Profit First for Lawyers

“The law firm that cannot function without its owner or owners being there every single day doesn’t really have a business. They have a job.” – RJon Robins, author of Profit First for Lawyers

Do you dream of a day when you can step away from the daily production work inside your law firm? You’re not alone. Many law firm owners find themselves so immersed in the practice of law that they have little time to build a business that can operate without them. So, where do you begin?

In part six of our seven-part financial literacy series, RJon explains why getting out of production is not an overnight decision, but a gradual transition. This episode builds on concepts introduced in Part 4: What Is Your Normalized Salary? RJon takes things a step further by exploring one of the biggest challenges law firm owners will face as they begin replacing themselves inside the business.

Every role you perform in your firm has value. Whether you are acting as a senior associate, marketing director, salesperson, IT specialist, or janitor, someone must perform that work.

The goal is not to stop doing valuable work. The goal is to intentionally replace yourself where it makes strategic sense while increasing the firm’s profitability enough to support new hires.

In a candid Q&A session with law firm owners held during the 2019 Profit First for Lawyers workshop, RJon lays out a practical truth many law firm owners avoid: When you stop doing a job, the business should stop paying you for that job.

The only way to maintain or increase your compensation is to create enough profit to replace the value you once produced. Transitioning out of production doesn’t happen overnight. It requires intentional planning and disciplined execution. If you’re ready to begin making that transition, this episode is for you!

Action Steps

The goal isn’t to simply stop working. It is to build a business that can keep its promises to clients, team members, vendors, and you, even when you are not there every day. That kind of freedom is earned by intentionally building a stronger business.

Stay tuned for the seventh and final episode in the Financial Literacy Series, where RJon brings together everything you’ve learned. You’ll understand why financial literacy is one of the most important skills a law firm owner can develop.

“Entrepreneurially immature people won’t deal with unpleasant emotions, which is why they just end up trapped in this cycle of mediocrity their whole life.” – RJon Robins, from The Exponential Entrepreneur podcast

This week we’re doing something a little different. Instead of our regular Profit First for Lawyers format, we are sharing a special episode from The Exponential Entrepreneur podcast hosted by Erika Ferenczi. The clip in this episode was originally recorded as part of the Practical Profitable Mindset program while RJon was recording the Profit First for Lawyers audiobook. This lesson explores one of the most surprising obstacles to business growth: the fear of profit.

According to RJon, profit requires doing things that feel uncomfortable:

Fear naturally tells us to avoid discomfort. But when we avoid discomfort, we wind up avoiding profit as well. And there is science to back up this instinctive behavior. Drawing on the science behind the fight-or-flight response, RJon explains how fear affects our thinking, why our brains begin rationalizing emotionally safe decisions, and how those decisions can quietly limit both personal and financial growth.

One of the most thought-provoking ideas in this lesson is that every voluntary exchange creates some kind of profit. Some entrepreneurs choose emotional profit over financial profit. One example is undercharging a client or failing to send invoices because they want to avoid rejection. By recognizing these patterns, business owners gain the opportunity to make more intentional decisions that align with both their personal values and their business goals.

The question is not whether we are making a profit. The real question is: What kind of profit are you choosing?

“When you’ve taken your profit off the top, like we talk about in Profit First for Lawyers, and you’ve only got what you’ve only got to cover expenses, it forces you to be more honest with yourself. It forces you to grow up as a business owner and make better decisions.” – RJon Robins, author of Profit First for Lawyers

What if the way you’ve been taught to think about profit is actually keeping your law firm stuck? This eye-opening episode will answer that question clearly. In part five of our seven-part financial literacy series, RJon breaks down the fundamental difference between traditional accounting and the Profit First approach. This is a small but powerful shift that forces your business to grow up.

In the 2019 workshop, RJon walks How To Manage a Small Law Firm members through the real numbers showing what happens when expenses outgrow income. The traditional approach leaves room to tolerate unmeasured marketing, underperforming staff, and bad processes. Implementing Profit First removes that cushion and forces honest conversations and decisive action about what’s really working in your business.

As RJon writes in Chapter 8: “When you put profits first, you force creativity, ingenuity, and innovation into your business.” This means, instead of accepting low standards because there’s money to cover them, you’re forced to find smarter ways to get the same results more efficiently.

Take Action

Look at your own law firm and ask yourself, “If I protected my profit first, what would I have to stop tolerating in my business that is currently taking my profit?”

And that’s it. Just sit with that question. The reality is you already know the answer. So what actions will you take now that you’ve taken the time to recognize that honest truth?

Next Time: Join us for Part 6 where RJon walks through the practical application of stepping away from some of the various roles you currently hold in your law firm without tanking your income.

“Someone in your office is stealing from you. They may not be stealing money and putting it into their own pocket, but they’re stealing time. They’re giving away work for free.” – RJon Robins, author of Profit First for Lawyers

Many law firm owners focus on generating new business, increasing billable hours, and growing revenue. But bringing business into the firm is only part of what makes a law firm profitable.

