Today I welcome Greg Crabtree, author of Simple Numbers, Straight Talk, Big Profits, to dive deep into the most common sense financial strategies that I have ever used. Greg shares his straightforward approach to accounting, including focusing on gross margin instead of just revenue, and why achieving a labor efficiency ratio of 2:1 is critical for success. We discuss practical tips on how to measure marketing effectiveness, set profitability targets, and why understanding your financial reports is the key to sustainable growth.

One of the standout takeaways from our conversation is Greg’s advice on profitability and growth strategy. He emphasizes that “sales are for show, but profits are for dough”, and explains how businesses should calculate and monitor gross margins to ensure they're meeting performance goals. Greg also touches on the importance of return on invested capital and why law firms, particularly those in personal injury, need to carefully balance labor and marketing spend to ensure consistent growth. Whether you're running a small firm or looking to scale, Greg’s insights on simple, actionable financial principles are a game-changer for any business owner. Know your numbers!

Key Topics

• 03:00 How Greg’s firm specializes in helping entrepreneurs and business owners understand their financials.
• 03:20 The Focus of his practice, which is now a special consulting unit of a top 20 US accounting firm.
• 03:42 The shift from principles-based to rules-based accounting due to regulatory failures.
• 04:00 Dislike for traditional accounting and his desire to make it easier.
• 04:35 The importance of making accounting intuitive and understandable for business owners.
• 05:04 Studying client data to uncover plain truths about business performance.
• 06:14 The importance of gross margin over revenue, defining it as revenue minus cost of goods sold.
• 06:32 The need for $2 of gross margin for every dollar of labor in a business.
• 07:10 Importance of setting targets and measuring performance against these targets.
• 08:45 The concept of return on invested capital and its significance in business performance.
• 10:36 The concept of labor efficiency and the need to maintain a two-to-one gross margin target.
• 12:01 Pricing strategy and ensuring effective pricing to avoid running out of business.
• 14:34 The importance of billing quickly and often to speed up cash flow.
• 16:11 The need for optimized profitability and opportunistic growth.
• 17:46 The challenges of personal injury firms with less predictable case values.
• 18:12 The concept of rolling 36-month revenue and labor cost for personal injury firms.
• 19:03 The importance of marketing effectiveness and the need to try different strategies if current ones are not working.
• 20:01 Insights on building a stable caseload and the importance of patiently building a base of cases.
• 22:28 The future of paid search and the role of AI in search results.
• 22:44 Skepticism about the future of paid search and the importance of standing out in a crowded market.
• 23:28 Google's efforts to improve AI search results and the importance of providing the best answers to users.
• 25:09 The balance between free content and paid content in search results.
• 27:21 The importance of branding and consistency in marketing for law firms.
• 27:46 The need for firms to pick a unique value proposition and deliver it consistently across all marketing efforts.
• 28:04 The concept of launch capital and the importance of making significant investments in marketing.
• 30:14 The need for a 50% return rate on marketing investments to ensure profitability.
• 34:21 The difference between traditional accounting and the Simple Numbers approach.
• 35:29 The importance of helping clients run better businesses and providing actionable insights.
• 35:45 The fixed-price model and the focus on profitability for clients.
• 36:15 The planning session process and the importance of understanding business data.
• 37:00 Three financial challenges to profitability: setting aside taxes, reinvesting in the business to reach an optimal caseload, and paying themselves a market wage to ensure personal financial stability.
• 40:46 The importance of scheduling personal time and the benefits of a task- and appointment-driven calendar.
• 46:45 The importance of working with privately held, entrepreneurial-minded businesses.
• 48:22 A call to all entrepreneurs to rethink and reset their business strategies in the current economic climate.

Resources Mentioned

Books:

1. “Quit" by Annie Duke
2. "The End of the World is Just the Beginning" by Peter Zeihan
3. "Simple Numbers, Straight Talk, Big Profits" by Greg Crabtree
4. "Simple Numbers 2.0" by Greg Crabtree

About Greg Crabtree:

Greg Crabtree is a speaker, author, entrepreneur and financial expert. Crabtree has used his entrepreneurial skills to develop Crabtree, Rowe & Berger, PC, a CPA firm focused solely on the needs of entrepreneurs, helping them build the economic engine of their businesses. Working with entrepreneurs all over the country in a broad range of industries, Crabtree has simplified financial reporting and empowered all entrepreneurs to take ownership of their finances. He has pioneered a revolutionary metric for driving business profitability: measuring labor efficiency and developing simple benchmarks for company, team and individual performance.

In 2011, Crabtree published his first book “Simple Numbers, Straight Talk, Big Profits,” in which he shares his core principles of how to turn your business into a wealth building engine. He is currently working on his second book, “Simple Numbers 2.0.”

Crabtree’s community service includes serving as Boys and Girls Clubs of America National Area Council Member, Entrepreneurs’ Organization Global Board (2006 to 2009), ALS Association of Alabama, Boys and Girls Clubs of North Alabama, Atlanta chapter of The Entrepreneurs’ Organization (EO) past board member. Crabtree is a frequent speaker at EO Chapter events, EO’s Accelerator Money Day program and the U.S. State Department’s New Beginnings program for international entrepreneurs.

