Expense versus Investment Thinking: Tools That Support Performance

I’m Melissa Shanahan, and this is The Law Firm Owner Podcast Episode #310. 

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Hi, everyone. Welcome back to this week's episode. Today, we're diving into a topic that I don't think gets enough attention in terms of conversation in the space with law firm owners, but it affects almost every firm that I work with in one way or another. And it's about the tools that you choose, or the tools that you refuse to equip your business with. You know that saying, “you have to spend money to make money.” And yeah, sometimes that can be an excuse just to spend money. But in other cases, it's dead on. And the trick is knowing which is which. So let's talk about it.

The principle behind everything that we're going to talk about today is investing to support performance. Running a business means resourcing it properly. I did an episode on allocating resources, not that long ago, probably, well, I guess maybe it could have been several months ago. Anyway, resource allocation was something I talked about and how important it is. And that's really the name of the game. If you're a business owner, it is all about resource allocation. And that's a fundamental truth.

Yet so many law firm owners end up cutting corners on tools that could actually help them grow. And you know many instances they'll pay for talent but then force that talent to duct-tape together processes that were never really designed to work together, or duct-tape together systems or tech stack, et cetera. Tools are leverage when they are chosen well. When you under-resource your business, everyone feels it. Your team feels it. Your clients feel it. Your numbers reflect it, and you might think you're saving money but you're actually creating drag. And that shows up in many different ways. 

It might show up as a lack of visibility into what is really going on under the hood. It could lead to dropped balls, things falling through the cracks. It can lead to chaos that could have been avoided. And when there's chaos internally, there is a result for the client that is not quite as ideal and experience for them is not quite as ideal but internally your team also, if they are living and dealing with a certain level of chaos, they start to feel it it starts to wear them down. So the drag that I mentioned earlier, it's in everything, all to avoid having to spend money on things.

Now, that leads us to the second section of things I want to talk to you about, expense versus investment thinking, and this whole episode is essentially about mindset. That's at the heart of it. There is expense thinking and then there's investment thinking. And expense thinking sounds a lot like, how can I save money right now? It's very reactive. It keeps you in survival mode. And I've talked about this before about that is not the way to address your problems. And don't get me wrong, sometimes it's necessary, especially in early stages. But if you stay in that mode too long, it starts holding you back.

Investment thinking is different. It asks, what does the business need to operate at a high level? Not just for today, but for where you're headed. And to be clear, not every expense is an investment. I'm not saying you need to throw money around. There's tools though out there that will save you time. It'll improve your data. It'll help you grow in the ways that you want to grow. And if they do any of those things, they deserve closer look.

I have seen firms waste countless hours using spreadsheets to track things that, you know, a hundred bucks a month system can handle flawlessly. So you might think you're saving, but if your team spends an extra ten hours a month reconciling things manually or having to keep up with things, what is that really costing you? It does feel important for me to say, I don't think that anyone, anyone who's listening to this, is consciously saying, “I'm going to save a buck even though it means my team has to work 10 extra hours.” That's not what happens. The problem is that we don't look at the big picture. We don't ask ourselves questions about is this an investment or, is this just an expense? And so do I want to spend the money based on my answers there?

So it can almost sound harsh what I'm saying that I've seen firms waste countless hours tracking things manually instead of just getting the tool that will help them and speed them up and create efficiency and create flow. They aren't consciously saying, “I opt out of that because it's $100 a month and I'd rather my team do it.” No one is saying that. But they are falling into the trap of “saving” money, I have air quotes around saving, “saving” money, and not realizing what it's doing. 

So, a few traps I see often, or commonly, taping together free tools or incompatible tools. And it's common because, you know, especially when you grow up, as you're growing up, your business is growing up, you start to adopt certain things that made sense for the stage that you were in.

So what ends up happening is, instead of paying for a system that handles everything end-to-end, people will stitch together three or four different tools, and it becomes a mess. Friction increases. Errors increase. Time just disappears because you are dealing with administrative workarounds or trying to fix the zap, or, by the way, I think Zapier is awesome, so is Make, or any tools that connect tools. That can be a really beautiful thing. But sometimes you're doing it and not realizing that there is a solution that will be better for you. And we just don't stop to look, right? So that's one of the pitfalls I see. This is one of the traps that I see.

