EP093: Building a Sellable Law Firm: Brooke Lively – Author of “Exit on Top”

We believe in running a law firm on the rule of thirds. 1/3 of revenue goes to pay people 1/3 goes to overhead, which includes marketing, sorry, and 1/3 goes to profit. So are you with a law firm owner taking at least 1/3 Home? And if your personal injury, we can push that up to 40 50, even sometimes 60% Are you getting the type of profit margin that you should be? Because that's what any buyer is going to look out.

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. We're actually coming to you from about five o'clock. It's cocktail o'clock, here in New Orleans at the pill mill show. It's gonna be a lot of action throughout this interview. But I always say good morning, good afternoon, good evening. Because when people listen to a podcast, it's not always good morning, and a lot of people say good morning on podcast. So welcome to the 10 Golden Rules of internet marketing for law firms podcast. So we're live today with Brooke lively. And she's got a new book we wanted to talk about, we want to learn all about prepping your law firm for sale or selling your law firm with an amazing exit. Would that be a good way of summing up? Part of your expertise? It is in your day job is helping law firms as like an outsourced CFO,

I own a fractional CFO company called calf cap. And I'm also an EOS implementer. So I help law firms get three things efficient, traction, unhealthy, vision,

traction and healthy. So that's like a takeoff on the US. We'll talk about us in a minute. But you know, I read the book, the book is called exit on top exit on top, I didn't read the whole book, but I'm working my way through it. And it's fantastic. And basically the concept is, you know, as I took from it, if you prep your law firm for sale, what you're doing is you're you're making a law firm that generates its own leads, manages itself, you can take time off. And because essentially the leader of the firm, if they sell it, they they have to be able to exit. And so the firm's got to be able to run itself. Right?

Yeah. So here's the thing I have found, it's an attractive acquisition, throws off a lot of cash, has happy employees and happy clients, and doesn't take a lot of effort from the owner. So didn't want to own that firm, right?

And then so a lot of people and I know in your book, someone very, very close to you, you fix the firm, you got it ready for sale, and then they didn't sell. And the person very close to you was

my father and brother. Yeah. And you know, it's so funny. In the book, I tell the story that we were going to sell, I even knew who we were going to sell to, like we were, we were down that road, and I was getting the firm ready to sell. And then I finally went to my father and I said, Daddy, have you ever watched that TV show? Love It or List It? And you know, HGTV not really my father's favorite channel, so hadn't seen it, I don't know it like right overs. And so I explained that, you know, there's a couple they get a budget to fix up their existing house. And then they also look for a new house and after their existing houses fixed up, they have to decide if they're you have fallen in love with that house, that newly renovated you know, fresh paint smell house, or if they want to list that and buy the new house.

And there's it's a couple right? And one of them's like the general contractor

fixes Oh, no, they they bring people bring people in, they bring. One of them's

like a real estate salesperson who wants to sell it.

Yeah. And basically that was what happened with my family's law firm. I came in, I fixed it up. And my brother fell in love with the law firm.

So are you a CPA?

I am an MBA CFA MBA

CFA, so you really understand the numbers on the firm. So if what are a couple of the basic tips for someone who wants to get set their firm up, so they love it, and orchid listed. So

you want a firm that the biggest thing is you want a firm that doesn't depend on you. So let's talk about marketing. Sure, that one's near and dear to your heart, right? Yeah. So if you're gonna buy a firm, you want a firm that does not depend on the name and the image of the owner. Because unless you find another Jay Berkowitz who looks exactly like you to sell your affirm to, it's really hard to sell that.

And that's why as principals is the naming and the branding?

Well, it is, you know, how dependent is it on you? Yeah. And so the less dependent you can make it in every aspect, in the marketing In the financials, and you know, the people.

So number one is the branding. Look at the number two is the marketing. And so you have to be able to generate leads, you have to be able to sign new clients, without the owner being the sole Rainmaker being

the sole person who was there turning the crank to make the machine work.

