Financial Clarity and Law Firm Profitability with Shavon Smith

Melissa: You said, "I just feel like there's more money in the firm." And we looked. I'm like, "Yeah, 'cause you're not writing it off. There is more money."  Yeah.

Shavon: And one of the things I said to you, I was like, "I probably need to see a therapist." When we started talking about writing the time off, I was like, "Oh, I think I have, I need a therapy problem." Like there was something internally about how I look at money, how I think about value and cutting time. And so I was like, "All right, I'm, see a therapist." And so I did.

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Melissa: Last week, we heard from Shavon Smith with part one of our interview, and today is part two. I really hope you enjoy.

That was February, January conversation. And then we met again for your retreat in March, like the end of March. And looked back at the quarter, and it wasn't, it just wasn't where you wanted to be. January was the toughest month, and there were varying reasons for that. Like, I think being out of office, and maybe expectations weren't super set and clear yet. 

Shavon: Yeah, and January is typically kind of slow for us, so it was kind of a mix of factors.

Melissa: Okay. Yeah. So then come March, which is a chance for clients to, at their retreats, it's like your head is down. You're working in between your retreats. But then it's time to lift your head again, look at the last quarter, look ahead at the next quarter. Are we in line with where you wanted to be for the year? Blah, blah, blah, all the stuff.

And so doing that, what we realized at that retreat was, or what surfaced really quickly, was how much was being written off every month. And I don't think, to be totally honest, we didn't get that data at your initial 'cause we didn't realize that it was a thing. But then as you're talking about it, you're like, well, through conversation, I'm realizing.  

Shavon: And I think it's because you were looking at my associate's hours and my hours, you're like, "She's working. Like, where, where is it coming in?” 

Melissa: Yes, yes. And so that's when it started to, we had a conversation about what you were writing off. 

Shavon: I don't think you knew how much. No, and it was the first time that I started to actually record how much I was doing it. And I didn't know; I just, I knew I was doing it. And I knew part of my process, like the natural of bills going out, was my bookkeeper would create them, and I would go in, and I would cut a bunch of time. And then, and I remember one time she said to me, her process is quicker with other law firm owners because they don't even look at the bills. They just send them out. And I was like, "How do you just send out a bill?" Don't they have to make sure and look and double-check, oh my gosh.

Melissa: Yeah. I think when we first looked, there were two months back-to-back that were somewhere, I think the average was like $ 11,000-ish a month. 

Shavon: Yeah, it was like $10,000. It was a lot of, it was a lot of money being cut off. 

Melissa: It was a lot of money. Yes. 

Shavon: And it was another kind of anxiety point for me of just like, "Well, I want to be fair, I want to make sure that people have the value. Did we spend too much time on this?" So I had all the excuses and all the reasons. And again, it's a practice I had done for years. It was just the way I did things. I cut off significant amounts of time from bills. And then even the bill that I got stiffed on by the client that was significant, that really put me in the hole at the end of last year, I had cut so much, I probably had cut 30% or 40% of that bill. And then they still didn't pay what I sent. 

So it was like, I'm doing a favor for what reason? And then the way I would cut my bills, it's not like it was clear to my clients that they were getting a discount. 

Melissa: Right. 

Shavon: I was just cutting it. 

Melissa: Yes. 

Shavon: They weren't even seeing that was happening. 

Melissa: I mean, there was all kinds of things around that. Like, one is you're kind of all up in their business 'cause you're worried what they're going to think. 

Shavon: Yeah. 

Melissa: The other is, well, I guess that was what was driving it, but I remember you, us having a conversation about the time it took your associate. And we were saying, but yeah, her rate is lower for a reason. And so charge the rate. I mean, if there's something totally asinine, that's different. 

Shavon: And again, in the years, the few years that I've worked with her, she's fair. Like she's never like churning. Like I know, I know that about her and her work ethic. So again, I was in everybody's head. 

Melissa: Yeah. Yeah. 