Greg and his wife Debbie have four children. Greg is an avid golfer and enjoys playing historic golf courses whenever his travel plans permit.

About Jay Berkowitz:

Jay Berkowitz is a digital marketing strategist with decades of experience in the industry. As the CEO of Ten Golden Rules, he has helped countless law firms and businesses harness the power of the internet to achieve remarkable growth and visibility. Jay is also a renowned keynote speaker and author, sharing his expertise at various industry events and publications worldwide.

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Will, I will challenge people, if you really want to make a difference, is start looking at data when nobody's paying you to do it. And I did something that no, very few accountants ever will even remotely think about doing. I just took a bunch of our client data and organized it in a way to start studying it. And in that organization process, we were we just stumbled on some plain truths that have been hiding in plain sight for decades. And you know, one of those that we always start off on is gross margin. Revenue is not the most important number. It's revenue minus cost of goods that go out to a third party, if it's materials in the services world, if you're talking about law firms, law firms can subcontract out things, out of pocket, expenses on cases, or even through some of the work to some other contracted party.

Welcome to the 10 golden rules of internet marketing for law firms, podcast featuring the latest strategies and techniques to drive traffic to your website and convert that traffic into clients. Now here's the founder and CEO of 10 golden rules. Jay Berkowitz,

well, good morning, good afternoon, good evening. Welcome to the 10 golden rules, Internet Marketing for law firms, podcast and webinar. We're putting this on YouTube as well. We have one of the greatest guests today, Greg Crabtree, the author of simple numbers, Straight Talk, big profits. And I was lucky enough to see Greg speak at seven figure agency. My mastermind, Greg, welcome to the 10 golden rules podcast. Yeah,

thanks for having me. Jay. Appreciate it.

So the reason I'm so excited about this one is I actually read the book and I want to share just a short story. So I'm doing a program called 75 heart. And 75 heart, if you've heard about it, you have to do two workouts a day, you have to follow a diet. You have to no no cheat meals, no alcohol, drink a gallon of water and read 10 pages of a non fiction book. So it was great, because I don't know, those of you who listen to this podcast know, you know, an accounting book might not be my go to so this is what I've been able to accomplish where I'm on day 73 is 75 hard. Who not? How fantastic. Dan Sullivan, that person, again, was great. This one's currently on a reading list. And then this next up, The Five Dysfunctions of the team. That is. That's been great for me. But today we're going to talk about simple numbers. But I wanted to, oh, I wanted to share the tip. So the tip is, you have to read 10 pages of a non fiction book. And you know, when you do that, and then sometimes you get into it read 20 or 25 pages. You know, I've been banging through books, because when you have that discipline, a lot of these business books are 202 50 pages. So you know, seven, eight days you're getting through business books. So highly recommend 10. Give yourself the discipline, 10 pages. So let me tell you a little bit about Greg, and then we'll get into his story, because it's more interesting than mine. You know, he has an entrepreneurial background, and he's real financial expert, but he's the author of this book, simple numbers, Straight Talk, big profits. And, you know, really, this is what I've loved about it, because we started working with with Greg's company, is it's just the most common sense accounting I've ever seen in my career. And you know, we're going on 30 years like, one of the simple things is, they do quarter, they look at quarterly rolling for projections. Because if you look at like, fortunately, our company's growing, and when you look at, you know, 12 months, or you look at last year for projections, you know, you sometimes you're looking at 18 month old data. So some simple things like that, that Greg will explain much better than I can. The firm is called Crabtree row and burger, a firm that specializes in helping entrepreneurs and business owners understand their financials to improve profitability and scale their business. But like I said, Greg can say it a lot better than me. So Greg, tell us a little bit about you know your journey and how you got started, how you got to where you are today?

