It's Q4 - prime time to review your law firm's finances and make strategic money moves to maximize profits in the new year. Join Your Practice Mastered hosts Richard James and MPS as they tap CFO Ryan Kimler for critical insights on planning marketing budgets, optimizing payroll, reducing tax liability, and creating financial freedom. 

Discover actionable tips to lock in bottom-line profits to set up your firm for an abundant 2024. Take advantage of this crucial quarter - listen to Your Practice Mastered now!

Ryan Kimler: Yes, absolutely. Yeah. I've got, so I know we might talk about this a little bit later in the show.

I do have a book coming out for lawyers. That's around the finances. And I actually talk about, there are five key positions for your finance department. And you just listed like four of them. You have your accountant slash bookkeeper, right? Who's making sure the books are good. You have your tax preparer.

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MPS: Hey, law firm owners. Welcome to the, your practice mastered podcast. We're your hosts. I'm MPS.

Richard James: And I'm Richard James. And today we're going to have a fantastic conversation, setting you up for the new year, because we're rolling into the fourth quarter, or maybe when you're listening to this, we're fast into the fourth quarter.

MPS: Yeah. The net profit CFO, super excited for this conversation with Ryan. Ryan, welcome on.

Richard James: Yeah, I tell you, I always try to get my clients and members and Michael does as well.

I mean, he focuses a lot on the sales and the marketing side and the lead conversion side and I do too, but then I dive into the profit and loss when it comes to the fourth quarter so that they're ready for what's happening in the next year. And there really are some big decisions you have to make right now.

Not only to set you up for success all year long, but really some decisions you have to be making in this four quarter. But Michael, let me let you kick it off.

MPS: Yeah you're spot on with that. And Ryan, why don't we break the ice a little bit? What's maybe one thing that not everybody knows about you.

So, you know, we have great Danes that are well behaved and we work with a local no kill shelter here and sometimes they'll have a great day that comes through that needs to learn some good habits so that they can go to a good home. And so, we will actually foster a 3rd great Dane. And it's really fascinating to see how they usually learn from our two very quickly.

Right on what they do, how to behave. It makes it for a full house because we'll have, you know, three dogs that are over a hundred pounds, but I enjoy it, my wife enjoys it. It's something we love to do. It's a good time.

Richard James: Is that Marmaduke? Is he a Great Dane?

Ryan Kimler: Yes. Yes. And Scooby Doo.

Richard James: And Scooby Doo.

Ryan Kimler: Okay. Great. Great. Good. As long as I want to make sure I had it. What's that?

MPS: He's got three ponies at the house.

Richard James: Basically three small, three ponies. Michael, you have the opposite of that. Yours is a French bulldog. He's a great thing, can pick him up and play with him like a toy, probably.

Ryan Kimler: It is. Yeah. I mean, it definitely takes patience, right? Because we really are trying to retain them. I mean, especially, you know, especially if we get one that's younger, right? A year or less. They're still in training. Right? But our dogs do. I mean, our dogs are really nice.

They get along with any other dog that we brought in the house and you know, so they, yeah it's fun. It's fun. It takes patience and it's a time investment, but it's fun.

MPS: Awesome. Well, I appreciate you sharing that. That's definitely cool. Something unique about yourself. So tell us a little bit more about your journey as an entrepreneur you're the net profit CFO. Tell us a little bit about how we got to that.

That's what I went to school for. Right out of school work for another CPA firm and we were doing bookkeeping and general ledger accounting for law firms, predominantly probably 80 to 90 percent of our clientele. And we remote before remote was the regular thing. Right? So I work nationwide with around 200 law firm owners with their books with their accounting.

And I was very young, very green in my career. And along the way, I had a couple of law firm owners. You know, I'm going to kind of paraphrase, but they kind of asked me. You know, we really like the work that you're doing. We appreciate that you produce financial reports for us and let us know where our receivables are and that kind of thing, but it would be really helpful if you could give us some advice on these financials and really tell us how we can improve our business based on the numbers that you're seeing.