Shavon: Yeah, cutting the time. And the one thing you said to me was, "You are making all of this kind of herculean arguments as to why you need to cut time. How about you start making arguments about why you don't need to cut time?" Like, make the argument in reverse every time. Make the argument in reverse. 

Melissa: Yeah. And then see where you land. Yeah. That's true. Okay, yeah. Did you start doing that? 

Shavon: I did. 

Melissa: Okay. 

Shavon: Yeah.

Melissa: Okay, yeah. Well, so we, I think I told you, just as a fun thing, if you can get it down to zero…

Shavon: You would buy me a plane ticket. 

Melissa: I would buy you a plane ticket out here. Yeah. And I think, was it for three months, zero? 

Shavon: It was three months, yeah. And I didn't do it. But...

Melissa: But say why. Yeah.

Shavon: I started to record how much I was writing off, and the time I wrote off, I had to write a reason, just to start giving myself a reason. And so I mean, now, I think the number was less than $500 that I had reason, internally reason, to cut off. But it was a significant shift of even forcing myself to justify, if you're going to cut this, do you have a reason why you're going to cut it off? 

Melissa: Wait, did you just say what the number was? That it ended up being? 

Shavon: I mean, it was less than the…

Melissa: It was like $450 or something? 

Shavon: Yeah, it was something way less than $10,000. 

Melissa: Yeah. That same time I talked to you on a call, you said, "I don't know. I just feel like…" This is before we like dug in and looked at the numbers. You said, "I just feel like there's more money in the firm." And we looked. I'm like, "Yeah, 'cause you're not writing it off. There is more money." 

Shavon: Yeah. And one of the things I said to you, I was like, "I probably need to see a therapist." Like I need to, yeah. And I did.

Melissa: Maybe explain 'cause people may want to think about this for themselves too.

Shavon: I'll go around the circle and get to your question. I wrote a book a long time ago, like two or three years ago, called Tell Me About the Hard Part: Five Steps for Business Owners to Solve, Prevent, and Treat Their Business Problems. And this is a hundred-page kind of business problem-solving book. And I have this section, maybe one or two pages, 'cause I went through and I started categorizing problems. Like you might have a systems problem or an operations problem.

And I had like a couple pages of like, "You might just have a you need a therapy problem," 'cause I saw a lot with my clients of like, yeah, there are a lot of external factors, but you, you're the head of this, and you're the problem. Like, yeah, your employees aren't perfect, but it's something that you're doing. 

Like, I could see where there were internal things that people needed to fix that could help write their ships. Like, if you're always firing people, like that's not normal. Like every, you can't hire a bunch of people. And so when we started talking about writing off the time off, I was like, "Oh, I think I have, I need a therapy problem." Like there's something internally about how I look at money, how I think about value, and cutting time. And so I was like, "All right, I'm see a therapist." And so I did. 

Melissa: Yeah. What did you, what, I mean, without sharing your therapy session with everybody, what, what do you, how has that been helpful?

Shavon: No, it's been incredibly helpful, of just to get conscious and to kind of uncover reasons why and get to the root of some things, and just even just to be more conscious of it, has been incredibly helpful. 

Melissa: That's so great. 

Shavon: 'Cause it's not a problem that just showed up. You'd always say owning a business just really holds a mirror up to you. And whatever is in your life is just going to magnify. And so it's something that showed up as me cutting off bills, but it showed up in other places in my life as well. 

Melissa: That was so great. So, okay, now, so when I think about this, and we just had your, your, the last retreat we just did was in July, which, I mean, this is going to air like end of August or beginning of September. So we had a retreat in July, and just looking back, it is all coming together.

Shavon: It is coming together.

Melissa: It is all the work you've done. And I do want to make it clear for people because we're talking about this story. It's like the success story for you. 

Shavon: I'm still in it. Yeah. 

Melissa: And also, it hasn't been a walk in the park. 

Shavon: No, yeah. It's still a struggle. I still have to think about things and think about hours and, you know, hit things. So it's not perfect, but my God, it is way better.