Yeah. Well, actually, a little bit of an update. I guess that was an older bio in 2020, our firm merged with a top US accounting firm car rigs in England, so we're now a special consulting unit of a top 20 US accounting firm, but we're referred to as simple numbers and so. So the focus of our practice came from, one is, I hate accounting, so it's just one of those things that it's like, see this, it was built out of a mindset that this has to be easier than what we're making it. And unfortunately, I guess I come from a long enough time ago, the. That when I started in accounting, we were a principles based profession rather than a rules based profession. And then with some famous regulatory failures of Enron and Arthur Anderson disappearing and those things it, it just continued to push the organization, the the the industry, towards rules. And if you know anything about rules, especially, I'm talking to a bunch of lawyers, the concept in legal is, the more you try to define something, the easier it is to defeat. Because the more words you use it, it becomes you create unintended consequences, unintended legals. And so the world of accounting became for accountants and bankers and third parties, not for business owners, that hey, we forgot the most important person, the owner of the business, and and, and. And the thing was, the data should have had a lot more intuitiveness to it. And so over the years, I was fortunate to work with some really successful entrepreneurs, and I just kind of dug into the brain and said, you know, what are you looking at? Because you're not looking, you know, you don't take my financial statements and run your business by it. You're looking at something else. What is it and and over time, and doing some research, one of the thing I did that is, I will, I will challenge people, if you really want to make a difference, is start looking at data when nobody's paying you to do it. And I did something that no, very few accountants ever will even remotely think about doing. I just took a bunch of our client data and organized it in a way to start studying it. And in that organization process, we were we just stumbled on some plain truths that have been hiding in plain sight for decades. And you know, one of those that we always start off on is gross margin. Revenue is not the most important number is revenue minus cost of goods that go out to a third party, if it's materials in the services world, if you're talking about law firms, law firms can subcontract out things out of pocket, expenses on cases, or even just pass through some of the work to some other contracted party. You're the billing face, but somebody else is doing that work and you're getting piece of that, well, it's that piece is the true value add. And so gross margin, the way we define it, is, before any of your internal labor. And then the next big aha that I'm telling you this audience that I'm talking to is you're the perfect fit for this. You need $2 of gross margin for every dollar of labor, whether it's billable labor, non billable labor, or somebody sweeping the floor. And you know that that's the magic number, and, and it's one of those that once you start to set these targets, then you can dig into the why, and, and so, you know, and we have some other nuances that I write about in both books, you know, but, but, but the idea being, you know, who's producing, who's not producing, who's in blended roles. And there's ways to interpret that data that we, we've become very adept at, and the fact that we, we've done it for quite a long time. And then the other aspect that really emerged out of this discussion of creation of profitability, but what's the right amount of profitability? Fortunately for me, I I'm in a group called The Entrepreneurs Organization. Been a member since 2001 and as a member leader in that organization, one of the things I get to do is I get to chair an executive ed class at Wharton Business School each year that I get to deliver some of the content as well. So as I like to joke, I mean, I'm just a kid from Alabama that grew up on a chicken farm. So, you know, getting to actually hang out and present information next to legit professors is really cool. But the first year I was in that program, David Wessel, our lead professor, who I just think the world of you know, David introduced me to the concept of return on invested capital. And so it was the missing link that I remember reading the audio book for the first book 10 years after it was written. So I went audit the recording studio in 21 to read it for audio. And, you know, I hadn't read it in 10 years, I mean, so it's like, what am I going to see in there that I don't like? And you know, when I finished, I remember having this little moment to myself going, Man, that was a pretty good book. I was pleased with it. It's a funny

thing, right? Like, I've gone back and read my first book, golden rules. Speaking of rules, yeah, the 10 golden rules of internet market. I wrote it 2122 years ago, and people quote things to me from it, and then I go back and read the chapter, and I'm like, oh, yeah, that was pretty interesting. That's right.

Well, the thing was, all of this happened to you or not? It. I when I read it, though I had forgotten all of the little easter eggs of thoughts that I left unanswered in the first book of where I was musing about I was still missing a piece to the to the recipe and return on invested capital is the final piece, because essentially, now we basically set the four cornerstones of business performance. And so the first one being, you got to get a return on invested capital of at least 50% or more. And for law firms, you probably should be closer to the 75% and the argument for that,

it's down. Let's go back to gross margin if we can, and we'll, we'll get into the return on invested capital, like for someone starting out a business and and for people who haven't figured this stuff out yet, and frankly, I was one of them, until recently. You know, a lot of our focus was on sales, revenue, revenue, and you talked about gross margin. So like to simplify it way down, if you would. You know, a million dollar business, million dollar law firm, what does it mean? What is the gross margin calculation? And you talked about the expenses in two or three things to look at,

yeah. So in most professional services firms, total Billings. Is your revenue number? Well, in that may be some client expenses. So those come out as cost of goods sold, and you may use, you may bill your customer anything that you bill your customer for, but I may subcontract out those services from another specialist. So is it another lawyer? Is it? Another firm? Is it? You know, you name it. So those would be cogs in a law firm case, but in a lot of law firms, it may be close to zero. You never travel for your client. You're just always doing services. Okay? Well, you're gonna have a zero on that cogs line. I still want you to have that line, because it tells you that there is another way. And so people that get overwhelmed with more sales than they got people to do it. Okay? Well, let's find a way to do it, and we run those subcontracted people, you know, through that line. But once I know, see the thing is, especially in today's what we can't flex labor like we did 40 years ago. You pretty much commit to an employee, and I got to go sell and keep that employee busy and productive. And so it is one of those that if you know what the labor is, the input, the margin is the output. And if I now know I can start every single month, everybody listening to this podcast right now, you know, within a rounding error, how much labor you're going to spend in the month of November. We'll just take that number times two, and that's your gross margin target for November. And then business, business strategy becomes really simple, have I sold enough, and my people produce enough, and do I have the right people and, and, and really, in the having sold enough, we get into the discussion of pricing strategy. Have I priced it effectively? You know, because I can, I can sell a bunch of stuff, but if I under price it, I'm just going to run myself out of business or just get by. And it's like we take too much risk as owners businesses to just get by and and we've yet to see people who commit to understanding how to set your targets and perform to those targets. I mean, those businesses thrive now, sometimes you have to address some really unpleasant things to get there. You know, do you have underperforming staff, under performing partners, even? And are you willing to do something about it and really create an a you know, a lot of times in professional services world, they're people that perceive their value based on what their skill set is, not based on what they produce. Yeah, you got to have a certain skill set, obviously, in a in a regulated profession, but you better perform. And you know, it's one of those things that you know, if you don't perform something, something's got changed. And, you know, so can you perform, or you better off suited doing, you know, working someplace else.