Right? And long story short, you know, that partnership or that CPA firm ended up dissolving partnership problem. So I moved on and I really spent, you know, I worked corporately somewhere else for the next 2 or 3 years at a larger company, but I really spent days off holidays, vacations, chasing mentors and trying to find answers to those sort of questions.

How can I really help small business owners through their financials and along the way, found a couple of really great mentors that I've been privileged to learn from and today I'm a part of a larger CFO organization, the CFO project, and we really have a system for helping small business owners improve their finances.

And was able to launch the net profit CFO. And today that's really all the work that I do is, you know, work as a part time CFO and work with law firm owners on their financials. I love it. Love every day. And I'm probably gonna work till the day I die, if it's my choice, you know, God willing, cause I just love it that much.

Richard James: Yeah I feel the same way about what it is I do. I tell everybody all the time, I'm probably not going anywhere. I'll be doing this, you know, in my seventies, I don't see me retiring. I might play golf more than I do now, but although my wife and some would argue, how could I possibly play golf more than I play right now? But I promise I can.

I made a hundred grand. My accountant said, congratulations. He said, you know, now I need you to cut me a check for $27, 853. And I'm like, excuse me. And he's like, oh, well, yeah, that's what you know, you owe in taxes. And nobody ever sat me down and showed me that concept and how I should have planned for it and prepared for it.

Nor did he ever mentioned plans to reduce my tax liability or anything like that in enough time. And so there was no planning that happened like on April 13th and I had up the check there on April 14th. And it was at that moment that I realized, okay, I got to do a better job at this. And then I had another company that had lots of inventory and we were on the cruel system and my gosh, there was so much accounting theory rolling around in that room.

And it never felt like it was really great practical advice. And I'd always say, look, you keep saying I'm making all this money, but there's nothing in the bank, what's going on here. And they could never really accurately articulate the difference between profit and loss and cashflow. And it was really difficult for me to manage it.

I'm like, wait, I don't understand. I got an A she says, well, it doesn't matter. You're getting a D. So anyway, I had to retake that class because I didn't like going to class. That being said so I'm not an expert, but I'm an expert in the fact that I had to figure this out for myself as to how it worked for an entrepreneur.

Would you agree with that?

Ryan Kimler: Absolutely. Yeah. And I think that's true accounting industry wide, right? I mean, it's not just specific to the law firm niche. I mean, there's a lot of accountants that they cannot get themselves out of accounting terminology, and shift over to being able to talk to a business owner and use the language that they're gonna be familiar with so that they understand.

And it doesn't sound like your accountant is talking Chinese, right? I mean, that just happens all the time, right? And that's really something that I work on all the time. And the folks at the CFO project, you know, they're really a training community for accountants and CFOs. That's something we work on all the time, for sure, 100%.

And I couldn't tell you whether things look good or not good. It was so hard to read. I think the same thing applies for accounting in that same type of philosophy. If you could just break it down into simpler terms and have actionable advice with it, it would be so much more powerful. So I think that's really great that you do that.

Now, I'm curious along that journey. You know, every entrepreneur has a journey and it's a journey for a reason. So was there ever a low point where you took a lesson out of it?

Ryan Kimler: There's a few for sure. One of the biggest is probably, you know, just figuring out that I've had referral partners kind of call me Midwest nice is what they call it. I am from the Midwest. I am, you know, small town raised and grown and I am Midwest nice, I guess. And just figuring out that, you know, not every client that, you know, comes to your door and needs your help and is willing to pay you is really a good client to work with.

That work for you. And this client had talked to your employees that way. He said, you know, what would you do? And I said, well, they probably wouldn't be a client anymore. And he looked at me and he said, well, then why is he still client today? Right? And so that was definitely one of the big lessons that I learned, you know, because I am Midwest nice.

