Interview Series: The Entrepreneurial Law Firm

At Kahuna Accounting we spend a lot of our time working with attorneys in solo practices or in small law firms. While we serve them by taking care of accounting, our real focus is on helping entrepreneurs be more equipped to run their business.

As a lawyer, there is a lot to learn about how to run a practice.

So today we have our latest installment in a blog series covering everything in law practice management.

We are interviewing experts who will share from experience some of the changes in the industry, and the most powerful things lawyers can do to ensure their success.

Dave Frees

Our guest today is Dave Frees, who has owned his own practice for 25 years. Dave is a true marketing expert, and our content here goes deep into the psychology and strategy of marketing in a law firm.

We covered so much ground, that this interview is broken into two parts.

About Dave Frees

David M. Frees III is Chairman of the Trust, Estates, and Wealth Preservation section of Unruh, Turner, Burke and Frees. He is also a Co-chair of the Elder Law Solutions section of the firm.

David’s team has over 62 years of experience in the areas of trust and estate administration and estate, tax, and asset protection planning. They have also invested hundreds of thousands of dollars in training, software and hardware designed to help you to save time and money.

David is sought after by lawyers and other professionals to represent them in their estate planning and represents over forty other lawyers and doctors. David also represents many family business owners and the executives, retired executive, or management teams of many publicly traded companies.

David is also an author, speaker and well known authority on family communication skills. He uses these skills to help families to avoid family disputes, or when that advanced planning has failed, to quickly end disputes which can be costly to the heirs and to the estate.

Dave Frees Part 1: Who is My Target Market

Micky Deming

So my first question would be for that attorney who has decided to make the jump, what is the first thing they need to be thinking about? What do they need to know as they go into this move of starting their own firm?

Dave Frees

Well, I will tell you a story. When I went to law school, I chose trust/estates, in part because it sounded interesting to me, but you never when you’re a lawyer really know what’s going to light your fire. Turns out I made a good guess and I liked the idea of helping people to perpetuate family business and create wealth continuity.

But one of the real reasons that I went into that area of legal training, and then ultimately practice, was because I had identified a couple of really important things.
I grew up in Pennsylvania, I knew I wanted to stay in Pennsylvania, so I went to law school at the University of Pennsylvania, with the expectation that I was going to stay here rather than go to Stanford or Michigan or any of these other opportunities I had, which were all great schools.

One of the reasons I did it was because Pennsylvania had at the time, and it has accelerated now, is one of the most rapidly aging populations in the country, and it had in the area where I lived, and it continues to be true, two of the most wealthy counties in the country, so if you look at the top wealthiest 50 counties in all the states in the country, there are 2 of them right here where I practice.

My point in telling that story was, even as a kid fresh out of college, I was thinking about who is my target market? Now, I wasn’t thinking big enough, and I wasn’t thinking smart enough because I just didn’t have the experience to do it.

But my transition from a big firm into my own practice went as smoothly as it did because I did not try to be everything to everybody. And that was very contrary to the thinking at the time. I remember reading books on legal marketing, which was very limited in those days because there wasn’t even lawyer advertising.

What Does My Target Market Want?

I remember reading books that said when you talk about your practice, don’t try to limit it, let people come to you, and that didn’t make sense to me.

So, I chose a narrow practice area, matched with the right geography and the right demographics. And then, I immediately started to figure out “What is it that my target audience wants?”

That was a process over decades of continuing to refine that, and finding out who we were best suited to serve and who we weren’t, but it didn’t take long to figure out that there were certain kinds of cases that we weren’t good at, and certain kinds of clients that we didn’t serve well because of their expectations; they might have been perfectly reasonable, but not for us, it wasn’t the way we did business.

By paying attention to that, the process went a lot more smoothly. I was kind of a marketer, generally speaking, from the start. I was trained as an interrogator, I was trained in all sorts of ways of enhancing communication skills, and so interrogation and marketing never seemed that different to me, and they both seemed to be a process of finding out what people wanted, what made them tell you the truth, at what point did they start to lie to you, you know, what were their real motivators?

So, right from the start, I had a plan. Now again, my marketing plans from the 1980’s don’t look like they do now, and my marketing calendar from the 1980’s doesn’t look like it does now. But I had a plan, and I used direct mail, and I used video; I remember the first time I did video, I ran an event, a live event, and I recorded it, we duped tapes onto VHS tapes that had just come out, it was unbelievably expensive, but you have to be prepared to invest in yourself.

Before You Jump – Have a Plan

So, you don’t want to jump out and go into practice with A-no capital and B-no plan to develop the marketing and the tools that you’re going to need. You have to have some basic capital, but if you don’t have enough, you have to have a pretty clear plan, and a realistic one, to get the marketing going that will generate cash flow that will allow you to do more marketing.

It took probably 5-6 years before we hit this really incredible critical mass. You know, a lot of the advertising we had out there all came together, we had enough clients that they were starting to refer, so in year 4 to year 5 there was a dramatic change in the practice.

And then we ended up changing the practice, we wished we hadn’t been so good at marketing, because we were marketing the wrong way to a lot of the wrong clients, but you know, it’s a moving target.

So, when you get ready to leave, you have to have made some arrangements for capital, understand cash flow, and you really have to have a handle right from the start, and I know you’re interviewing me in part because you’ve got resources for lawyers in this area, and I’m not a shill-I’m not plugging it-but we were very meticulous about how we kept records right from the start.