So one of the lines I like from your book and your presentation, sales are for show, profits are for dough. Want to speak to that a little bit. And, well, I

mean, you know, I mean, you can, you can sell a bunch of stuff. Can you get it done? I mean, it feels like I said, you know when, if, if we think of November right now, and you take your total labor, you expect to spend in November multi times two, that's your gross margin target. The first question is, Have I saw. The Oh, we got plenty of backlog. Okay, great. I can't tell you. I mean, 90 plus percent of the time when somebody tells me they got enough backlog, they still underperform to their target, because they didn't get it out the door within that monthly, you know, time period. And realistically, the problem is, is what I just said, it's a monthly time period. We don't produce on a monthly basis. We produce on a weekly basis. And the more that you actually get people to think of quit turning business on months I every week is a productive unit of time. I can actually get, get my labor productivity down to the point that you know, did, did we bill enough this week? Matter of fact, I'm big fans, especially for legal practices, any other professional practices I want you to build. Anything that got done this week needs to get billed this week. Bill, quickly. Bill, often that speeds up cash flow as well. But, but the fact that completion now, when you're doing monthly recurring revenue, you know, type agreements, which, in the legal world, there's some states that allow retainers like that. They're a little more of a okay, I'm making a payment, but then I have to settle up, okay? But I, you know, a few states have started to allow more creative, you know, type billing arrangements, much like, you know, what your industry does where, hey, I'm going to provide you this contracted support, and it's not ours based. I'm going to charge you $2,000 a month, and then I'll review all your any contracts, and blah, blah, blah, you know, what? In some more, more of a, you know, contract legal counsel, you know, you know, for, for the company, or something, something along those lines, you know, but, but at the end of the day, it's Bill it quickly, Bill it often. But you're, you're always maintaining that two to one pace. And if I drop below it, it tells me that I either have a productivity problem, or I've got a pricing and sales problem if I'm above it. It's called, the really powerful thing about labor efficiency measurement is it tells you when you're running hot that, yes, this is great, but you can't do that 52 weeks out of the year. Just don't even think about it. I mean, you would never have anybody want to work for you. And so we've got to guard against we've got to find kind of my mantra of late has been, I want to create optimized profitability with the work that I work stream that I have, and I want to look for opportunistic growth. And opportunistic growth can come in multiple forms. Right now, I would say that there's business purchase opportunities that are at bargains that we've had multiple clients. I've seen more bargain purchases from my clients in the last 18 months, and I've seen in 15 years. I mean, so the yes, there's a handful of businesses out there that get premiums, but a lot of the common businesses that don't typically get premium notice from private investors. Doesn't mean that this is probably the best time that's been in a while for businesses to buy a business on the cheap. Do, you know, do an earn out, you know, in terms of a payment, and it it's generally growing by purchase is not the best return on investment as organic growing is. But sometimes I need those people as much as I need the business that they have. And so we've seen reasons why people do both. But the idea is, you know, you kind of know what's there. Once I know I start every month with that target, and I if I'm constantly falling below it, what am I going to do about it? I'm not just going to accept that. That's the way it is. Well, that's a good way to go out of business.

Now, we talked a little bit before we started recording about a lot of our clients are the personal injury clients, and even, you know, other single event type of practice areas. So it's a lot less predictable. You know, what the average cases are? You know, the $10,000 cases that pay the bills, and then you get a million dollar, you know, car accident, or, you know, couple million dollar serious injury, motorcycle, truck accident. So how do those guys schedule and plan using your methodology? Yeah, really,

what we've done with some of the the the personal injury folks, is really step back and look at like a rolling 36 I mean rolling 12, still, for most of them actually, is still pretty, pretty stable. You're going to close a reasonable number of cases. So a lot of it, let's kind of, let's kind of break the personal injury world into two groups. You've really got the group that primarily settles cases and refers out, and so their threat of litigation is they will refer it out to somebody else to litigate. Eight, but they are more more, what we call file Turners. You can get the highest labor efficiency ratio. It being a file Turner, personal injury firm, you just always have to find a way to create that threat of taking it to court, or else you're not going to get people to settle. But invariably, where you have a good marketing program to get cases in, and you effectively quickly identify the issues and present options, you know, then you're gonna the ones that settle quickly. You can make a really good business off of, like you said, the cases have a tendency. So the time frame that we generally use is three years. I've just got to expect that. I've got to, I got to work my tail off for three years to build up to my my rolling caseload, and one once I'm there, then I've just got to maintain that. So when we get to that rolling three period, we're stepping back and looking at, here's my rolling three year 36 month revenue, here's my rolling 36 month labor cost, here's my rolling marketing spend. And this is where, you know, we look at marketing effectiveness of if that marketing is delivering the cases, you know, then it's kind of like a hot hand in in the blackjack. I mean, you feed the hand, and if it's not working, unfortunately, it's a industry that has to market. I mean, if you don't market, you don't eat. And so the key there is just try something different. And you know, we're not experts in telling people what to do, but we can sit back and look at the measure, the effectiveness of the spin, you know, from a standpoint. But those are the basics of if you can ever build that 36 month case load, and then cases start to they'll still settle prior to litigation. A lot of times, we don't, I don't consider that turning a file, turning a file, is something you turn within the first 90 days. You know that you get it, and you do a quick settle and move on. Once you go past that, then everything kind of goes into that two to three year bucket, you know, way too often. And you know, and it just takes a lot of capital, you know, and what? But once you build that base of capital, then it turns over reasonably effectively. Yeah,

