Profit: most of us use it as a marker for whether our practice is thriving or just barely limping along. But, just glancing at overall profit without taking a deeper look can spell disaster for your law firm. Profit can be a false sign of health, masking deeper problems.
Did you know there are two types of profit? There’s intentional profit, and there’s accidental profit. Most law firm profit is accidental — you can’t point to precisely why it’s there, and you couldn’t replicate it next month or next quarter, but you’re really grateful for it! Accidental profit, though, is dangerous. If you don’t know precisely what you’re doing to generate a profit, and you can’t consistently re-create the profit, then you never know when you’ll turn a profit again. And a practice can’t thrive this way.
Intentional profit, on the other hand, comes from consistently doing the right things in the right way. You can pinpoint the actions taken to generate the profit and, more importantly, you can repeat those actions to replicate the profit over and over again. Intentional profit, generated repeatedly and in predictable amounts – if it’s used wisely – will fuel the growth of your practice. How?
- It provides investment capital;
- It provides bonus capital for your staff’s excellent performance;
- It provides operating capital to sustain your firm through shortfalls; and
- It provides you, the attorney-owner, with return-on-investment capital as a reward for taking risks and growing your firm.
So, in addition to figuring out how your firm can generate profit intentionally, it’s essential to have a plan for the appropriate and balanced use of that profit once it starts coming in.
President & Co-Founder
American Academy of Estate Planning Attorneys, Inc.
6050 Santo Rd., Ste. 240
San Diego, CA 92124