The reputation so long as the reputation of the firm

is the right. And it needs to be the reputation of the firm, because you can sell the reputation of the firm, you can't sell your personal reputation. I think, you know, really the most important thing is, is the firm making money. And we believe in running a law firm on the rule of thirds 1/3 of revenue goes to pay people 1/3 goes to overhead, which includes marketing, sorry, and 1/3 goes to profit. So are you with a law firm owner taking at least 1/3? Home? And if your personal injury, we can push that up to 4050? Even sometimes 60%? Wow, that's awesome. So are you getting the type of profit margin that you should be? Because that's what any buyer is going to look at.

And by the way, we're at the Pillman trade show, personal injury lawyer Marketing and Management Association. Brooke and I are both speaking here. And we're, you know, it's about 15 or 20 minutes before cocktails. So that's all the action in the background. And then probably in a minute, the lead out the trade show, there'll be a lot more action in the background. So we'll you know, this will be for those of you who liked the shorter podcast, this will be a mercifully short version of the 10 Golden Rules of internet marketing for law firms podcasts. But But tell me a little bit about the book. What was the genesis and that you told me the name? Yeah, it really I remember the book is

exit on top exit on top. You are a marketing

title is there's really good subtitle, right?

Yes, there is.

And you can not. So So you want to just go to Amazon Brooke lively exit on top comes up. That's how I bought it. And then what was the genesis of the book and talk to us about writing it? Because so many people were on ready to book and don't get it done or dream of getting it done? Yeah.

So this is book number six for me. Okay. So I've I have gotten this down now. But really, it started because I was at an event in Miami, about a year and a half ago. And they had the head of the Arizona ethics committee, they're talking about non attorney firm ownership. And I was like, Oh, my God, this is it. I'm gonna own a law firm. Because let me tell you, I am not an attorney, but I can run the crud out of a law firm. I know exactly how to do it. Because I run a law firm on on the numbers using data.

It's just a business. It's a business as matter of fact, more attorney should run a law firm like a business not not like a practice court law, you know, lawyer. Yeah,

yeah. And so I got all excited about that. And I thought, all right, I'm gonna do this. You know, I'm a typical visionary, shiny object, let's go chase it. And I stopped and I started thinking about how that was going to impact all of our clients, and what non attorney ownership was going to mean to them and I thought, I've got to prepare all of our firms to compete with law firms who are run by business people. They've got to get really good at this. And then I also realized at the same time, we are looking at a period of time where all the baby boomers are retiring. There are more law firms that are going to change hands than ever before in history over the next 10 to 20 years and the ability of non attorneys to buy a law firm. I know it's only in two states right now. It's well and the District of Columbia, Utah, Arizona and DC, but I think that it will spread. I think that we're going to have it in other places that there. It's going to happen for attorneys, you guys have done a great job of protecting your industry, but sorry,

are up and protect yourselves.

And it sounds like I've got to prepare them. They need to understand that they've got a great asset It's worth something you can sell it. There's value in that practice, there's value in that firm, there is value in that business that you have built.

So tell us a couple of case studies. Because no, I think there's sort of the urban myth that law firms are not that sellable.

I think you're absolutely right. I think people have traditionally, you know, I say this. Attorneys have kind of milked a law firm, for all it's worth, while they've owned it, you know, they, they might have bought in as a partner, you milk up for everything it's worth. And then if you're lucky, you kind of sell your shares and get out and maybe get out your original,

I guess, the big white shoe firms, the corporate firms, they, yeah, that's how that's how they do sell their shares to partners. But we're at a PI conference, we hang out with a lot of personal injury guys. Yeah.

So that's not true anymore. So you know, there are a couple of different buyers right now. So there are family buyers. So like my family, for example. My father wanted to practice law with his son wanted to leave the firm to him, traditionally, he would just kind of bonk them on a head with a magic wand and give him the firm. Yeah, that can't happen anymore. There have been some changes in the law. And you now have to report corporate ownership. And so that's going to start to trigger attach to that

transition. Yeah. So

you have to look at that. So I've got a client started working with us when they were doing about 5 million firm was not worth a lot, it was worth probably 1.21 point 7 million. When he started working with us, he grew the firm to 20 million, they did 25 million last year, they're going to do over 25 million this year, his father gifted him 40% of the firm back when it was doing $5 million dollars. Well, I got a problem. And the problem is this. Yes, the firm is worth so much now that the trust Estate Attorneys can't figure out how to transfer this firm that is now worth $12 million from the remaining 60% Other to the sun without triggering a tax event. And what they're really worried about is it his father might get hit by a bus and die before they can do it. Because that would totally mess up the whole estate plan. And that was

so you can't transfer the asset in an estate. You

can, but that's going to add, you know, additional $7 million in value to the estate.