I think from what I see, like the firms who average, like, 50 or more cases a month in the personal injury space, they're pretty consistent. And I guess a big part of it is they have history of cases and past clients who are going to refer them, they have relationships with, you know, other attorneys and medical providers who are going to refer a certain number of cases. And so that business becomes a little bit more predictable. You know that you're going to have 50, 6070, new cases every month. You're going to settle 40, 5060, old cases every month, and that's a more predictable business. I guess it's the smaller guys who can vary from five to 10 a month to 2025

Yeah, they're gonna have a lot more volatility, but the wins are so much more valuable to them because they have they don't have the fixed overhead in a lot of cases. Now, the ones that come to the ground and try to spend too much money early, money early, you know, they that they don't fare too well. So, so the idea is, you just got to be patient as you build, build that base, you know, and get up there. The one thing that I you know, your background, I love your answer on I made the statement, it would not shock me if Google makes $0 from paid search in 24 months from now, because why would anybody pay for it when, when all search will be aI driven looking at Non influenced information? What's the point of buying Google AdWords, doing pay per clicks and all those things.

Well, I mean, one thing Google's done to fight off the chat GPT and the other AI searches is they've brought their own organic, you know, AI search results to searches, right? So now, but those,

but I would imagine, and you tell me, if you I'd love your answer on this is, is Google's AI search results that I now see at the top of the page is, are those influenced by paid promotion? Well,

Google's always said that they don't influence the organic and they're paid. They've always said Church and State are separate. They also had do no evil. It's one of the core principles, and they they recently took it out of their you know, over the last five or six years, they've actually taken that out of their corporate documents. But I think, you know, it's in Google's interests. Look at it from their perspective, give you a good answer. Answer for what you're searching for, and they can give you the best answer. You're not going to go to chat GPT as frequently dance, you know, like a year ago, there was questions that chat GPT answer better than Google. Now, I think Google, with their AI result, it's as good, or even sometimes better than chat GPT, because they use current documentation. The other thing that's interesting for our clients is in those AI overviews, in Google's AI search result, they're showing their homework, so they're showing the three prominent websites where they got that information from, and those are clickable. That's an organic search result, like Google's free organic SEO. So although

I did, I did. I did a search on chat GPT the other day that actually did the same thing. It delivered me the the the starting

to show their homework, yeah. So I think you know to answer your question, like, if Google's still the best place to get answers, and essentially, that's why we search we don't know you and I probably both Google our own company, but the most part, you're searching something that you don't know the answer to. So if Google has the combination of a chat GPT style answer and the paid and the organic and the maps, and they have the best sort of maps, if you want to see who's close to you to provide a service, then people will still go to Google. Then Google has to find the right balance between the free content and the paid content, something we're super focused on as the local service ads, the Google screened results. So those are right at the top of the page, and there's a click to call, and you know, a lot of people just want to call a lawyer, and they want to talk to them right away, so Google can present that result as a paid result, if that's what the consumer wants, and if they're giving them what they want. So I think you know the answer to the question is, like, if Google continues to be the best place to answer questions, they'll be able to serve paid results as a part of that mix. Yeah. And

to me, I'm more in interested in, how does client get better response rate? Because right now, not part of it, the big part of its market. I mean, the market is the most unresponsive I've seen in quite a while, you know, at this point, but I do think that as you move towards less sponsored search results, you've got to get better at telling your story and getting that information out there and, you know, and that that's Just going to that's got a lot more art to it than science. You know, there's a science to the one hand, of how the search box find it, but the art is how to elevate and stand out and stand above and and I think that's really where the next marketing battleground will be fought. You know, for these types of businesses that are heavy. I mean, you you've got to spend a ton of more. If you don't spend marketing, you've either got a really good source in your pocket somewhere that's feeding you business, but the vast majority, you're having to go out and do hand hand combat, you know, to find the next, your next case, because there's a lot of people, you know, buying for it.

Yeah, you're right, and something we've been talking a lot about over the past six to 12 months, because we were very transaction focused as a direct marketing agency, so we were all about what's the cost of a lead, but we've been spending a lot more time with our clients on brand, and it's very important for the firm to figure out who they are, what they stand for, and then deliver that consistently across everything they do. You know, if we're talking personal injury like, you can be the guys who get you the biggest check. You can be the guys who are the part of the community and really care. You can be the guys who fight the insurance company, but you got to pick one, and then you've got to be that very consistently in all your advertising and marketing, your website, on your social media, and even in picking the community activities you participate in, which is very, very important, as we see in the results that our guys get. So one