Melissa: Yes, yes. We were talking about, and that's why I said, "Would you come on the podcast to talk about this?" because you are working less. 

Shavon: Yes. 

Melissa: You are making more, and there's more stability internally. You, I think you believe and buy into the plans that have been made more now than you did before.

Shavon: Yeah, and I just feel better about the firm. Like I feel, it feels better.

Melissa: And yeah, I guess I just was thinking, I, I do want people to know that it wasn't a cakewalk because there were just points where, I mean, even that first quarter, that's not, that's not fun. It's not fun to look at the numbers and be like, well, because if you were hanging on to, I can afford this because I'm going to be in a different place. And in the first three months, even though you weren't expecting a perfect get-go, it still, it's not fun to look at the numbers, and they're not near where they need to be. And it's not like you're not working; you're busy. It's not like you're twiddling your thumbs and like, "Oh, I wonder why it's not working." You're, you're really going at it. And so for you to, I guess there's, there's ups and downs along the way. 

Shavon: There's absolutely up and ups and downs along the way. But I'm committed, committed to the process, committed to the team and growing the team. And you know, doing all the things it takes to keep growing.

Melissa: Your mindset is incredible in terms of how you think about possibility and your awareness about you is important. 

Shavon: I think it do question you asked earlier about, you know, people's thing and work. I think that is just the awareness of knowing awareness. Yeah. Yeah. 

Melissa: 'Cause you really... 

Shavon: And being aware about the cutting the bill problem of knowing like, 'cause we could have just had a very surface conversation, a mechanical. Okay, I'll stop cutting. I was like, "No, there's something else here that I probably need to explore."

Melissa: Yes, yes. And how honest you are in those moments 'cause I, I can see your face now 'cause there's times on retreats, this is specific to you. You'll just sit there and look at me, like, you're thinking, you're just looking at me for a second like, "I don't know." But you're just, your gears are turning. So I just give you the space for your gears to turn, and then you'll say, "Okay, here's what I think." You get your thoughts together, and then you go because it's not just like everything I've said, you've been like, "Okay, Melissa, that sounds great." It's really been, it's been, it's taken a minute.

Shavon: Yeah. It's a back and forth.

Melissa: Yes. Yes. And even, even with the getting to zero, "I'll get you a plane ticket out here if you, if you get to zero with the write-downs." You're like, "That's not..."

Shavon: I was honest with you. I said, "I'm probably not going to do that."

Melissa: You were like, "I don't think I could commit to that."

Shavon: Yeah.

Melissa: And you were being honest. But I guess what you did get to was you did not cut any of the things you did, you shouldn't have cut. 

Shavon: And I made myself have a reason why, and an emotional reason why. 

Melissa: Yeah. Yeah. I mean, so essentially you, you didn't. I mean, $450 dollars is just not a big deal. $11k is a big deal. 

Shavon: It's a big deal. And again, think that I had been doing that for years of how much, like, my boat is sitting out there in write-offs that I could have bought. 

Melissa: You could have, yeah, totally. I just got what you meant by that. Yeah, exactly. Do you want a boat?

Shavon: I would take a boat or a vacation house. And if I stop writing off time, I can probably get a boat or a vacation house.

Melissa: Yeah, exactly. That's so funny. Oh my gosh. So, okay. I do want to give credit, we've kind of given some credit to you, your associate.

Shavon: Yeah, she's been fantastic. She bought in, and when I said this is where we need to be in terms of hours, she locked in, and when she doesn't have enough, she's vocal about not having enough. And...

Melissa: Yeah, which is important. I think some people don't speak up when they don't have enough.

Shavon: Yeah, she'll say, "I'm getting, I'm getting to the end of whatever." 

Melissa: And maybe for people who haven't set clear expectations with their team, what was that conversation like? And actually, you've done a lot of work. We, we built something together. We took what you had and tried to build it out better for you. But how do you do that? First of all, how did you set expectations well? What did that look like? And then was it just one conversation? How do you keep that alive? Like, what's your norm now that didn't used to be your norm?