And then there's a and there's

tax. And, and it's so funny, because when I was talking to a law firm, we didn't have figured that out, you're worried about that, you know, talking to him, and I write about this in my book, and we call him Sebastian, because that was the name he wanted to use. Sebastian was on the phone with me going, you know, Brooke, this was not something we anticipated. He's like, but I didn't realize we hadn't increased the value of the firm so much when we're working with you. So

the basic thing is, you know, start conversation with someone like how obviously, Brooke could be the best person because of her expertise and really living this with a number of firms. But you know, if your CPA really understands this stuff, and has done some transition, start those conversations. And then the second thing is, you know, starting the conversation, and read Brooks book, and start getting your firm ready to run without you in place. That's really the core principle that I learned from my firm, is it's got a, you know, it's got to generate leads without me, it's got to be able to sell without me, operations has to be able to run without me when we're five or 10 years away from it. But that's, you know, at least we've started, you've got to put the pieces in place. And frankly, you know, the biggest thing we're putting in place is more for the sanity part of the conversation. And we've done a lot of work with EOS. And Brooke and I are both big EOS fans and Brooks actually a trained implementer. So there's two. There's three confusing roles in us. So that actually one's not confusing at all. So the visionary is typically the person who is the founder of a firm out of there. It's a digital marketing agency, or law firm. They're the Rainmaker. They're the big relationship person, they go to the trade shows, and they love being around people.

They're the one that gets distracted by the shiny object every 30 seconds, saying

all the good things about and then, you know, the typically the visionary comes back from the trade show with 20 ideas and hands it off to you know, what was historically called the Chief Operating Officer, right. And in Eos, we call it an integrator. So the integrator is the in house firm person, and ironically you're a visionary for your own. in your own life, but you're an implementer, which is kind of a sister role to the integrator, or someone comes from the outside and helps a firm implement EOS. So Entrepreneurial Operating System, by the way, great webinar on our YouTube site with some fantastic law firm EOS expert. And so, Mike Morris from Moore's Law Firm and in Detroit is that big US guy wrote a book called fireproof and Gerardo Escalona, who's our implementer. Okay, so check out EOS and spend some time with that. I just want to, we're gonna get kicked out of here. So we're gonna ask Brooke a couple of quick wins, okay, and then we might come back. If this is this might be a two parter tomorrow, depending on your schedule. A quick one is give us some software, any technology or any systems use for personal productivity?

Well, I mean, I'm a numbers girl. So it's all about Excel. I've got spreadsheets galore. But in our company, we really have we bought into Microsoft. And we use Power BI a lot. And we have all of our scorecards, and all kinds of things running in Power BI, and now does it really nice. It pulls from QuickBooks, it pulls from spreadsheets, it pulls from all different kinds of places, analyzes the data, and then shows it to us visually.

Love it, like to see it one day. And what are your go twos in terms of blogs, podcasts, YouTube, like, you subscribe, and when it comes into your feed, you're like, I'm listening to that podcast first today when I'm on my workout or my walk or whatever. Okay,

well, you know, 10 golden rules first.

Well, thank you. Yeah.

And then if it's not 10 golden rules, I almost always fall asleep during podcasts. So I'm not great.

Any blogs you like or YouTube's? I think about passion stuff. Like,

I think attorney at work is great. Yeah, they've got some awesome stuff on there. I read anything on travel.

Like the point sky, the points guy, and this travel stuff start popping up in your YouTube feed. Yeah, it's amazing to me how good YouTube is, like, my stuff's basically all like hockey, tennis training, and marketing, you know, like, and then yeah, they suggest to me all the time. And then the last one where can people find you? You're gonna find the book on Amazon. But where can they find you if they want to have a conversation?

Calf cap.com ca th ca p.com You can find me on the website or you can email me Brooke at calf cow.

Awesome. Brooke, thanks so much for doing this. Sorry, but all the action.

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