Richard James: That's such a great lesson. You know, my wife's license plate says ECIB. It stands for East Coast Italian bride. That's who I married. And it's been 28 years now, as of last week, we're together 36 years. So we are symbiotic. And when we moved from Pennsylvania to Arizona, the West Coast were dressed up was wearing flip flops.

He said Richie, and that's not what everybody calls me. He's the only man on the live that gets to call me Richard besides my father. But anyway, he said, I want you to know Richie here. He's from Scranton, Pennsylvania. He's not very nice. But he will tell you how it is. So I love that you're Midwest nice.

Cause I love nice people. And I, by the way, I have softened up through the years, but your point is well taken. You know that lesson as an entrepreneur, which clients to say no to is so important. And we all have to learn that the hard way. I remember we had one prospect. He wasn't yet a client. He wanted to be a client.

And so, yeah, you gotta be able to stand up for yourself and identify who's going to be right in your world. Michael, I think we're pretty much have a pretty good no jerk rule in our world. We don't really let them through the door. Would you agree?

MPS: Yeah, I just, it disrupts culture among your clients, disrupts culture among your team. It just, it's like a venom that just wreaks havoc. And so it's not worth it. It's not worth it. It's equally as important to know who you don't want to work with as much as it is with who you want to work with.

So I think that's a very good lesson brought out of there. What about the flip side of that? Was there like a defining moment for you, Ryan, where like the light bulb clicked and things started to go?

Ryan Kimler: Yeah, so I think probably finding the CFO project and finding a couple of the mentors that I found and really learning from them over the span of a few years.

Richard James: Two, two big lessons there. One is the fact that it takes time.

So you said it took you like four years through that mentoring process. I tell people that all the time, if you're going to learn this new skill of building your business, the business skills, the proper questions to ask, the things you're going to need to do to find that lever point. It takes time, there's no such thing and easy is an easy button.

There's a learning curve. And the second thing is, once you do find that lever point, you can have what's called the phenomenon. The phenomenon is the situation where you'll earn five times more money in one year than you earned in the last five years combined because you found that lever point and everything started to take off.

And that's what happens in small businesses once they put the time in and they start to realize where those lever points are. And so Michael, I know you've experienced that in your companies as well. And we're experiencing that through our companies and the different values we bring forward.

MPS: Yeah, absolutely. So, you're totally right on that. And Ryan, so for a law firm owner that's listening to this, some actionable advice. What are maybe a quick tip or two to start prepping here as we're entering the 4th quarter from a financial standpoint for the law firm owners?

Richard James: I'll be honest with you, I'm shocked if a lot of law firms actually plan that far. I mean, I'm not picking on him. Honestly, God, I'm not picking on.

That's not I mean, I tell our law firm owners all the time, like running a business is hard, running a law firm is harder, right? I mean, because, you know, not only is running a business hard just in general, but when you're a law firm owner, you're usually in the beginning early, at least you're the lawyer too.

You're doing all the billing work. You're doing all the client work. And then, Not only are you serving the client all on your own, maybe with some support or help, but you've also now have these third parties that are fighting against you, the court system, opposing counsel the guidelines and rules of the law that you're under, the bar association.

Like, do you force it on them? Do you make it a mandate of working with you? Do you, is it a strong, I know you're, you know, Midwest nice, but you know, do you tell them, look, this is like a baseline for us. We have to be able to meet in this quarter and talk about this.

Ryan Kimler: It is, yeah, and typically, yeah, I mean, we're sitting down, we're having a couple of planning meetings, right?

That span an hour and when you're my client, I mean, that's part of the value and working with me, right? Is I'm going to help you set aside that time and hold you accountable to setting aside time and really investing into building out a plan. I mean, I totally agree with what you just said and managing the calendar can be a hard part, but when you get a plan put together and you know, know what your profits are going to be, not just revenue for next year, all the way down to what your profits are going to be.

