Law firm profitability – Lessons from basketball

Yesterday, I attended the West Regional NCAA basketball game between UCLA and Texas A & M. I also watched the Stanford / Marquette game that preceded the West Regional UCLA game. Both games were about as rough and close as basketball games can be. Both games featured some of the best college athletes playing today. One lesson to be learned from these young athletes is that the game is not over until over … UCLA, for example, had mental toughness to stay in the game despite playing one of their worst games of the year. As a biased UCLA fan, I do not believe their performance was influenced that much by their opposition, notwithstanding that their opposition was excellent.

For me, this is reminiscent of the discussion I had recently with a client who asked me to do a profitability analysis of her firm  She and her partner believed that the expenses of their small firm were too high My review of the data indicated that there were areas where reductions or revised characterization would be relevant. For example, several capital expenditures could be removed from the expense side of the profit and loss statement and recast as assets; a management fee could be removed or recast as a draw by one of the partners because such a fee is inappropriate for a small firm. However, the real focus for this firm should be on increasing its revenue. That would have the most dramatic impact on the performance of the firm. Recasting the expenses would not change the cash flow of the firm, but would help generate the mental toughness confidence that they are not in terrible shape, that they could succeed, and provide the  mental toughness to continue seeking the appropriate client base to generate increased revenue.

Looking at the relevant data helps remove the fear of failure, engender confidence that small changes in one’s own behavior can have large impact on one’s success, and bring the realization that success is just around the corner.

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