When I first became an entrepreneur, I believed success meant earning a million dollars. And I was able to make that happen twice in the space of five years.
After three years, my personal law practice was bringing in seven figures of annual revenue. Then my second venture, an online training company, started bringing in over a million dollars in revenue in 18 months. I had figured out how to make money. But even as I was doing well on the surface, I made some legal, insurance, and financial mistakes that led collectively to a loss of more than a million dollars.
At the time, I felt as if I’d failed, but I don’t see it that way now. Those missteps helped me learn how to effectively manage my resources and become a better CEO and businesswoman.
In 2012, I started my current company, New Law Business Model, to train other lawyers to help families and business owners not repeat the same expensive mistakes I made. And today, thanks in part to my own overhauled approach, my business earns over $5 million a year and allows me to lead a life I love.
Here is what I’ve learned.
Be open about what you don’t know
In law school, I sat in the front row with my hand up constantly, asking questions no one else would ask. But when I went into business for myself, some of that willingness to ask the “stupid” questions disappeared. As a new business owner, I didn’t want to let my lack of knowledge show.
For example, I knew there were certain financial reports I should be looking at but I didn’t know where to begin. Even after I hired a CPA, I continued to make decisions based on the money I had in the bank, and figured everything would work itself out.
Being open about what I didn’t know and asking her for the help I needed could have saved me $50,000 on my taxes the following year. Instead, I had a surprise tax bill that came to over $100,000, and I had to take out a loan to cover it.
Since that painful, unplanned-for tax bill, I’ve learned that I need to share my income and expenses projections for the whole year with my CPA, at the latest by mid-November. Now, I ask for projections of what I’ll owe in taxes with at least three options for various scenarios that may include accelerating expenses, deferring income, or setting up retirement accounts or other tax planning strategies, so I can get strategic with my tax planning before it’s too late to take action.
Always get agreements in writing
Even though I am a lawyer, I was, early on, often afraid to ask for agreements in writing or thought they were unnecessary. If I really wanted to work with someone, I’d get nervous or insecure when it came time to ask for the agreement, and I’d just keep moving forward without it. Or if I was collaborating with friends, which is one of my favorite parts of entrepreneurship, I thought I didn’t need an agreement because we trusted each other.
My first web product was a site to help parents easily name legal guardians for their kids online. I started working on it with a friend. When I needed to move my project to a different developer, my friend claimed the source code was his and I’d have to buy it from him for another $25,000, even though I had already paid him $25,000 for work completed, because we didn’t have an agreement with a “work for hire” clause in it.
No matter what stage you are at in your business, you need to have two standard agreements on hand: One that you use when you are the provider of services, which you can and should incorporate into your sales process, and one that you use when you are hiring service providers.
Remember that agreements actually protect relationships, whether you’ve never worked together before or you’re close friends, because they require you to be as clear as possible about your expectations and the interests at stake.
Invest in expert help
Five years after opening my doors, I sold my law practice in 2008 to a lawyer with 25 years of experience. It seemed like he had the expertise to keep things running smoothly. But within six months, he handed the practice back, claiming the client flow had dried up and he could no longer make the payments he’d promised.
When I looked over the books, it turned out that he had chosen to stop implementing some drivers of the business, like the marketing campaigns which consistently brought in new clients. It was an expense that had been a priority for me, and I realized that as part of the buyer vetting process, it was a key piece of information that should have been communicated.
I didn’t want to leave anyone in a lurch, so I decided to operate the practice out of my savings for another six months while I transitioned my clients to other trusted attorneys and helped my colleagues find new jobs.
In hindsight, I should have invested the money to hire the right advisors for my transaction. It probably would have cost between $15,000 and $25,000 to hire a lawyer and a CPA with specific experience in the purchase and sale of law practices.
Thinking I could save money by handling the legal and financial matters myself meant I had to pay $250,000 out of pocket instead making $250,000 on the sale.
Make money decisions from a position of strength
In those early ventures, I made a lot of my money decisions from a place of scarcity and fear, trying to do it all on my own, even when I wasn’t the best person for the job.
Hiring the right legal and financial advisors is just as valuable as hiring someone to run my Facebook ads, design my website, handle my sales conversations or even manage my calendar. I know that I have to be able to see all the numbers clearly to make wise strategic decisions as we grow.
If you are developing a side hustle or business, be clear on the service you offer and the market that needs it, and make sure you know how to reach your market. Then, go all in on the business end of your business with the LIFT systems to support you. It’ll be an investment that pays you back many times over.
Overall, my best advice is to spend the necessary time, energy and money to learn about the LIFT (legal, insurance, financial, and tax) aspects of running your business, and hire the right people to be on your team. It is one of the most important investments you can make in the growth of your side hustle or company.
Take my 20-Point LIFT assessment to see if you have holes in the legal, insurance, financial or tax systems for your business.