Shavon: I think it's just one looking at the numbers and just kind of reinforcing and asking, "Do you have enough?" and, "How long do you think it'll take? What are you working on?" and just being connected. And then being really mindful of what's outstanding. Like I just had to even create internal spreadsheets in terms of what have I signed to me, to her, to who, to our contract attorney, where is it in the process? So even just getting more aware of what was outstanding and what was in the process. Again, not perfect, but just building that spreadsheet has been really helpful too. 

Melissa: Yeah. And, and that's if it's the same, no, it's probably a different spreadsheet, but you have... 

Shavon: Right, but then the hours spreadsheet is what you helped me build in the last retreat. 

Melissa: Yeah, which is just lets you week to week have a sense if the daily average is, is adding up or, like, if it's, if it's going to contribute in the ways it needs to week to week. But she's staying connected to those numbers too. It's not just you looking at them and then you making decisions.

Shavon: Right. So we send every Monday, we send it out to, my assistant sends it out to both of us so we both have access. 

Melissa: Yeah. And that didn't, you did not used to look at that stuff together or at all. I don't know. Yeah. 

Shavon: Not at all. 

Melissa: Yeah. In the conversation you had with her, I mean, I don't, do you remember the conversation you had with her where it was like, "Okay, listen, we got to..." 

Shavon: I don't, but she's also very easygoing. So it wasn't a...

Melissa: It wasn't a big deal.

Shavon: Yeah, it wasn't.

Melissa: Yeah. That's, that is great. 'Cause sometimes when you make a change for someone and it feels like they need to do more work. 

Shavon: And I don't know if she felt like she had to do more work. It was just setting expectations around what counts, what doesn't count. You know, just being clear, like if I'm doing something for the firm, so I'm mindful about how much non-billable work I'm giving to her as well because I know she's trying to hit a target. So I think it's just created some clarity. 

Melissa: And we decided at some point, some of the things she was doing, somebody else could do. She was handling things; it's like the work wasn't distributed in the ways that was like the most cost-effective way to get the thing done. 

Shavon: Right. So excited that now we have a part-time paralegal on board, so to be able to further divvy some of that work up as well. And again, another producer being added. 

Melissa: Yes, absolutely. And you have an admin assistant who's great. And so some of the things, I feel like she took a few things that you guys were doing that she can do. Yeah.

Okay, let's talk about producers and the multiple. We were just looking at your charts before we started. And one of, the chart we looked at was your producer multiple has just gone up over the months because, first of all, you're finally capturing the income. So there's that. And the expectations are clearer, and your rates are different than they used to be. So, yeah, like this year for the whole year, and remember, the first quarter wasn't that great, you're at a 3.8 producer multiple for the firm, firm-wide. That is so awesome. Like, you know, as someone who the numbers tell a story, 

Shavon: The numbers tell a story. 

Melissa: And so when you look at that, if I hadn't talked to you but I could see that arc, I would know you're feeling much better inside of your business than what you were. 

Shavon: Yeah. I mean, it's really, again, it's not like we added a bunch of new people, added a bunch of new technology. I mean, we just kind of took the things that we had and just tightened up. And tightened up. Yeah. And I think that's an important reminder of it didn't take a whole lot more resources. It's, it took being kind of real intentional about the things we had and what we were doing. 

Melissa: Yes. That is important. And for people that don't know that are listening or don't remember what a producer multiple is, it's the income divided by the total, the all-in costs for producers to produce the work that brought in that income. So, you know, you never, you don't want it below a three because that usually means there's not enough money coming in to go around to cover the whole business from an expenses perspective and then enough left over at the end so that owners can take the distributions that they should be getting, that you could save money, all the things.

So, so it needs to be above a three. But anywhere from three to five is, is there's a range there. But and so now you're creeping up on four, which is, four is, four is the sweet spot. That is, it's not just there's not enough. There's more than enough, which gives you options. Like you could hire somebody a little earlier than you planned so you don't have to walk them through the ring of fire right when they get in. 

Shavon: Right. You're not hiring out of desperation. You can be intentional about it. 