In this episode, Jose Luis Perdomo, Fractional CFO at How To Manage a Small Law Firm, discusses one of the most common threats to profitability: unpaid invoices and growing accounts receivable balances. Drawing from a Chapter 14 clip by RJon Robins from Profit First for Lawyers, Jose Luis explores why outstanding balances create more than a cash flow problem. They impact:

And because collections conversations can feel uncomfortable, overdue balances are often allowed to linger while additional work continues to be performed. But every unpaid invoice that lingers as an accounts receivable balance represents labor, overhead, and resources that have already been invested. A best practice is to develop healthy collections practices long before an invoice becomes overdue. When collections become an afterthought, profitability suffers.

Every unpaid invoice tells a story. Often, that story begins long before work begins. Clear communication, well-defined expectations, replenishment policies, and accountability systems all play a role in the final outcome.

The goal is not simply to collect money that is already owed. The goal is to build systems that make timely payment the natural outcome. That prevents “free work” from becoming a common practice in your firm and collection problems before they occur. This leads to stronger cash flow, healthier profit margins, and a more sustainable business that can help even more people.

“One of the big problems that we see in your profit and loss statement is when your business is not paying you an appropriate normalized salary.” – RJon Robins, author of Profit First for Lawyers

Many law firm owners know what they pay themselves, but few have stopped to ask an important question:

What should the business be paying them?

In part four of our seven-part financial literacy series, RJon takes a deeper look at normalized salary. This is one of the key components of Total Owner Benefit discussed in the previous episode, Calculating Your Total Owner Benefits. Drawing from a 2019 Profit First for Lawyers workshop, he challenges a common assumption about an owner’s compensation:

A law firm owner’s salary should be based on the work they actually perform inside the business, not their title, credentials, or ownership stake.

A normalized salary is the amount a law firm would reasonably pay someone else to perform the same work you currently do inside the business.

Whether you are acting as a senior associate, marketer, salesperson, tech support, or even the occasional janitor, each role has a market value. Understanding how much time you spend performing each role helps create a more accurate picture of what your labor is worth to the firm.

Many law firm owners unintentionally blur the line between compensation for labor and compensation for ownership. When that happens, financial reports become harder to interpret and profitability becomes more difficult to measure accurately. But calculating a normalized salary creates greater clarity around both.

Normalized salary is not about assigning a value to yourself as a person. It is about creating a more objective understanding of the work you perform inside your business.

Action Steps

While this exercise may feel uncomfortable at first, it can provide valuable insight into how your time is being spent and whether your firm’s resources are aligned with its highest priorities. The clearer you become about how your time is spent and what that work is worth in the marketplace, the easier it becomes to make informed decisions about compensation, profitability, and growth.

“Happiness is not accounted for in Generally Accepted Accounting Principles. Neither is peace of mind, propensity for burnout, or the quality of your life.” – RJon Robins, author of Profit First for Lawyers

Before you can build a roadmap for the future, you need to know where you are today. Evelyn Aucoin, Financial Literacy & Strategy Expert from How To Manage a Small Law Firm, joins us to discuss understanding your starting point. Whether your goal is greater profitability, more time with family, or long-term financial security, meaningful progress begins with an honest assessment of your current reality.

Drawing from core financial literacy concepts found in Profit First for Lawyers, Evelyn explains why financial reports are not simply accounting documents. She introduces the seven key financial reports and explains how they help law firm owners understand where they are today so they can make better decisions about where they want to go.

One of the central themes of this episode is that success is personal. For some law firm owners, success may mean growing a multi-million-dollar firm. For others, it may mean working fewer hours, spending more time with family, or creating greater flexibility in their lives. Before measuring progress, law firm owners must first define what success looks like for them.

Once that destination is clear, financial reports can help answer an important question:

Are you currently on the path that will get you there?

Financial literacy is not an end goal. It is a tool that helps law firm owners make better decisions. If you are ready to take action on the concepts discussed in this episode, start here:

This is not a one-time set-it-and-forget-it exercise. The destination you choose today may need to change as your business and personal goals evolve. That’s why it is important to keep your hands on the steering wheel. While this may seem challenging at first, regular monitoring keeps you in tune with the direction your business is headed, allowing you to adjust for road hazards and stay on course.

“There are three ways you’re going to get compensated from your business. One is W-2 Salary. Two is K-1 distributions. Three is other benefits.” – RJon Robins, author of Profit First for Lawyers

How profitable is your law firm? The answer might be more complicated than what shows up on your P&L statement. In this third part of our seven-part financial literacy series, we revisit a topic from season one: Total Owner Benefits. A topic of such importance that it has an entire chapter devoted to it. Listen in as RJon takes a law firm owner through an exercise to calculate the true value they are receiving from their firm.

