417. The 4 Types of Leverage to Scale Your Law Firm

[MUSIC] Why do some law firm owners get stuck work in 80 hour weeks for the same revenue, while others scale to eight figures while barely stepping foot in the office? The answer comes down to one word, leverage. Today we're breaking down the four specific types of leverage. You need to stop grinding and start scaling. This is Personal Injury Mastermind. I'm Chris Strider, founder and CEO of ranking. The Elite Performance Mark in the Agency for Personal Injury Law firms. Usually, I'm setting down with the heavy hitters to unpack their massive growth blueprints. But today, we're back with another solo cast. Every single year, I reread the Almanac of Naval Ravicon. Naval is an elite investor and philosopher and is framework for building wealth relies on four distinct types of leverage, labor, capital, code and content. Today, we're getting into the nitty gritty of how to take those four principles of leverage and apply them directly to your Personal Injury firm so you can maximize your output. Let's get into it. So the first one is Collaboration or Labor. This is the oldest form of leverage. It's why your mom asks you how many employees you have at your firm or your business. Because it's the easiest to understand. The goal of Collaboration or Labor is to the more labor you have, the more output you have, essentially. It's also of the four types of leverage. It's the most challenging, the most complicated, the most difficult, but it is the easiest to understand. So to give you a simple explanation, you have a big pile of boulders and you want to move that pile of boulders from one location to another location, you just get more humans to do it. And you can do it faster. And at our company, this is how we think about output for the most part. And I'm going to talk about other forms of leverage, but this is the most common, right? You can think about how to encompass this in many different ways and I'll give you a few. So the first is you always hear you want to hire a players. Well, no crap, right? Because an a player has more output, they have more collaboration ability, they have more output ability than a B or C player. That's why they have the ability to do more when you pay them. Here, lead attorney, you don't want them drafting every single demand letter. You want to focus on the highest leverage activities, the high level strategy, the highest scored cases with the most potential, but really, it's more people can do more things and better people can do more things. It's a reason why there's so much near shoring right now. And near shoring, it used to be a huge pricing arbitrage opportunity where in the U.S, you go higher, a paralegal or an assistant and say, you know, South or Central America, or the Philippines because you could get this big discount. Well, now we're becoming more interconnected and what you're seeing, they hire with me or the talent crosses and all these different organizations as those prices are increasing because we're more interconnected. And it's the reason why the paraprofessional position was created, the paralegal, to do some of the activities at a cheaper cost than the lawyer. That's the reality, right? These are the things that people don't talk about. And it's if you want more output from your top performer, get them an assistant, right? Maximize their ability to enhance their throughput, enhance their output. This is the most challenging. It takes many years to become a good leader. That's why there's so many famous books about leadership from Lentzioni or the motive in this book in that book. It's because it's the most complicated of the four forms of leverage. A lot of times too, when I look at businesses and I see businesses don't scale. And I think, oh, that individual's really sharp. Why did their business hit a certain cap? A lot of times is because of the founder, it's not somebody that you want to follow. They don't lead by example. And to understand this and to really have a lot of leverage, you have to be someone that people want to follow. And that's this reality. So that's why I think some of these A-holes, we've all had these A-hole clients in the past and you see their small businesses because nobody wants to follow them. They're jerk. But number one, the formal leverage is collaboration or labor. It's the biggest things that you can think about is hiring a player, is training your people, identifying the highest value activities of your high cost labor and putting them on those activities. Think about the paraprofessionals, the assistants, and just essentially getting more labor. The way that you would look at this from a scorecard perspective, it would be utilization. You attract utilization. How much activity they have? You want to be at 80/85% tile unless they are an intake specialist because you don't want them on the phone that much. And then you could also track from a metric perspective, you could track revenue per head. You want to be in at least that $200,000 per employee range. That's if you're optimized, if your company's really optimized by headcount and not by code in some of these other forms I'm going to talk about in the future, that's the number that you need to be at is around 200,000 in order to be profitable. The second form of leverages capital. So the goal of capital is to use money to buy time and to buy market share. How you do that is in the PI space there's a lot of different methods, but litigation finance. You could get capital to speed up your marketing deployment. For example, you could borrow against your case inventory with a company like Esquire Bank. Look, I have no affiliation with Esquire Bank. I'm just telling you of my clients what I see them doing. I see Esquire mentioned quite frequently. There's a book called The Seven Powers that talks about scale economies and with capital you can get more distribution for cheaper. For example, if you buy in bulk or you buy over long periods of time capital also allows you to buy wisdom. And what I mean by that is when you have enough capital you can afford C-suite talent, a C-O-O, a CFO, a chief strategy officer, maybe a managing attorney capital buys time. And that's why you see these businesses throughout history utilize leverage outside of just you don't pay tax on debt. But it is a very important or strategic component of leverage. And that's capital. And if you look at some of the biggest PI firms, they're using this lever very wisely. Maybe they're utilizing private equity. Maybe they're utilizing their case inventory or they're doing