Five Questions to Ask Yourself About Your Firm

Your cash flow, your hours, your take-home pay. Those are symptoms. These five questions are how you find the cause.

Last week I made the case that a firm is four layers deep, and that pain always shows up at the top layer, the scoreboard, while the cause sits somewhere further down.

Look at what your scoreboard is showing right now. For most firm owners it's some mix of the same three readings:

• cash flow that's permanently tighter than the amount of work coming in says it should be
• days that are full from the first email to the last, every week, with no slack anywhere
• take-home pay that doesn't square with the effort, the risk, or what you'd earn as someone else's employee

Those are real, and they hurt. But they're symptoms. And the instinct, when the symptoms are numbers, is to reach for more numbers: pull the P&L, run the reports, build the spreadsheet. I spent years doing exactly that. The problem is that a spreadsheet is just the scoreboard in higher resolution. It can describe the symptom in as much detail as you like, and it still can't tell you a single thing about where the cause lives or which fix to start with.

For that, you need a different instrument. You need questions, and it turns out you only need five of them. Ask them of yourself, answer honestly.

The five questions

One. What happens when you take a week off?

There are only four answers. The firm runs. The firm slows. The work follows you to the beach. Or you don't take weeks off, which is an answer dressed up as a scheduling problem. This is the fastest read there is on how your firm delivers work: it tells you whether you've built a business, or a job that owns you back.

Two. How do you know if a month was good?

Either a number you check, or a feeling in your stomach. If the honest answer is the bank balance plus a general sense of how busy everyone seemed, the firm is being steered by feel. Feel is not nothing, it got you this far. But feel can't tell you whether the busyness was profitable, or whether that will actually translate into cash, and it has no opinion about three months from now.

Three. How long does finished work sit before it gets billed?

Under two weeks, a month, longer. This one stings because everyone knows their answer instantly, even though almost nobody has ever counted it. That gap between doing the work and billing the work is money you have already earned, sitting in a drawer, while the overdraft charges you interest on its absence.

Four. Which fix did you have the highest hopes for?

The marketing course, the practice management system, the hire that was finally going to take the load off. Somewhere in the last three years there was one you hoped was going to work. That one matters most, because a fix you fully backed that still didn't hold wasn't defeated by your discipline. It was aimed at the wrong layer, and where it died marks the layer below it, the one that's actually broken.

Five. How much more room is left in the work-harder lever?

When the pressure comes on, a soft month, a cashflow dip, most owners reach for the same lever: more hours. Be honest about how much is left in it. For most principals I meet the answer is none, it was fully spent years ago. That's not a comfortable answer, but it's a clarifying one, because it means the next improvement cannot come from effort. It has to come from one of the other four questions.

"I don't know" counts

There is no failing this quiz. If you read question three and realised you have no idea how long work sits unbilled, that is not a gap in the exercise. That is the exercise working. Every question you can't answer is telling you which part of the firm is running unwatched, and an unwatched part of a firm doesn't hold still. It drifts.

The questions you couldn't answer are worth more to you than the ones you could.

Read them together

Write your five answers down, then read them as a single page rather than five separate items. What usually appears is not five problems. It's one pattern, viewed from five sides. The week off that can't happen, the billing that sits, the lever with nothing left in it: they tend to point at the same layer, and it's rarely the layer you've been spending money on.

As it happens, this is the first thing I do when a lawyer starts working with me: a one-hour diagnostic session. No homework, nothing to prepare, no documents to dig out. Questions like these and a few more, a real conversation, and now a written report setting out what I found and what I'd do about it. The five above are the short version, and they're yours to keep.

More next Tuesday,

Gordon