Melissa: Yes, yeah, exactly. So that's that number speaks volumes, and I didn't know exactly where that was for the year for the firm, and looking at that is like, that's amazing. 

Shavon: And again, the spreadsheets and the database and being able to look is really great. It's a, it's an impressive platform. 

Melissa: Yeah. Okay. What she's talking about is there's a client dashboard. So you can go, you guys submit data every month. It with that's in spreadsheets. These spreadsheets power visual insights. And so that's where you can go look through, there's a page for income, there's a page for expenses, there's a page for owner comp, there's a page for marketing. There's pages of data. You can go look at the charts on those, and producer information is one of them, and that's where that producer multiple was. And it does, yeah, it does, it helps. It helps just keep you connected to what's happening.

I would love for you to share a little bit about there's two things. There's two resources that you use. One, you know for sure, is amazing. The other you're just getting started with, and you have a good feeling about it. It's not necessarily, it's not like you're just trying to tell everybody to go run to this solution, but there's a good feeling. So maybe worth looking into, which is LevLegal. Okay. Do you want to share what who, what is LevLegal?  I need to meet this person, the woman who owns it.

Shavon: And I think I found her via a Facebook group. Someone mentioned her company, and I knew, I knew we were still, my associate and I were still probably doing too much work that we could push down to another producer, but it was that paralegal-type work. So I knew we needed help, but I knew I didn't have full-time help.

And so it was an emergency project that I had that really pushed me to say, "Let me find a paralegal," because I'm spending a lot of time on this and it's not worth my time. And so that's how I found this company. They have paralegals; it's remote. It's like a subscription-based, so you pay for a certain amount of hours. So I've just been, paired with a paralegal who will help us with our corporate work and a little bit of litigation that we do as well.

So it's been, you know, it's very early in a relationship, but excited to add that capacity to the firm. I mean, that's how I ended up hiring my first associate. I had contract attorneys, and I started looking at how much I was paying them. I was like, I could probably hire someone, a junior person to come in and help. So again, thinking that we'll continue to grow our capacity and be able to grow our firm, in an efficient way.

Melissa: Yes. And that's, is it kind of like Lawclerk.legal? Do you know...

Shavon: So that's the company I was working with; that's when I got my contract attorney. So I'm used, I'm comfortable with the model. And so it's similar in the way it operates.

Melissa: For those that don't know, Lawclerk.legal is contract attorneys for hire that could be subscription-based or project-based or, you know, it's basically, it's a great way to bridge the gap until you're ready.

Shavon: It's a great, which is what, you know, I just got really busy and I needed to bridge the gap and it was a great way to build capacity and still have reached out to them and other contract attorney companies when we've had, we've needed capacity, but certainly not enough to justify a hire, but it's like, "Oh, this is a busy couple months. We need help here in these targeted places." So always great ways to build capacity.

Melissa: Yes. And so, and so this is like that, but for paralegals. 

Shavon: Exactly. 

Melissa: Yeah, exactly. Okay. So you have a good feeling about that.

Shavon: I do.

Melissa: You're just getting rolling, but that good feeling,  and I've heard good things from other people. I really, I really need to have her; I need to meet her, and I should have her on the podcast. Okay, then the other thing is your bookkeeper. 

Shavon: Yes.

Melissa: Your bookkeeper is amazing.

Shavon: Thank you. We've worked together for years, yes.

Melissa: I will tell you, so I was asking, for those listening, I did an episode earlier this year, like February or something, about how to structure your P&L, and went into, you need to have a good bookkeeper. You need to have someone who, number one, is down for that and understands and is willing to hear like, "Hey, I'd like a new category, a new line item," and they don't act like it's some dramatic thing. So, but your bookkeeper structured your P&L the best we've ever gotten. 

Shavon: That's amazing. And again, we had to talk about, because, you know, we do flat fee and hourly, and so there's definitely been some back and forth on like how to set this up.

