In this week’s edition of Things I Wish I Knew, Joleena Louis discusses how cash flows are not always consistent in her solo practice, but she uses several strategies to manage tough times.
One of the biggest realities of being a self-employed lawyer is gaining the privilege of professional freedom, while giving up the financial consistency of a paycheck. This was exactly what I experienced when I first started my solo practice.
But that doesn’t mean you have to wait for help to arrive on its own. There are things any lawyer can do to add a little financial security to their firm.
Here are the top five things I’ve done within my own practice to balance out the cash flow peaks and valleys:
1: Make Sure You Get Paid
It doesn’t matter how many clients you bring in if they don’t actually pay you. Without an efficient collection process, you are working for free, and your business won’t survive if you’re not bringing in money.
My firm is rarely owed money and I’m almost always paid in full up front for every case. I’m pretty hardcore about getting paid and it’s really helped with cash flow in my practice.
Whenever possible, get paid up front. And if that’s not possible, invoice right away.
If you want more of my tactics for always getting paid as a solo, enroll in my eCourse launching September 20th.
2: Anticipate Future Needs
The best way to survive the cash flow peaks and valleys is to plan.
Knowing your monthly and seasonal expenses, in addition to knowing when business will be slow, will help you prepare for the valleys.
In my business things slow down slightly in the summer when everyone is on vacation and more substantially around the holidays. They pick up again after the New Year.
Since I know this is going to happen I set aside cash during my busy season to supplement the slower months. I also set aside cash for important yearly expenses like attorney registration, CLE’s, website hosting, etc., months in advance. So even if I’m in a “valley” I have those expenses covered.
3: Get a Line of Credit
Having a small business line of credit is a great way to manage occasional cash flow issues.
If you know your cash flow issue will be short term, using a line of credit can keep you afloat until your revenue stream is flowing again.
4: Find New Sources of Revenue
Find a way to supplement your income during the slower months. For my practice, I’ll take on more uncontested divorces or cover other attorneys cases per diem when I need extra cash.
You could even create an extra revenue source by selling a seminar or eBook.
5: Never Stop Marketing
The best way to manage cash flow peaks and valleys in your solo practice is to never stop marketing. Even when business is booming you have to stay focused on bringing in more business.
Most marketing strategies take time to yield results, so what you work on today can bring you new clients in a few months. If you consistently market you’ll have a never-ending flow of new cases.
Even with these tips, you will still face cash flow peaks and valleys, but these strategies should make getting through them a little easier.