I’m Melissa Shanahan, and this is The Law Firm Owner Podcast Episode #247.

Welcome to The Law Firm Owner Podcast, powered by Velocity Work, for owners who want to grow a firm that gives them the life they want. Get crystal clear on where you're going, take planning seriously, and honor your plan like a pro. This is the work that creates Velocity.

Hi, everyone, welcome to this week's episode. I am in Atlanta right now. I am here working with clients this week. We have a really, really great week lined up, and day one is under our belts. We had a really great day. I'm going to talk to you about something that did come up today, that comes up often when we talk about growth and the growth of the firm.

We're going to talk about growth rates today. When people talk about growth, sometimes we'll get into conversation about the rate of growth. And when we start working with someone in a group or privately, it is not uncommon to see a bump in growth more than what they have in the past.

Naturally, right? They're here working with us, getting themselves lined up with a bigger vision, with a bigger goal. And so when you do that, and you get really intentional about planning and honoring your plan, you will see growth. You will see the results of the work that you're putting in. This happens all the time.

But what can happen, is that people will have a growth rate that is pretty substantial... So, let's say 40% growth rate or 50% growth rate. That's not uncommon when you start to get your ducks in a row. Naturally, if they haven't thought a lot about this, and they're not really sure how this should look, could look, how they want it to look, they'll think that that is what should be held as they move forward; year over year, a growth rate of 40%, or whatever they had.

Oftentimes, we will have the conversation about ‘Wait, wait, wait, wait. We don't need to do that. We have to really consider, is that what we're shooting for? Because there are byproducts of that kind of growth.’

That's what I want to talk to you guys about today on the podcast. We tend to think growth is good. That level of growth year over year would be fantastic. It doesn't have to be 40 or 50%, it really depends on the firm, it depends on how much revenue you're already doing. Also, the bigger you get, the harder it is to hit higher percentages of growth, typically. That very much depends.

That's sometimes why I don't talk about this on the podcast, because it depends. It depends on if you're introducing a new practice area, or if you're trying to grow what you currently have, if you're trying to create efficiency in what you currently have. There's all kinds of ways to grow. And so, I just want to be really clear.

There's not anything I'm going to say on this podcast that is probably going to define exactly where you are and exactly what you need to consider. But I'm hoping that through these conversations, you can start to pick up on important ways of thinking that will serve you and serve your firm.

One more thing I'm going to say before I dig into these points I want to cover, is that when you are lifting a firm off the ground, of course, your growth rate is likely going to be substantial. Year over year, when you're going from zero to one, you are going to have a ton of growth rate.

And so, as you grow, and you start to see that slow down, it should not be a problem in your mind. Of course, it's slowing down, we aren't going from zero to one anymore. We are trying to incrementally grow beyond that. Again, this depends on where you are, but there's times where between year one and two, of a firm, they may go from $100,000 to $350,000. And when they calculate their percentage of growth rate, that's 250%.

So, you can see where this is a little crazy when you're just lifting off the ground. And even maybe if you've been in business for just a few years, your growth rate is still pretty astronomical, because that's what we're dealing with, the beginning of the business.

But as a firm levels out, in terms of the amount of time that they've existed, and if they are growing, a typical growth rate for a firm is something more like 10%, maybe up to 40%, on any given year. It really depends on what they're focused on and what they're pushing at, etc.

When you have a year that's 40% growth rate or something higher, even 30%, depending on where you are with revenue, you expect that over and over and over, year over year over year.

What I want you to understand from this episode, is that there are byproducts that occur when there is a higher growth rate. I'm going to talk to you about four of those. This is not to say that there's not more, I think that there are. But these are the four biggies.

The first thing that tends to happen, if you have a year of intense growth and you are shooting for and put your foot on the gas to have that same level of growth again, what will happen is that you will blow out your firm in terms of expenses.

The reason for this is because when you feel such growth, you have to act and respond quickly to the growth. Usually what people will do is throw money at the problem, in the form of hiring people. The problem with this is that things aren't really tightened up internally in the firm.

I mean, when you have that first wave of growth, and even if you had systems in place prior to that wave of growth, your systems probably need to be revamped, revised, etc. And who has the bandwidth to do that?

And so, “Okay, well, it's working. So, we're just going to add more people to it.” It's not really efficient, it's not dialed in. What will happen is, over time, you will be spending more percentage of your income on people and maybe overhead, and it's unnecessary.

So as you grow, even though your revenue is growing at a “good clip,” your revenue is growing, with just as much vigor so are your expenses. It doesn't need to be like that. And so, essentially, what I'm trying to say, is that you will build a firm that is less profitable than it could have been. That matters over time.

