them yourself and you'llgo, Oh, I'm not buying this
because I've certainly done thatwhere I go in and analyze
something. Then when you dig in,you're like, Yeah, no, I can't
buy this.
And so I agree with you on that.Alright. So I so appreciate you
being here and sharing yourwisdom with us and those little,
you know, financial insightsthat we all need to know. How

(52:52):
can we get in touch with you,find out more about you, follow
you, tell us what we can do?

Ryan (52:59):
Sure, absolutely. Easiest ways for that, probably
netprofitCFO.com. That is mywebsite. Right in the upper
right hand corner is a link tomy calendar. We'd be happy to
that's like for a shorttwenty-thirty minute meeting
would be happy to haveconversations with your audience
and fill their needs.
You can also Google me RyanKimmler LinkedIn always does a

(53:20):
great job of you know coming upto the top in their in their
Google searches. That's a greatplace to connect with me as
well. So, those are probably thetop two ways to really connect
with me, message me, get a holdof me, and yeah. Great. Thank

Davina (53:36):
you for being here, Ryan. I really enjoyed our
conversation.

Ryan (53:39):
For sure. Absolutely. Thank you for having me. I love
to give back and give knowledge.So thank you.
Wonderful. Thank you.

Intro (53:46):
If you're ready to create more of what you truly desire in
your business and your life,then you'll want to us at
WealthyWomanLawyer.com to learnmore about how we help our
clients create wealth generatinglaw firms with ease.