of the concepts that we came up with, and this is in the second book, simple numbers, 2.0 I talk about this concept of launch capital. And so this applies very much to the the heavy advertising legal marketplace, because essentially, the idea is nobody's sticking a gun to your head to make you spend money on marketing. It's a choice. And so, and now there's kind of a maintenance level of marketing, and you've probably seen this where somebody comes to you and says, Hey, we need to grow. We need, you know, we gotta push on the gas. And so to me, you know, this is kind of a thing that the traditional world of accounting just does not get. And I get the reason why they fall all over themselves dealing with it. But most businesses, especially like these. Grow through the P L, not through the balance sheet. And the idea being that, and unfortunately, personal injury also grows through the balance sheet, because you gotta wait. You gotta out of pocket cost, and a lot of times you don't get any money until the end, and so you gotta, and there's you gotta deal with, do I? Do I finance it? Do I pay for it myself? Those are different strategic decisions, you know, but, but, but the idea is, I'm making significant investments of an expense in the present period that does not pay off until some point in the future. And looking at those to where the idea is, we've come up with a process where we strip out the extra discretionary spend, and we hold it below the net operating income line. And said, if we had just spent this, we'd have continued going at the same pace this money was being spent as a catalyst for growth. We have to, we have to take a step up in pace, not maintain the current pace. And then what we look at is, once you identify that cost, you can isolate it and then hold it accountable, saying, did it work? And my goal is in the example in chapter six of the 2.0 book goes through this, the goal is, is, I want to spend. I want basically, in the next accounting period. Take that discretionary spend. Let's say it's 100 grand. I should see profit go up in the next period that it paid for the 100 grand and made 50% on top of that. And to me, that's a minimum acceptable win. Now you won't win all the time, because it's not science, you know, it is something that you got to do, but you've got to be able to measure and go the reason why you need a 50% win rate or a 50% return rate is because I'm not going to win 100% of the time, but when I do win, and the example I show in the book, one of the years they got a 400% return on that bet, and it was very much worth it. And case study I show in the book, which would fit perfectly for a law firm. This business grew from 700,000 to 10 million in five years, and was profitable every year, and didn't borrow a dime to deal with that growth. Fantastic. And it's like, okay, I want me some of that, that's, that's, that's some good business.

They see my smile. So if someone's just starting out, should they read the two books consecutively? Or can you skip ahead to 2.0

no. I mean, if you're starting out, the first book is the the absolute. I mean, you gotta read it because it's more of a mindset book, and it's going to give you the simplest parameters, you know that that we deal with the second book is, once you cross a million dollars in revenue. Okay, now let's go to the second book, you know, and start applying some of these. Because the problem is, is, at a million, you're you don't have a diverse enough team to where you can kind of see the fields in front of you. You're not blind. Mostly, you know to what's going on. Once you get past a million. You got a couple of partners, okay, we've got to have some different metrics. We got to communicate to people in a very logical fashion, of them understanding you get paid a salary for what you do, you get a return on what you own. Don't confuse the two, and this is whether it's lawyers, accountants, architects, engineers, doctors, they all screw this up. You've got to have a bifurcation of compensation to where I'm I'm paid for this thing, this role that I'm doing. It may be administrative, it may be billable. I don't really care if that person got run over by a bus tomorrow and you hired a person with no equity to do their task, what would you pay them? That's what that person should make. And unfortunately, we all just cram all that in there together and it it really creates a constraint to clear understanding of how profit is created, how the entity should be stable itself that rises above the individuals. You know in that now, if you're a soul, sole owner, sole practitioner, okay, you know you don't you have a you have a book of business. You don't have a business and, and so, okay, you know that there's a, there's a value to that. And unfortunately, there's, there's generally a finite value in the legal and accounting world, you know what that book of business practitioner stuff is worth? You know? But yeah, at least the law world. You guys are not in that shape as the accountants. I think the last data I heard was for every CPA that passes the exam, we have five that are retiring. That does not end well, I can just tell you,

so there's a massive shortage. It is,

oh, and it's getting more. You. A Red Line critic. I mean, we certainly, a lot of firms like even ours, have tapped international labor to some degree, yeah, sometimes with questionable results, you know, but, but it's, you know, in in some of the the professions, I don't know what the rate of passing the bar is, you know, at the moment, but I would still imagine, even in the legal world, you got more people retiring with a law license than you have people that are getting the next new one, would be my guess.

Yeah. I don't know those numbers, but I know everybody's looking for good lawyers. Yeah. So can you explain simply, like, what's the difference between, you know, your traditional accountant and the simple numbers way