Remember, every time we talk about anything on this podcast, we are shooting for the long game. We play the long game. And playing the long game means that you take your foot off the gas. You get your arms around what is going on inside of the firm… after you've had a big growth year. You address some of the things that need to be addressed. You tee yourself up to increase capacity in a really responsible, healthy way.

And some of the other points that I'm going to make on this podcast will be, nurtured and taken care of, because you are taking a little space. So, if you don't take space and you just keep growing at the same clip, and you had a really high growth year, then you can expect that you'll be burning more money than you need to be burning. And literally, nobody wins when that's the case.

Okay, the second byproduct that happens often when there's a big growth year, is that your team will be overextended. When that happens, not only will the quality of work tend to diminish... I'll say more about that in a moment… also, your team will be burning out.

And so, imagine a team that's burning out. They might be cutting corners, not because they're trying to cut corners, it's just because they're trying to do the best they can with what they are handling. The volume has gone up, the same amount of team is there, there isn't time to properly hire and train help, and so you waste money because of that.

This kind of goes back to when you bloat out your firm. You make quick hires. You don't vet as hard as you could have. You do not train them and onboard them as well as you could have, so it doesn't set them up for success. It doesn't set your clients experience up for success. This all becomes very messy, very quickly.

But the main point with this second byproduct that I want to share with you is all about your team. Your team is going to be overextended. They are more likely to burn out. The quality of their work will likely go down because of that. And, also still thinking in the team realm, no one, including you, has the bandwidth to properly hire, train, and onboard, so that the firm can responsibly increase capacity in that way with team.

Everybody is grinding. No one feels like they have the luxury of lifting their head to raise their gaze. And by that I mean, look out further. Think a little farther. Think proactively. Everyone's head is down grinding and reacting to everything that's going on.

So, from a team perspective, this is not only not a good thing for the firm and for the team members culturally, this is a mess. On top of that, no one is being proactive, and so we're just spinning in a cycle, a working cycle, that is not healthy for anyone. The owner doesn't win, the firm doesn't win, the clients don't win, the team doesn't win. This is not a game that you want to play.

That's the second byproduct that can happen with high growth rates year over year. I'll talk about when it just happens in one year, but I'll say more about that at the very end. Okay, so we've talked about the team.

Now, a byproduct of that, that stems from that, is that you will inevitably have… and this is true no matter what, but it's super hard to recover from when you are dealing with year over year high growth rates… you will have periods where there are big pushes of growth, and so the quality of the client experience will take a hit.

That can happen with just one year of a high growth rate. But you can imagine, if you're stacking these on each other, you're stacking year over year over year, it is very hard to recover and to course correct, to improve the quality as you grow.

Because the quality will take a hit. There are times where that happens. That's part of business growth, but you cannot course correct very well if you are growing at a high growth rate year over year.

The final byproduct that I want to share with you on this episode, is that all of this results in fewer clients raving about you, and referring you to their network and their friends and their family. That's a problem. Not only will they not be referring you, but you will see reviews that reflect the decrease in quality. You will see reviews that reflect a subpar client experience.

That is something that, as an owner, oh God, that hurts so bad. It hurts so bad when you experience something like that. It almost feels… When you realize… I mean, I just gave you four byproducts. And that fourth one that I just gave you, which is fewer clients raving about you, an increased number of reviews that are not stellar, that's the final byproduct of the ones I just listed.

The ones I just listed, it kind of does go in that order. I mean, you have a high growth rate. And the first thing you might do is throw money at people, and get more people on board. But that actually isn't a positive experience for anyone, in many cases, because of the way that it's done, it's with haste.

And so, then you do have a team that's overextended. No one has time to train or properly hire. They're also experiencing burnout. Their quality goes down because they're just trying to keep their heads above water. No one is raising their gaze; everybody is heads down, very myopic with what's going on. And all of that leads to clients and what they have to say about you.

Each one of these is its own thing. Each one of these is something to understand; that it's so natural to have happen when you have high growth rates year over year.

Now, it's really great to have a year where you have a high growth rate. There's a lot of excitement. There's typically a lot of stress that comes with that. But you're grateful for it, and so you do your very best. What we do… I mean, I think that's one of the things that we feel so lucky to get to work so closely with clients… is that when they start to experience that…

Which if they were working with us prior to this increased growth they know it's coming. We talk to them about what's coming. We make sure that they're prepared for it; just having the knowledge that increase growth is going to happen likely.

And so, we will set them up depending on the numbers and where things are sitting and what their people cost is at. They will either make decisions to hire right now. Or if they are already maxed out with people cost, we will have them dig in, get more efficient. Make sure that everything is really tight in terms of systems, processes, execution, how people execute.

We will have them proactively do that. Because as they're really opening themselves up to all this growth, they have to focus on some of the fundamentals in order to be able to handle it with as much grace as possible.

