Have you ever found your self up to your belt buckle in alligators and remembered that all you really wanted to do at the time was just drain the swamp? Are you so busy trying to brand, market, and advertise to perfection that you have no time to actually provide goods and services profitably enough to maintain the rest of your life? Yeah, me, too.
Usually, such situations almost always result from failing to keep the end in mind almost all the time. So, let’s at least begin with the end in mind. And that end is money. There are more great quotes about money, than at which one can shake a stick. A good one is best understood by reading the entire lyrics to the song, Money (Makes the World Go Around).
Money is the scorecard of business. Money measures gross earnings, costs of goods sold, net income, general administrative and overhead, gross profits, EBITDA, and owners’ discretionary earnings (or what most people refer to as “income”). Money is the common exchange medium for the property component of life’s precious resources.
So, as you begin fashioning your branding, marketing, and advertising plan you have to first understand your score card target of your living business plan, which is money and more specifically the end product of almost all entrepreneurs, the entrepreneur’s discretionary income. How much “money” will it take to make your cash register of life go “Cha-ching!”?
A little data may help you decide. From 1967 to 2014, U.S. median household income has trended up from $45,000 to $54,000 or so. And most people are satisfied with that status, being fat and happy enough living in the middle.
Lawyers earned an average annual salary of $136,260 in 2015, which is substantially more than any other occupation on U.S. News’ list of Best Social Service Jobs. Paralegals make much less than half that. In 2015, paralegals earned an average salary of $52,390. So let’s assume for the sake of choosing an example, we are fashioning a BMA Business Action Plan for a lawyer wanting to make $136,260 and pay one paralegal $52,390 as part of his 53% expense ratio.
This means our targeted gross income from attorney’s fees collected will be $289,914.89, or so. Let’s assume the lawyer graduated law school in 1990, which means (s)he will have to bill (really, collect; but that’s another thing to worry about) the $300 average hourly rate for lawyers with 25 years of experience. This means the lawyer has to collect for about 966.382966666666667 hours, or so. Let’s round that up by the 5% effective collections rate of law firms to come to the understanding that a lawyer with 25 years of experience wanting to net $136,260 annual income must gross $289,914 a year needs to bill about 1,000 hours per year.
Established, medium and large firms spend about 3-4% of their billings on marketing. Smaller, growing law firms spend about the average of 10% for all small businesses on their marketing. Therefore,, we need to perceive a BMA plan that will generate $300,000 in billings for about $30,000 a year.
$30,000!
Besser! Have you lost your mind?!? No one spends 10% of their gross revenue on branding, marketing, and advertising. Well, many solo practitioners and small (2-5 lawyers) firms do. They may not realize it but they do.
To get a grip on how much it really costs to branding, market, and advertise a small business, in this case a law firm, start off by reading this old article from the ABA Law Practice folks. The data is just a little dated, but the theory is still fairly current and it applies to almost all small businesses providing goods and services.
So, go read the reference article and come back to the next post to begin working with the end in mind, developing a BMA plan that will result in $300,000 a year in annual collections.
[reminder]What’s your BMA plan? And, more importantly, if your BMA plan doesn’t work, then what is your plan B?[/reminder]