Richard James: Michael, by the way, jump in. If you want to at any time, I got another question though. So, I'm always thinking about this, like tax liability reduction. So, assume that's something you want to see them doing at least by the fourth quarter, right? So if you see that they're going to have a really profitable year this year because of the work you did last year, I assume you're going to want them, if possible, if it makes sense for their financial plan along with their financial planner, to do some tax liability reduction.

Would you agree with that?

It makes sense if your tax preparer is not an expert at liability reduction, it makes sense to seek out someone who is.

Richard James: I want to hit that point hard, right? So like, not all tax preparers are can be CFOs. And not all CFOs can be tax preparers and likely neither one of them are going to be bookkeepers.

Right. And so you need all three levels of expertise. Would you not agree? You need the CFO to be able to help you interpret what's going on and make adequate plans. You need the tax preparer to make sure you're doing things in accordance to help you minimize your taxes. And then you need the bookkeeper to make sure that all the things are reconciled and all the transactions are in there. So both the financial plan or pardon me, the CFO, as well as the tax preparer can make, give you adequate advice. Is this really how this should work?

Ryan Kimler: Yes, absolutely. Yeah. I've got, so I know we might talk about this a little bit later in the show.

You have a tax planner who is really a liability reduction specialist, just like you're talking about reducing taxes. Then you have a CFO and you need someone that's in your corner helping you plan for retirement. Those are really the five positions that you should have in your finance department, if you're a growing law firm owner and all five of them need to be on the same page. Absolutely.

Richard James: Totally, totally agree. And I did not know that as a young entrepreneur, Michael, I don't know. I guess, you know, cause you're learning it from me, but do you feel like you knew it at a young age? Did you just kind of, now you realize you had to deal with it? I think I know the answer, but I'm going to let you answer that question.

How do you think you felt about it before and how do you feel about it now?

But I absolutely agree with the five layers you just mentioned. I think that's spot on. And I think it's, I mean, that right there is a valuable tip for every law firm owner listening to this. Wouldn't you agree, Rich?

Richard James: Yeah, no, I 100 percent agree. I want to take us into more, a little bit more detail.

By the way, Ryan, I want you to make sure before we end today, you tell everybody how they can maybe get a future copy of that book. I think it's going to be a great tool for everybody. So I'd like them to be able to get on your list so you can send it to them when you have it. But for now, you said that, you know, at the minimum, they plan on how many clients they have and how many revenue they have, if they're going to do any planning at all, what's one of the, or two of the, or, you know, whatever you feel is right, the number of the key things that they should plan for in this fourth quarter?

Maybe that's you doing it all yourself. Maybe that involves bringing a partner in that can help you do that. So you need a marketing budget and a plan with it for the next year. Part number two would be around payroll, right? And around the capacity that you have in your firm, right? If you're going to grow to X next year, does that require that you bring on more staff?

What is your payroll expenses going to look like and planning for how am I going to be profitable on the staff that I bring in? Right? That is super important. And then the last thing is just overall overhead. You know, is your rent going up next year, right? The last couple of years, we've seen crazy inflation.

And that's a really good starting place and then we can start to look into, you know, what are the items that affect cash flow after profits, but that's the minimum starting place.

Richard James: Yeah, no, that's perfect. Because Michael, you and I just did a exercise a couple of weeks ago. Right?

Where we looked at every transaction. Now we were fortunate. We taught our bookkeeper to make sure they added a vendor to every transaction so that we could run a vendor report in QuickBooks. So we kicked out a vendor report by transaction and he and I went line by line. I mean, there was hundreds and hundreds of lines.

But Michael, how did you feel about it? And what did we do?

MPS: I feel three different ways about it. I felt like it was a bit monotonous. I felt like it was necessary and it did feel accomplished after. So, although it was monotonous, the other two outweighed that substantially, it was absolutely necessary.

And you do get a sense of accomplishment after you get it done.

Richard James: I mean, we've freed up. We identify we what do we use? Keep kill and investigate, right?

MPS: Correct.