Another one is refusing to upgrade your plan or add seats if you should be upgrading or adding seats because it's going to unlock something for you. If you're the only one in your firm who has visibility into something within a software, or if there's one login that has visibility, you really do have to evaluate, is it worth it? What is the effect of only having one login? And sometimes the effect is no big deal. Sometimes, when you really stop to look at it, it's problematic. You're not able to see certain things because everybody's logging in as the same user.

So if you're the only one, or if there's one seat that has visibility, whether that's into your pipeline, whether that's into revenue, time tracking, the fact that there's only one seat can be a bottleneck, and you need to evaluate it. And when that happens, your team can't perform well if they don't have access to the metrics that matter. Data blindness will hurt your growth, period. It may not feel like it will hurt your growth, but it will. That's the whole thing. The whole thing here is keeping your business really healthy and being a good steward of the business. And if you don't have visibility into the numbers and the ability to evaluate how things are going because you have access to data, then you are absolutely stunting your growth.

Another common trap I see is trying to out-hustle a missing system. We are all capable people, and sometimes it just feels easier to just push harder. But long term, it's not sustainable. You don't fix broken operations by working longer hours. You fix it with the right instruments. You fix it with the right infrastructure. You fix it by investing in resources that will make a difference that you can leverage. Remember, this is all about how you allocate resources.

Let's talk about how to know if you are being smart and not cheap. So let's say you're weighing out a new tool or system. Here's how you can sense whether you're being strategic or just scared to spend and hanging on really tightly because you are not thinking about this in the right ways. The first thing, you evaluate the ROI. What is the time saved? What will be the accuracy gained? What clarity will be improved? These are all very valuable returns. And even if you have a hard time putting a number to it, really try to play it out to the end. If you have better accuracy, what does that mean? Like when you play that all the way out, what are the effects of that? What are the results of having that? And same with clarity. If you're going to get clarity because of this investment, play that all the way out. What are all the effects of having that clarity? And you'll start to see the cost of not investing in this thing.

Okay, another way that you can tell if you're being strategic or if you're just scared to spend. You test options, but you don't delay endlessly. So comparison is smart. I'm not saying don't do that. I'm not saying just throw your money into this thing because it sounds like a dream, right? Comparison is smart, but stalling is the problem. That's what a lot of people do. They end up sitting on something and they stay in indecision about the tool or about the resource or whether it's a person, whatever it is that you're considering putting this investment in. If you sit on it, and you don't really look at comparison, you're not actively evaluating, and you're just stalling, that is costly.

So, how can you sense if you're being strategic or if you're being scared to spend? With this, it's if you are sitting on something, if you're staying in indecision, you are sitting on something. Stop sitting on it. Push yourself to get the information that you need so that you can compare what it is that you need to compare and that enables you to make a decision based on the facts, based on the information that you can gain, the knowledge that you could have around this. Don't let yourself sit on it. It's a waste of time.

Okay another way that you can tell if you're being strategic or not is you are strategic when you resource your team according to the level of your goals. I'm going to say that again. You are being strategic when you resource your team according to the level of your goals. Now this can also be true for tools when you resource tools according to the level of your goals.

If you are aiming for $1 million, but you're trying to run it like a $250,000 firm, there is going to be a disconnect, and you will feel it every day. And it's easy for me to use the $1 million because it's a nice round number. But many of you listening to this are shooting for $2 million, $3 million, $4 million, and higher. So whatever it is, if you are not resourcing your team and or tools according to the level of your goals, there is going to be a disconnect. So, how you know if you're being strategic is if you can actually do what it takes to follow through, so that you give yourselves the opportunity to achieve those goals because you're resourcing your team and tools in a way that will support it.

The most successful owners that I know, they don't cheap out on critical tools, and they also don't overspend. They invest with intention. And to be intentional, you need data. You need facts. You need to know what you're aiming for. You need to know what options exist out there that will enable you to achieve whatever it is that you're aiming for.