so I mean a traditional accountant, number one is only going to talk to you at the end of the year to get your financials, to file a tax return, maybe produce a simple financial statement to give to the bank, to back up your line of credit, and all of those things, they'll set you up on a safe harbor estimated tax schedule, and that that's the routine. Call them and ask them a question, and they'll send you a bill, you know, for answering the question. In our case, what we says is, now, you know, we're going to help you run a better business. The first thing that when somebody works with us, we do a planning session. And those can we for smaller businesses, we make it a little more compressed and a little more affordable. The larger businesses still, still isn't very expensive. You know that we'll do a day long session or a couple of zoom calls to get all the data in, but essentially replay to them. Here's your data of what has happened, and here's where you're at today, and show it to them in our structure. So we believe the simple numbers, presentation of data tells the story of the business, whereas traditional financial reporting does not. And we get down to just the handful of numbers that really matter. And then from there, we can say, Now, is this, is this performance acceptable to you or not? What are your problems? What are your challenges and and so we go through a process to help them understand, here are the actionable things that that you can do, partly based on our experience of working with other firms in similar nature, and help them set those goals and objectives that are measurable, and then, on a monthly basis, we get their data and update the model, hold a call and measure that progress toward performance those that are a little short of back office help. We have a client accounting service team that can do some outsource bookkeeping as needed to support that process. But we don't deploy the way, the way our office works. If you don't come through the consulting door, we don't do anything for you. I won't, I won't deploy tax resources. I won't deploy bookkeeping resources, unless you're a consulting client and then. But we do everything in fixed price as well. So we don't, we don't bill by the hour, you know? And so, so we'll quote you the price, and it is what it is. And, and I think that's, you know, what you're what you're getting, and, and the idea being our thought, first and foremost is help you to be profitable. Now, what happens when you're profitable. I basically have three forces fighting against my profitability. The first one I need to take care of is setting aside my taxes, because that one has a big stick. They're slow. They move really slowly, but when they want to whack you, it hurts, so just don't mess with them. Second one, my business needs capital. So if you're in that growing stage, especially as a personal injury firm, yeah, I'm profitable, but I need to retain that profit to fund I'm not to my optimal caseload, so I've got to reinvest in my business until I hit that maintenance level. The third thing is, I have financial needs personally. Well, here's the deal. If I get you to pay yourself a market wage for the job that you're doing, I don't I should not be living off of profit distribution. That's a personal consumption problem, not a business problem. But I want you to pay yourself the real market wage, because here's the thing I found, you will defend your paycheck 10 times more than you'll defend the bottom line profit of a business. It is personal if you have to skip a paycheck because there's not enough cash in the business to write a check, and so it tends to create focus. Let's face it, lawyers aren't exactly top of the rung in terms of quickly getting their billings out and keeping the cash flow going. And so hey, if you don't bill and you don't collect, you don't eat, these are 50. Physics. And so what we want to do is align everybody in the firm to understand, for all of us to get paid on a consistent basis and stay in the game and be a thriving business, the trains must run on time.

Was that three or four? Was there a fourth principle? No.

So, like I said, taxes is the first demand on that profit retaining cash is the second demand, and then your personal needs of, if I need distributions to cover my consumption, you know, I'd like to fix that a different way, you know, if I can. But, I mean, we have clients that they're they just have a personal consumption habit that just understand if your consumption habit exceeds what the business can produce. You have a you built your house on sand, not rock. You gotta, you gotta fix something,

all right? I love it. We've done this podcast for about 15 years. Took a little break, but I've been asking this question for a long time. These are our one liners at the end, right? So do you have any apps or techniques you use personally for personal productivity.

You know, for me, it's mostly just just outlook and but it's, it's using Outlook the right way. And so about 10 years ago, I freed myself from the to do list. So I don't, I don't have a to do list. I have a calendar, and the calendar is both task and appointment driven. And so my technique is something stays in my inbox until I act on it. And fortunately, I have an assistant that, you know, I can quickly forward an email and say, hey, put this on my calendar, find out the date for it, and whatever. But living by the calendar has become extremely freeing, because I go to sleep every night and don't worry about it, because I wake up and do whatever was on my calendar the next day. And because if you schedule prep, I don't have to show up for the meeting, because I know that I've scheduled I'm already ready for the meeting. And so when everything's working the right way. I mean, that is, that's just been huge, you know, because now I have to remember to schedule personal time, because it's easy to let business, you know, kind of, you know, chew into availability. So you got to set parameters. But, I mean, it's the greatest tool ever, you know. And I think we just don't, you we just don't exit, we'll interface with it, you know, in the most optimal way,

is that, how you wrote the books? Did you schedule time for writing?

I did. I did writing retreats. So I'd go away for a week and and I'd have before I could go do anything fun, I'd have to get up and write so many words, you know, each day. But that's the only way the books got done.

I love it. So obviously, we recommend your two books? What business books do you recommend for, you know, maybe an attorney starting out.

So the odd one that I love right now is it's a book called quit q u. It by Annie Duke. Because really, if I was going to go back to college right now, I'd get a doctorate in behavioral economics, because, I mean, that is the field that fascinates me. Because, I mean, a lot of the government people just don't know how to apply the human part of the equation to supply and demand and various economic concepts and theories. So I think that one, you know, certainly one, an odd one that will show up in another category is Peter Zions book. The end of the world was just the beginning. I think everybody needs to read that book to get a mental reset of why the next 10 years is in 20 years is not going to be like the last 20 we're in a we're in a time like none other in the history of the world, much less the history of the US. And so you're playing a team that you don't have film on. And so you've got to be able to put your resources out there, and you've got to have more than ever. You got to have your data antennas up watching movement, and be an early mover, both for opportunity and risk prevention. You know of your business, and if you're not, I mean, you're missing this demographic shift of labor and how the market's going to have to react to that.

