Law Firm Budgeting and Money Mistakes

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Budgeting-and-Money-Mistakes-New-Law-Firms-MakeMost new law firms are pretty frugal with their money—they’re watching every dime they spend so that they can stay in business and be prepared for the lean times. But despite this trend towards frugality, there are a few common money and budgeting mistakes that new law firms make.

Spending Too Little

Just like with anything, there is such a thing as spending too little. When it comes to budgeting, you don’t want to cut out budget items that are essential to keeping your law firm operating and thriving. Here are three expenses you should never cut back on:

  • Marketing and Branding.  Marking and branding are the foundation of your law firm’s sales pipeline. People can’t hire you if they don’t know you exist. No matter how tight money is, you must allocate money and/or time to your marketing efforts. You must always spend time letting potential customers know that your law firm exists. Cutting back on this expense will kill you law firm eventually.
  • Technology. Technological tools such as software and hardware are a necessary investment for law firms. Well designed tech tools such as Smokeball’s case management software, can take a one hour job and turn into a 15-minute task. And for law firms that could mean a savings of thousands of dollars over the course of the year. When you’re budgeting and deciding how you will allocate your money, decide what software tools can help your law firm grow and earn more profits.
  • Hiring.  There is a difference between cutting back on non-essential staff and cutting back on hiring that will make or break your law firm. For growing law firms, cutting back on hiring new associates could mean leaving new business on the table because you don’t have the capacity to do the work. Don’t let that happen. Plan ahead by estimated how much new work you will bring in within the next year and be prepared to add new staff when necessary.

Spending Too Soon

While it is important to not spend too little on necessary expenses, some new law firms spend too soon on items that can wait.  For example, you may not need to bring on administrative staff immediately, especially in the early days of your law firm.  You may consider outsourcing your administrative tasks so that you can quickly hire temporary administrative help when you’re too busy to answer the phone or return emails. You also may want to hold off on leasing expensive office space with all the amenities when your law firm isn’t bringing in significant income and such expenditures will do nothing for your bottom-line.

Not Hiring Professionals

There are certain things that you don’t want to try to DIY, one of them is managing you financial books. If you want to avoid headaches and possible problems in the future—hire a tax accountant. The last thing you need is an audit because you failed to file your tax returns correctly or failed to pay taxes for your employees. Hiring a professional for taxes and other necessary skills you don’t have is a great investment that shouldn’t suffer from your budget cuts.

When making budget cuts take care not to harm your law firm’s ability to survive and thrive by cutting out the meat as well as the fat.

By |January 23rd, 2018|

About the Author:

For years, Josh has helped lawyers become more organized, productive, and profitable. A trained litigator, Josh came to Smokeball from a large east-coast law firm where his practice focused on franchise, insurance, marine, and general litigation. His work with Smokeball, and his continued passion for what he does each day, is driven by a desire to help lawyers and their staff do better in every way. Knowing well the stress and strain put on today’s legal professional, he regularly focuses on improving work and life in the law. He has traveled the country working with and learning from lawyers and their staff. Josh speaks regularly to bar associations about successful law firm practices and other legal topics. Recent notable engagements have been with the Chicago Bar Association, the Illinois State Bar Association, and the Missouri Bar’s Solo and Small Firm Conference. In addition to his work at Smokeball, Josh serves on the Writing Resource Center staff at The John Marshall Law School. Besides legal technology, his research interests include judicial decision-making, jury decision-making and psychology, and legal writing. He has written and overseen research exploring causal effects of sex/gender on federal appellate court decision-making, and assisted with research for a forthcoming textbook on judicial decision-making. Additionally, Josh sits on the Board of Directors of Chicago-based Community Activism Law Alliance and on the Board of Directors of Chicago Fringe Opera Company. Josh holds his J.D., cum laude, from Washington University in St. Louis, where he served as a Senior Editor of the Wash. U. Law Review, held the prestigious Thompson Coburn Research Fellowship, served as Research Assistant to then-Vice-Dean (now Chancellor) Andrew D. Martin, and clerked at the U.S. District Court for the Eastern District of Missouri. He holds a B.A. in Political Science and a B.M. in Music Performance with Honors Scholar distinction from the University of Connecticut, making him a Huskies basketball fan through and through. Follow Josh’s activity on LinkedIn, and keep up with new articles on the Smokeball Blog.

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