And then, as the growth happens, there are going to be things that they find that are problematic. There's going to be things that they realize along the way. And our job is to keep having conversations, so that their head is lifted, and they're staying above the fray. They're staying proactive. They're staying strategic.

They'll come through when we get to their next retreat, or their third or fourth retreat, after they've really been through some changes in the firm because of the growth that they've had. They have made hires. They have worked to give themselves the space. When I say “give themselves,” they have worked hard to take space.

It is very difficult to get… if you are the main producer, or if you're one of the main producers and you're growing at a really fast rate... It is tough to get you, as the owner, shifted out of that so that you have more space to focus on the business. So if that's where you are, and that's where you're headed, I want you to hear that.

Of course that needs to be where the focus is; how to get you more space so that you can focus on taking care of the business, being a good steward of the business, focusing on the health of the business.

Now, if you're already out of that, and you have producers working for you, and the growth that's happening, are you giving it the attention it deserves? Are you analyzing? Are you reviewing? Are you tightening processes? Are you focused on leadership? Are you focused on culture? These are all of the things that have to be considered.

Some quarters or phases will be more focused on one thing than the other, but it is dependent on what's needed for you and for your firm at that time. You'll get through that. You'll work on that wave of effort to get something more ideal. And then, the next thing will surface that must be addressed. And then, you'll focus there. Maybe it's a department, maybe it's culture as a whole.

In all of this, I'm not saying that you shouldn't pay attention to all this all of the time. But when everything is growing really fast, everything feels messy and chaotic. And it's hard to know where to turn and where to look. So, when it happens for a year, that's to be celebrated, right?

Inevitably, you will experience where team might start to get overextended. You will experience where maybe work product decreases. You might experience someone that isn't happy about their experience, a client that's not happy about their experience, and you end up hearing about it and you have to step in. That's after just a year of this kind of growth. You will experience some of that.

Your job is to address it, and not be pushing for that growth rate year over year. When you do, I think, it's first of all, I want to say it's normal that you have some of those pain points of the growth.

But if you keep pushing, for whatever reason; because you think you should. Because you think if you don't grow at the same clip it's not as ideal. Because you think it'd be fun to stay at that growth rate. It is very easy to implode your own company, because you don't have the infrastructure and you don't have the foundation that can handle that kind of growth year over year.

So, the healthiest businesses I have seen, they usually have a wave of growth, and then they get their hands around it. They take a year to just focus on settling in and accommodating the growth that happened, while also teeing themselves up to an increase in capacity so that they can have more growth in the future.

Then they may decide to really push again, and then they pull back and they get centered again. Still, they have growth on the years that they're not pushing so hard, but it's not 40%. It doesn't need to be that, right? It's something more along the lines of 10 to 20%. And so, there is growth, they're getting their hands around things, and then they push again.

So, I just want to offer through this episode, that a higher growth rate year over year is not something that you should necessarily shoot for. And in most cases, you should not. If you do you have to know what you're getting yourself into.

Instead, how can you think about this as sort of waves of growth? There's a wave of growth, and then there's some settling and an adjusting. There's still growth happening in those years, that's fine, but it's not the big push. Then there's a big push again, and then you get your arms around it.

It doesn't mean that some of this won't feel chaotic. It doesn't mean that you won't have problems. It doesn't mean that you won't experience anything that I've said here. But when you stack, year over year, the byproducts that I've shared with you here, it becomes untenable for you, for your team, for your clients. And this business will not thrive.

Growing a business is one thing, growing a thriving business is another. Thriving businesses also have challenges. Thriving businesses have pain points. Thriving businesses do need to push the reset button sometimes. You're not going to get away from that, as a business owner who has a growing business.

But you can certainly set your expectations appropriately when you think about growth year over year. It can help, as you think about the vision that you're creating, and how long of a timeline you're going to need to fulfill that vision, and all the things.

Really lining yourself up with where you want to go, and thinking about it in a way that's healthier than just massive growth year over year. No, that's not helpful. It's not going to get you where you want.

I've worked with way too many people to see what happens, and it's better to take your time. Still move, still grow, but take your time. You do not need a high growth rate year over year. As a matter of fact, it will give you the opposite of what you really, really want.

Alright everybody, I hope there's some good food for thought for you here in this episode, and I'll see you here next Tuesday.

Hey, you may not know this, but there's a free guide for a process I teach called Monday Map/Friday Wrap. If you go to VelocityWork.com, it's all yours. It's about how to plan your time and honor your plans. So, that week over week, more work that moves the needle is getting done in less time. Go to VelocityWork.com to get your free copy.

Thank you for listening to The Law Firm Owner Podcast. If you're ready to get clearer on your vision, data, and mindset, then head over to VelocityWork.com where you can plug in to Quarterly Strategic Planning, with accountability and coaching in between. This is the work that creates Velocity.