RJon poses a powerful question: Would you rather own Firm A (making $1M but working 70-hour weeks doing work you hate with no vacations) or Firm B (making $500K working 50 hours doing meaningful work with real time off?) Your banker might say Firm A is more profitable, but which would contribute to your family’s happiness more?

In the 2019 workshop, RJon shows how a business that appears to have a 20% profit margin actually delivers 38% in Total Owner Benefits when you account for all three components (W-2 Salary + K-1 distributions + Other benefits). The difference is dramatic and changes everything about how you evaluate your firm’s true profitability. Understanding Total Owner Benefits reveals the value your business is actually providing you with.

Action Steps

Next Time: Join us for Part 4 where RJon walks law firm owners through normalized salary calculations. This is an eye-opening episode you won’t want to miss. So be sure to subscribe to the Profit First for Lawyers podcast.

“Accounts receivables are so much worse for a law firm than most lawyers understand or appreciate. So much worse.” – RJon Robins, author of Profit First for Lawyers

In this episode, How To Manage a Small Law Firm CFO and CEO advisor, Etienne Hardre expands upon RJon’s clip from Chapter 14 about the devastating mathematics behind accounts receivable.

Here is what really happens when Client A doesn’t pay their bill. You’ve already spent the money on marketing, sales, production, and overhead to serve them. When their bill goes unpaid, they’re not just skipping the 33% profit, they’re stiffing you on the entire bill. So what happens next?

Now you need to cover marketing, sales, production, and overhead for Clients B, C, and D before you begin to see your first profit from working with all four clients. Here’s the breakdown for a theoretical $10,000 case/matter with a 33% profit:

After four clients you’ve finally recovered what one client should have originally provided. This illustration makes is easy to see how Accounts Receivable is the silent profit killer that is crushing law firms nationwide. Is it any wonder that RJon put A/R in the Profit First for Lawyers book twice?

Most law firm owners hate looking at their aging A/R reports. Some have six-figures of A/R outstanding and are challenged to ask to be paid for the completed work. The mindset issue around asking for money compounds the problem. The fact is that A/R and Profit First work against each other. The more money trapped in A/R, the harder it becomes to take profits first. To combat the mindset issues, start implementing Profit First even with 1%. The urgency will force you to address your law firm’s accounts receivables.

So, what’s a law firm owner with A/R to do? Stop the bleeding.

Start with preventing new A/R from forming. Screen clients for ability to pay during marketing. Use retainer policies and implement “red rubber band” systems that stop work when payments are due. Adopt more frequent billing to top up retainers.

Tackle existing A/R by starting with recent accounts receivables, be flexible with payment plans and discounts. Remember: Get creative because any A/R you collect is 100% profit since you’ve already paid all the associated costs.

Your Action Steps:

“If we can develop good habits for you when your business is still in the first stage of growth, you’re going to bring those good habits with you into business maturity.” – RJon Robins, author of Profit First for Lawyers

A growing business requires a growing owner. During a Q&A session in part two of our seven-part series, RJon explains why financial literacy does not carry the same weight at every stage of growth. In the earliest stages, the owner’s job is to “hustle, market, and sell.” New benchmarks require the owner to develop new skills, learn to hire, delegate, and build team productivity. Then as the business becomes more complex, financial literacy, systems, metrics, and accountability become increasingly important.

The lesson is not simply that law firms grow in stages. It is that the owner must gain new skills and maturity to grow with the firm.

Financial literacy is not equally important at every stage of growth. A growing business requires the owner to keep learning, adapting, and leading differently.

Action Steps

The goal is not to master every financial concept at once. The goal is to begin building the habits that will support your next stage of growth.

“We are going to break away from the dictionary’s limited definition of profit and profitable, which only account for financial profits.” – RJon Robins, author of Profit First for Lawyers

For many law firm owners, profitability is measured by one thing: money.

But what if profit gives you something even more valuable?

Time.

In this episode, Michigan estate planning attorney Rose Coonen shares how implementing Profit First accounting principles transformed not only her firm’s finances, but also how she spends her time, serves her clients, and shows up for her family.

RJon challenges the traditional definition of profit and introduces a broader perspective: profit can be personal and professional as well as financial. For Rose, that shift in understanding changed everything. Since implementing Profit First three years ago, she has built a strong financial foundation, gained the freedom to stop working with toxic clients, become more present with the families she serves, and grow a law firm that supports the life she wants to live. Today, her law firm is a family affair with her husband and daughter working alongside her as the business continues to grow and serve her community.

What started as a desire for greater financial stability ultimately became a way to regain control of her time.

Sometimes the most meaningful result isn’t found on a financial statement. It is the ability to spend more time with family, build a business that aligns with your values, and make a greater impact in your community. Because the most valuable form of profit may be time itself

Plan Like You Won’t Be Here Tomorrow

And most importantly, order your copy of Profit First for Lawyers today!