Thank you. I'll add that to my big stack of books. Yeah,

it's actually, it's actually not, it's a good audio book to listen to. He's a very entertaining speaker, you know, so and

what blogs, podcasts, YouTubes Do you subscribe to? And when they hit your feed, like, Oh, I'm stopping this podcast. I'm gonna listen to this

guy. Well, actually, Peter has a daily blog. He's actually just recently moved it from you can still get the free one, but it's one week delayed, but he has a daily one on Patreon that you pay a small subscription fee to. But he's been the most accurate and informative, economic person that I follow. And. I still have a daily regimen that I scan the Wall Street Journal headlines. You know, every day, you know, takes about 1015, minutes. But still, Wall Street Journal is gold standard of business publication. I mean, they're not perfect, you know, but they, they had a little dip about five, six years ago. But they, I feel like they really gotten back to, don't tell me what to think, just give me information. And so I think they're doing the best job right now. Of the stuff that I read on a regular basis, might have a handful of people I kind of follow on Twitter, you know, that gives me kind of early, you know, early alert to things. There's a guy called the huntsman that is a he's, he's a logistics expert, and I found and he doesn't post all the time, but he kind of comes and goes whenever there's like he was posting a good bit during the dock worker strike and but I've learned a lot about logistics just following his post. You know, in that response, obviously you can't, you can't, not miss Elon Musk. Elon has some of the most interesting posts out there. And what he

would repost, I think, post, but he,

yeah, yeah.

I think he gets information on what's super hot, and then he reposts it. And so it's like, how does he, how does he always know what's super hot? Well,

but he's got his hot button issues. I mean, he's a big one on elevating everybody's understanding of this population, you know, crisis that I, you know, I don't think any of us really know how that plays out, because we, the only time that world population ever went backwards in modern history was during the bubonic plague, which ushered in the industrial age, because I couldn't just throw bodies at every problem and and so, you know, we're in that. I mean, certainly AI is beginning to take up some of that slack, you know, but it's, it's a lot of the easy wins in labor have already been taken and and so a lot of it is just kind of how things play out, you know, really, really from here, you know, in that process.

So I asked most people what their NFL team is, but you're from Alabama and you're wearing a tide sweatshirt, so that's right,

yeah, yeah, my professional team that I back is Alabama, although we are very much smarting from a loss to Vandy, but we'll see. We'll see what we're made of this week.

And did mostly follow your guys when they get to the NFL then,

oh yeah, yeah, because I like all NFL teams, because almost all of them have some Alabama players

out there. Five or six were going in the first round. And what's a great introduction for you, like, who's a great prospective client that we all could could introduce you to? Really,

for us, I mean, our focus, we don't. I mean, we have buckets of clients in just about every industry, what we like to work with are privately held, entrepreneurial minded businesses. They want to optimize their business. We don't care whether your your goal is to grow, but we do believe in profitability, and so no matter whether you're going to stay in your niche and you need, you know, tools to optimize that if you want to grow, okay, we can help you model out growth and kind of what the economic impacts of that are, you know, in those types of things. But any probably held business, you know that is, you know, if you, if, if you, as the CEO, feel like you're not getting vision, visioning data to run your business by, to make clear decisions of going, I, you know, you need to know this is a bet, and I put the money in and I have a stop loss somewhere. I better know where that stop loss is. And Annie Duke tells this really cool story. Well, it's a tragic story. This long time, guy from the climbing Mount. Everest you know was he had a client, he taken a couple of times and had made it, and this guy is probably this guy's last chance. And so they, they, they get the base, the final base camp, and then they ascend. And there's a standing rule, if you don't get to this certain spot by two o'clock in the afternoon or something like that, you know, you turn around, go back. The only time that God violated that rule. He died and his client died, and, and, and it shows that they didn't have to die. I mean, they they should have followed what the the guidance was. And a lot of times we get into hero syndrome. And, you know, it's like, stop it. You know, there's valuable if, if there ever was a time, I mean, there are valuable things that everybody can do in today's economy. And so just back up and rethink, and then reset and then then move forward. But I see a lot of entrepreneurs that make these bets to try to change. Their business, and they just don't turn off that cost when give a specified time for that to work or not, or else we do something different. Last

question, Where can people get in touch with you?

The best spot is email. Greg dot cradle, simple numbers. Cri.com I have a speaker website as well, and for the book and speaking engagements, Greg crabtree.net all one word. And so those would be kind of the easiest places you know, to find me, but I'm like the easiest person to find in the world. So if you Google either Greg Crabtree or simple numbers, you know our videos that there's a lot of podcasts. I've done a lot of videos recorded. That's a great place to start. We have a podcast on our simple numbers, Sierra com website that people can go back and listen to, where we get certain topics. And one of the things a lot of people might find interesting, every every month, we'll do an update on what we see in the economy. So we have 100 company model that is about a billion dollars of revenue that we update every month that is our trusted view what's actually happening in the economy. And to nobody's surprise, it's slightly different than what the government says. So great.

This is awesome. Thank you so much. Yeah, appreciate it, and

you always enjoyed

it. Thank you for listening to the 10 golden rules of internet marketing for law firms podcast. Please send questions and comments to podcast at 10 golden rules.com that is podcast at t e n golden rules.com you