Spending Wisely vs. Being Cheap
As a default, many lawyers think the best way to run a business is to scrimp, scrounge, and save every possible penny to reduce overhead.
But there’s a big difference between spending smart and saving money just to save money.
You have to (wisely) spend money to run your business
Keeping overhead low is a mantra for any small business owner. If your overhead is low, that should mean more less expenses to offset income. That should mean more money in your pocket. But there are basic/standard expenses that are considered essential to running a business.
You need a computer, you need a phone line, advertising, and an office. Depending on your practice area, how much you spend on those essentials will vary. But the bottom line is that you have to spend money to make money. For example, I still have a fax number that I rarely use. But it costs less than $60 a year. $60 does not make or break my firm.
Here’s a bigger and better example: an office. If you can’t possibly stomach the thought of paying $250-$1,500 a month for an office, you should probably consider a different career. On the low end, you should be able to get a virtual office for around $250 a month. If you are just starting out, that may work just fine. If you just need a one-room office (that’s all I have), you are probably looking at $500-$1,000, depending on location and amenities. If you have high-end clients that expect a nicer office, spending more for a nice office is absolutely worth it. If you need to pay more to have a better location, spending more is likely worth it. If your clients just need a room, then stop telling yourself you need a downtown office for your client’s benefit.
Same thing with office equipment. You don’t need a giant oak desk, but your former high school desk is probably not gonna swing it. If your computer is a netbook, at least buy a monitor. You need something that looks like you are running a real office. Do you need to buy a ginormous 27″ Thunderbolt monitor? Well . . .
Spending money to be more productive is money well spent
Buying useful technology that is helpful, but not necessary, is a prime example of when “overspending” is completely justified.
For example, my Thunderbolt monitor. It’s easily one of the more expensive monitors on the market. It’s great for me for two reasons. One, I carry my laptop back and forth between my office and my home. When I leave I unplug two cables. When I come in, I plug in two cables. I don’t mess around with jacking in 4-5 different USB devices, an ethernet cable, and something with Firewire. Other monitors do not offer a comparable solution. When you’re running in and out of an office, that convenience is absolutely worth it.
Two, I spend a lot of time comparing documents—complaints/answers, questions/responses. Having a big monitor makes it much easier than staring at a 13″ inch screen. It also means I can get it done faster, which leaves more time for other tasks. In addition, a big monitor makes it much easier for me to meet with clients to review complaints and discovery responses. Again, easier usually means faster. Faster usually means freeing up time for other tasks.
I don’t have any support staff, but I can imagine a similar analysis is applicable for handling phone calls from potential clients. If you can use a virtual answering service for a modest amount and then make valuable use of that extra time, that’s money well spent.
Of course, the trick is making good use of your extra time. You don’t have to write a Supreme Court brief in your free time. But you have to do more than manage your fantasy baseball team and upload Facebook photos.
Saving money is great, until it becomes counterproductive
If you clip coupons and only buy things on Black Friday, running a business might be a challenge for you. I wish I had more eloquent way to put it, but time is money.
For example, driving around for ten minutes so you can save two bucks on parking. Or spending an hour each week staring at your books and meticulously searching for a way to save a few bucks. Think about it, if that takes away 10-20 minutes per day, that’s 50-100 minutes per week you could spend on working on cases, having a valuable networking lunch, or writing blog posts for your website.
Here’s one more example that I frequently see from other young attorneys: avoiding networking events/lunches because they don’t want to spend $20-$30. It’s one thing if you go there and stare at your phone—that is a waste of money. But if you possess basic social skills, this is a terrible place to try and save money. Building a personal network is one of the most important things you can do. You can easily do that by going to 2-4 lunches a month. Or you can save that $50-$100 a month, which is unlikely to burn a hole in your pocket.
Bottom line: loosen those purse strings
I’ve never been accused of throwing money around in my personal life. And to be fair, I run a fairly lean law firm.
But I also realize there are certain things, like an office, technology, and marketing (in various forms) where spending money is absolutely worth it.