Measure So You Invest Time and Money Wisely

It allowed us to see if our advertising was working, it allowed us to see how intelligently we were spending dollars, it allowed us to know if we were going to be profitable, it allowed us to know after a while, once we had a few quarters under our belt and then a couple years under our belt, when there were times that were slower than others for reasons maybe we understood or maybe we didn’t but at least we could see when they were.

So, you’ve got to leave with a plan to have capital, a plan to generate cash flow, a plan to keep track of and track key performance indicators both on the financial side and advertising side, and you have to have a plan where you’re either going to do everything, which will soon burn you out, or you’re going to generate the cash flow to hire people.
And you’ve got to have a plan for “What stuff am I getting off my desk first?”

You shouldn’t be cleaning the office and emptying the trash if you can get that done for 8 dollars an hour, and you shouldn’t be doing the accounting if you can get that done…because all those hours you’re spending doing that stuff, you should be billing at a gigantically leveraged rate, or working on cases that have reasonable profit margins built into them.

You have to have clarity about all that before you jump. Don’t use that as an excuse not to jump, but you really have to work on that.

Micky Deming

That’s an awesome answer that really answered my next three questions all in one. I like that you talked about having a plan, so while I have Dave Frees on the phone, I have to go into some psychology here, because you brought up something interesting.

I think you answered it already, but I’d like to hear you go deeper, because there’s a psychological piece in the context of going narrow, and we’ve run into this with accounting too because going narrow is scary. You know, it’s scary to say “I’m going to say no to certain opportunities.” Or I’m going to even put my messaging in a way that I know is going to eliminate people right off the bat.

How do you balance that with the need for cash flow? I’ve got to have cash flow, I’ve got to have capital to keep this going. Where does that fit?

Narrower Outperforms Broader

Dave Frees:

I’m glad you asked me to deeper, and I deliberately threw a lot of stuff out there that I could spend the whole morning diving into, but you picked the one that is probably the most important. It goes to the mindset of success and, counter-intuitively, narrower almost always outperforms broader.

People don’t believe that, but it’s true, and I have seen now that I’ve had the privilege of building a successful practice over the years and of advising literally hundreds of other lawyers, mostly in firms of one to 25 people.

Now that I’ve had the privilege of doing that over a number of years, I can tell you that it’s not just my anecdotal sense of what’s going on, but it’s statistically verifiable that building a firm that focuses on practiced areas…so you can have a firm that ends up being a general practice firm, but you probably should not have and should not intend to be a general practice lawyer, you’re dooming yourself to the lowest, least profitable work.

Narrow is More Profitable

Going narrow lets you do several really, really important things that almost immediately boosts cash flow. It lets you charge more, because when you’re narrow, and you have a developed expertise, there are usually bigger profit margins in that.

It makes it easier for you to find the right client. Once you decide who the perfect client is, so for example, in my trust/estates practice, this is not always true, but currently if you looked at our perfect client profile, it would be somebody between the ages of 52-67, and actually 52’s a little young and 67’s a little old, but we have them in there because they’re the outer fringes of the most profitable, happiest kind of clients to us.

They live in a certain number of zip codes, which are all within, for the most part, 8 miles of one of our offices. They have a net worth, as we measure it, which is different from the way most people measure net worth, but they have a net worth for our purposes of about $3-30 million, which is a big range but you’d be surprised, from about $3-10 million there’s a lot of the same planning, and from $10-30 million there’s a lot of the same sorts of things that we see.

So, we know that they are equally split between men and women, but women tend to be the driver of this planning. So, we know that they are in certain types of professional practices, they have certain kinds of business that we’re just really good at servicing, and that makes it relatively easy for us.

Narrow Makes it Easier to Get the Right Clients

Whether it is advertising on Google pay-per-click or on Facebook or to run webinars on topics that are interesting to them, so it makes it pretty easy to know who they are, what they like, what motivates them, what their fears are, and we have developed, by the way – and this is terrifying for the same reason that you suggested – we have developed a What-we-do list and What-we-don’t-do list, and we have developed a who we want and who we’re not for.

Almost all of our advertising says “If this is you, then you’d be interested in this.” But this is not for somebody who has a net worth of a million dollars, this is not for someone that wants to skimp and save on their estate planning because that’s so important. And of course, even sometimes people who it’s not for go “I don’t want to cheat my family, I don’t want to skimp and save.”

But when you have a client that responds to advertising or blogs or marketing or videos or pieces which, as they’re discussing a specific topic, saying “this is how we do it, and if you like that, this is probably for you, and this is how much it costs in general. And that may seem astonishingly high to you, but here are things you probably didn’t know about, so if they’re important to you, this is for you. If that seems high and these aren’t important to you, this isn’t for you, don’t bother calling and we don’t want to waste your time.”

And that’s a terrifying thing to do, to acknowledge that your marketing should repulse people as well as invite people, but it should be carefully crafted and created to repulse the kind of people that aren’t a good match for you.

Micky Deming:

Yeah, that’s kind of exactly where I was going, and we’ve learned the same thing, so I appreciate what you’ve said. You know, the narrower we’ve gone, the easier it’s gotten.

Dave Frees:

It does! And the spin, actually, I think the spin goes down or at least you get a higher ROI.

Micky Deming:

It’s so much easier to get in front of people.

Dave Frees:

You’re getting in front of the right people, and a greater percentage of them are going to be responsive.

See Part 2 of the Interview Here