Melissa: Yeah. So your income section is great. Your expenses section is great. It's detailed enough that you know it's a tool for you. It's not just a page. And so, we joke that, our client services director we were recently talking about we need to create a list of bookkeepers to be able to recommend to others. And I said, "What's the best P&L we've gotten?" And she said, "SJS," which is, which is your firm. So to this day, and I haven't met your bookkeeper yet, but she's another person.

Shavon: She'll be elated to hear this. I can't wait to tell her.

Melissa: So she can watch this episode. And then, and then I should talk to her too because it really does matter. And you feel like she's a good partner.

Shavon: It's absolutely, yeah, absolutely. Like I said, she does our invoices.  

Melissa: Oh yeah, what else does she do for you? 

Shavon: All of our financials, our invoices, payroll for us, set up all of the payroll. 

Melissa: Trust accounting. 

Shavon: Trust accounting. So, no, it's been a great partnership. 

Melissa: She is obviously good.

Shavon: And again, another person, I like to work with people who are easy to work with. And so she's easy to work with. And so that's, that's important to me. Yeah. It can't be a lot of hurdles.

Melissa: And we can say her name. So Anna...

Shavon: Anna Sites, Velvet Bookkeeping.

Melissa: Velvet Bookkeeping. Yeah. And she's in Texas. You're in DC.

Shavon: She's in Texas, yeah.

Melissa: She does, she works with people everywhere.

Shavon: Yeah.

Melissa: Yeah. Yeah, anyway, awesome resource there too. Well, Shavon, your future is bright.

Shavon: I'm excited.

Melissa: It is. I'm glad you're excited. I'm excited for you.

Shavon: Me too.

Melissa: I feel like, and now with this new paralegal on, you're, you're, you're going to experience a bump, which we planned for, but that bump is, it's not a pipe dream. Like these steps are...

Shavon: It's not. Like I feel like I, I had this goal of reaching a number, but it felt impossible. It doesn't feel, it feels like there's still work to get there, but it feels like, "Oh, if I can just pull these levers, I could probably do x, y, z."

Melissa: Yes, yes. You, you seem and feel much more empowered. To me, you feel more, more empowered than you did a year ago.

Shavon: Yeah, and again, when we had our retreat, it was just a tough timeline. It was again, the money was tight, this client on the invoice, all of it just felt like...

Melissa: And it was the holidays, which is just an extra thing in business. Yeah, totally. Yeah. And so I'm sure that was partially, obviously was playing into that, but even, you know, I don't know, at the beginning of the year, I just, just the version of you now feels more from a business perspective and from a like mental, internal perspective, more centered, more certain. Just like that, it's, it's not, I don't know.

Shavon: Yeah, I do feel that way. And I think some of it is also age. You start to get older, and you just have, you just better boundaries, all the things. 

Melissa: Yeah. Yeah. Yeah. It's super impressive, super cool. I just so, it's such an honor to witness your journey and... 

Shavon: Thank you. 

Melissa: Yeah. So that's, it's been fun. Man. Okay, any, any final thoughts you'd share that you have or you think maybe would be great for listeners to hear?

Shavon: Get help. Now, and that's something I'll say to my business clients all the time. Like, you should not be doing everything. You shouldn't be an expert on everything. If there's a place in your business that you feel like is not great, seek outside help. If you're trying to grow, like, don't try to just punch through it on your own. Like find someone to help you. Like it's, business ownership, it feels like a lonely journey, but it's a team sport. 

Melissa: Well said. Man, thank you for coming on.

Shavon: Thank you for having me. This was exciting. 

Melissa: This was. This is so exciting. And we'll have you back again if you're willing. Yeah. 

Shavon: When I get my vacation home. 

Melissa: Yes. And your boat. 

Shavon: And my boat. We'll have you back. Thank you so much.

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And we give away some pretty great free resources that help law firm owners who aren’t clients learn some of the core principles that we use in our framework. An example is a Producer Calculator, which lets you put in your producer salary and production numbers to give you a sense for how healthy your firm is and how your team is performing. Head over to velocitywork.com to try it out.

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