Richard James: I think we identified like 150, 000 plus things that we were going to kill. Like expenses that had we not looked at was 150 grand that just would have gotten washed through next year. Right?

Do you agree with that? Do you think they should do it that themselves? Do you think they should outsource that to the bookkeeper? Is that something you do with them? I mean, what's your general opinion of? I'm just asking, like, if you like the idea that we did, or you prefer we didn't do it that way.

Ryan Kimler: I do, and I think it's really important, especially, you know, now in today's world, we live in a recurring subscription model world. Right? And it really, you know, I think started with gym memberships. Right? And eventually, I mean, it's kind of a rip off system. Right? Because. You know, you find the subscription, you think you're going to use it.

And let's just, I don't know how long this exercise took the two of you, but let's just say that it took you, you know, an hour one subscription, 50. If it takes you an hour to find it, you just made 600 an hour. If you're going to pay for it all next year.

Richard James: That's exactly, you're exactly right.

I mean, we didn't find one, we found 150, 000 worth. So theoretically we made 75, 000 an hour, right? By doing that.

MPS: Which is a good rate. Yeah.

Ryan Kimler: When was the last time you made that? Right. I mean, you're not going to compete with it. Right. I mean, I'm going even the small route, right?

Find one thing, 50 an hour, you know, or 50, $600 an hour. Right? Most of the most attorneys that I know are not billing $600 an hour.

MPS: Yeah. You're spot on. I think you nailed it. So, Ryan I'm curious, obviously we heard about the book, but I'm still gonna ask what, what's got you fired up and excited today?

Ryan Kimler: Yeah, so two things, two items. Number one, I do have a book coming out. It's gonna be Bottom Line Profits, all for all focused on attorneys and helping them improve their bottom line. Super excited about that. And then number 2 is very soon, you know, right now I am working on the book and going through final edits, things like that.

When I get that done. I am going to be launching a financial small group for attorneys, and I am super excited about that. It's going to be, you know, part video course. So it's going to educate you know, attorneys and law firm owners on their finances. It's going to require 1 short 5 minute exercise a day for a span of 45 days.

And yeah, that's going to be coming out real, real soon. So I am excited about that and ready to get that started.

Richard James: Yeah, we're super excited about that for you, too. By the way, that's how we run our world with so we know it works really well. It really puts all the pieces together. And so it's a powerful positioning tool allows you to the power of the peer group really works well together.

We've seen that explode our attorney's results. And so if you can help them explode those results in a financial sense, that's going to make a real meaningful item to the bottom line. So super excited about that for you. And as well as your clients, Hey, Ryan, I just want to say it was a pleasure having you on today.

Thanks for giving a peak insight about who you are and your entrepreneurial journey, as well as some insight as to what's going on and what they should do be doing in the fourth quarter and building that team that they should have in their corner financially. I think this was sound advice. This isn't the, this might be the first time that we've heard from you, but I have a feeling this isn't going to be the last time we hear from you.

MPS: Yeah, no, absolutely. And Ryan, just in case people want to do get prepared to get a copy of that, where's the best way for them to do that when it comes out?

Ryan Kimler: Yeah best place to find my book. It's going to be NetProfitCFO.com, really simple. It's just my home webpage site. That's the best place where they can get in connection with me and I will have my book on there and make sure that I get that to your listeners.

MPS: Excellent. Well, Ryan, we very much appreciate it. And to the law firm owners listening today we got the gentleman's agreement around here.

So if you enjoyed the content today, and this isn't your first time listening, you got some value. We kindly ask, make sure to drop a like down below, comment, let Ryan know if you got any questions. And then depending on where you're listening or watching hit that follow or subscribe button, turn those bell notifications on, but we appreciate you tuning in.

We love delivering this. Content to you and Ryan, once again, thank you for taking some time to spend with us and the audience today.

Ryan Kimler: Absolutely. Thank you for having me. I really enjoyed the conversation with you guys. So.

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