I just pushed pause just to sit here for a second and collect my thoughts because there's something around all of this that is scary. I mean, that's why people sit on things. They can chalk it up to being busy. But there's something deeper there. And also, if we're too busy to make the right decisions or to get the right information for our firm, something's wrong. We need to address that, and we need to shift that.

I just want to take a moment to acknowledge that some of these moves are scary. Sometimes allocating resources in a way that helps you line up with the level that you're you're shooting for and bridging the gap to where you're going, not just where you are right now. Yeah, I mean, this is super uncomfortable. It's your uncharted territory. And that's not easy. There's a lot of people that out there that don't take this path and there's a reason why, but you're here and you're in it and it is your uncharted territory. And that can be extremely uncomfortable, maybe downright scary, like full-on fear. And maybe it's not. Maybe it's another sort of discomfort, but it is. It's not comfortable ever, ever, ever, ever, ever, ever.

If you're being intentional, it does help. Data helps. When you really look at the options and you make decisions and you believe in the investment that you're making is the right decision for the business, for the long game, then yes, it's easier to take that step. And that's why it's important to arm yourself with this stuff. So not only is it based on facts, not feelings, but it's also going to make it a little bit easier, like, oh, okay, I can see how this is gonna play out. I have played this out, so I'm gonna take this step now. I'm going to take the risk that comes with investments.

So do not expect this to feel all warm and fuzzy inside. This isn't gonna feel good. It takes courage to make these kinds of decisions, even when you are making sure that it all checks out and you are being intentional, it still takes courage to make some of these investments, depending on the investment. And I really want you to think about for a moment that courage, that emotion, is not a good feeling inside.

When you have to exercise courage, like think about someone on the battlefield who's got to run into battle, like that requires courage. And that is not a good, what many people would associate as a good feeling state. But it's necessary. It's part of it. It's kind of part of playing all out. Let's do that. Let's do that. And if you're going to play all out, it's not going to feel comfortable.

These investments that, you know, when you squeeze tight and you don't spend where you should be spending, whether it's that you've been choosing to not invest in the software seats that you need for your firm and you've been holding on tight to those things, whether it's that you are sitting on the decision to hire someone or you're hiring, but you're not paying enough to get the kind of person in the door that you want to get.

Does it all need to check out from a math perspective? 100%. But you can see that many of us with our businesses, and it's because we feel stretched in, we don't feel like we have the bandwidth to be intentional. But the truth is, we do and we need to make the time to be intentional and to really think about how we're going to allocate our resources. And if you can just play it all the way out, do the math, make sure that you are thinking this all the way through before making the investment, you are going to be fine. You are going to be fine. So feel that courage and step forward anyway.

I have a few questions here that you can ask yourself when you need to decide about an investment. What's the actual cost of not getting this thing? Am I avoiding this spend out of logic, or out of fear? The third question is, what would a business owner at the next level do here with my set of circumstances right now?

And sort of along those same lines, we've talked before about future self and how useful of a tool it can be, a future self tool. So thinking about the version of you that got to the next level, the version of you that owns the firm that is running with the way you have in your mind's eye that you're gonna get to. That version of you, what would she do or he do right now? What advice would they offer you for where you are right now, knowing you're gonna end up where you want to end up? So what advice do you get now?

Often, the smartest move you can make is to act as if you're already running the firm that you are building toward. And so you start making decisions from that mindset, that future mindset. And guess what, you get there faster. You still need to be responsible, you still need to check ROI, you still need to do some comparison, then you're equipped, and you can go all in.

As we wrap up, you know, the main point of this episode, and the reason I wanted to do it, is because people tend to think that they are saving money by under-equipping their business, but you're stunting it. Be calculated, be thoughtful, and don't be cheap where it counts. Every tool doesn't need to be a Cadillac. But if a piece of software or if a process is going to free up your time, if it's going to empower your team? If it's going to give you better insight, why are you still hesitating? That's it for today. Thank you for tuning in, and I will 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.