The year was 2006 and I had hit a $1,000,000 in revenue in my law practice for the first time. As you can imagine, I was thrilled to have reached that magic number that so many strive for, but part of me was terrified because I knew that I had done it with a broken business foundation and at some point that would catch up with me.
You see, I hit a million in revenue by focusing all my energy on sales and marketing, which is what all the business gurus I was learning from said I should focus on.
But I didn’t have my legal, insurance, financial and tax systems lined up. And, truth be told, I didn’t even really know what I needed to have in place.
If you’d like to watch a video where I share each of the $1,000,000 worth of mistakes that made up my broken business foundation and how I fixed them one by one (and how you can use your own business stories to sell legal services from the stage), you can check it out here.
I knew I would be facing a big tax bill in April of 2007, but I didn’t think much about it as I was so focused on the sales and marketing side of my business and, frankly, I didn’t really know there was anything I could do about it.
Each month, my bookkeeper would put reports on my chair and I would glance at them, but I didn’t really know what I was looking at or what I was looking for, so I just tossed them into the stack of papers on my desk to look at later. Of course, later never came.
The big, bad news came a few months later when my CPA contacted me and told me that I had $105,000 due to the IRS that year. $105,000 that I didn’t have.
I had to take out a loan to pay my taxes. Back in 2007, taking out a loan was fairly simple as the banks were lending and I had a great credit score, so I did it, but it hurt.
And, today, getting a loan isn’t quite so easy. (If you have a big tax bill you can’t pay this year and you cannot get a loan to pay it, look into payment plans with the IRS — they’ll loan you the money. Or consider whether you may need to work with someone to negotiate down your tax debt. Via our New Law Business Model membership, we have trusted providers who can do this for you.)
The worst part was that once I made the commitment to get my legal, insurance, financial and tax systems handled and learn what I didn’t know about how to build a solid foundation beneath my business, I discovered I could have decreased my tax bill by at least $50,000, if I had planned in advance.
That would have been an additional $50,000 in my pocket, which I could have used for my kids’ private school tuition, a trip to Bali with the family, or re-invested back into the business.
But, back then, I didn’t even know how to ask my accountant the right questions. And I knew my bookkeeper wasn’t handling things the right way, but I didn’t know what handling things the right way even meant. So, I paid big time. (We’ll be offering a training for our members later on how to work with your bookkeeper, watch for it.)
For those of you who are facing a big tax payment this April, first of all congratulations. I say congratulations because it means you have figured out how to bring the money into your law practice. That’s great news and before you go beating yourself up for overpaying the IRS, congratulate yourself for knowing that you’ve got one of the hardest parts of business down — bringing in the cash flow.
If you would love for your cash flow to be more consistent, steady and predictable, focus first on nailing down your system for engaging clients then focus on creating a perpetual marketing machine to bring in a steady stream of inquiries — that’s how you get off the cash flow roller coaster once and for all.
Now, commit to doing things differently next year. If you want to keep bringing in the big money, it’s time to learn how to create the foundation to hold it all, otherwise, you’ll be likely to lose it just like I did and have to start over from scratch. Stay tuned for some resources we’ll be sharing with you soon to support you.
In my next post I’ll share with you what happened when I had a big tax audit in 2007 and how I handled it in such a way that I ended up building my second million dollar business as a result. Yep, I turned a terrifying tax audit into a million dollar business. If you want to hear how, stay tuned for the next post in the series.
Missed the first post? Read it here.
Interested in learning how to put the new law business model to work in your business so you can serve families you love, love looking at your numbers each month, know you are making a difference in your clients’ lives and make a great living while you do it?