traditional financing. But this is the component. The Rockefeller's used it. This is why you look at overfunded whole life insurance of the component of using this as leverage, you know, assets maybe purchasing your law firm building, borrowing against it as a hard asset. There's a lot of strategies that goes into this. And if you can understand capital, it allows you to buy wisdom and a top talent, which we know that goes hand in hand with the first point of leverage being collaboration or labor. Even up is a specialized proactive AI built for personal injury law firms. Personal injury is in their DNA visit even up law calm to learn more. The third is code or software. This is a new form of leverage. We see this in the PI space. There's AI intake. There's AI chase agents. Wait, we got capture now from an AI intake. We've got Nito from a chase agent perspective. There's automation CRM's power dialers like aloeware, texting connect, even up for medical chronology and demands. And now you've got AI agents. So agents being essentially replacing humans, the labor component. I was shocked. And I sent a few of my friends. I sent James Helm attacks on this. I talked to Anthony Johnson about this. When I saw that meta acquired main is oh my goodness. I don't think many people listening have an understanding of how huge that is. I mean that just completely puts them in the game from the agent perspective. Just as an example, I was on a retreat in Tahoe last year. And how I use main is at rankings is I just will say, Hey, I need to recruit this individual and give them a criterion. It will build me an entire database from my town acquisition specialist of the people, the contacts, the names. And if you had an individual do that without code or software, it would take a tremendous amount of time. So code or software is the new form of leverage. What's interesting is from Neval's explanation of this, everything starts out as software at some point to the degree of oil in his explanation of software. He would place oil and even tires and things like that into this category of leverage. I know it doesn't fit nicely. You don't think of it as code. But essentially, he's just talking about tech or enhancing things. It's it's moving from the farmer that has the big sheer doing everything by hand and moving to the combine. It is the future. And I think that those that freely adopt and take chances and utilize automation are going to be the ones that that have a chance. I think that's where you see companies like Cleo. Cleo is really a law firm. I know people don't want to say that, but that's what they are. They are law firm. They are law firm of the future. I think the definition of them, people put them in this tight box of a CRM or project management software. software, but they're a law firm and they're utilizing code. It's just something to look out for. And also, one of the indicators of success, when you look at these companies, when I was talking about companies that are very, that utilize labor, when you use it from a metric perspective, you're looking at 200 to 300,000 per head employees, code based or, you know, companies that use code or software as their leverage component, you're looking at a million dollars per head plus. That's why when you go look at how much staff versus the revenue for Google or Apple or Facebook, they're almost all of them at least a million dollars per head. It's because they're utilizing technology for leverage to buy output. The fourth form of leverage is content. It's media, it's distribution. I talk about this a lot. You guys have probably heard me say this, but, and I sound like an asshole when I say this, but I don't do a lot of speaking engagements. And the reason is, it's not worth my time typically from a distribution perspective. A lot of times you'll go to an event and, you know, they'll have a lot of breakout sessions. So maybe you have 70 people in the room or maybe you're a keynote and you have 200 or 300 people in a room. And look, there's other benefits and intangibles of, you know, the personal relationships you develop. There's a lot of reasons to go to events. But from a distribution perspective, you're one to 200, one 400 maybe if you're lucky versus a podcast. Why I love a podcast. Why I'm speaking to you right now. I'm talking to thousands, thousands of people all from my little office, a little cubby hole podcast booth. And I just like it from a distribution perspective. So that's one form of content media distribution. Once you start to identify it's value from a leverage perspective, you start to look at things a little bit differently. So I just gave you the explanation of the podcast versus say an in-person presentation. But then you look at things like social media and don't think of social media as like just where people congregate and kind of chit chat and send memes. You look at it from a distribution perspective, TikTok, Facebook. And then you have to think about, well, how do they monetize? Well, in the beginning, they need adoption. They need network effects so they get everybody on the platform. Everything's free. You get a ton of distribution and then they crank it to you. Right. And then you got to pay for distribution. It's funny because when you started TikTok, you got a ton of views for your videos. Well, now there's a lot of people on it. Now you got to pay unless you really have something that hits from a viral perspective. You got to pay for distribution. It's the same for Facebook ads. I mean, you get basically zero reach from organic distribution unless you just have something that's fired and really hits from a hook, you know, viral perspective. You got to put ads behind it, broadcast television. That's how Morgan and Morgan, a lot of these biggest firms in the state, that's how they grew and they still use it today. If you read John Morgan's book, you can't teach hungry. I believe that's the book. He talks about his marketing mix. And if he had to pick one, he picked TV. It's because of the distribution. It is the amount of people and eyeballs that you can get on your business and on your brand. And I think when we're looking at each of these from a metrics perspective, when you're trying to gauge attention, the thing that you want to attract at the top level of the top of funnel is going to be CPMs. It's going to be cost per thousand. That's why in the PI space, the cheapest cost per thousand gets you the most distribution. So that's why I like Facebook ads, broadcast television, even today, radio, billboards, from a B to B perspective podcast. That's not from a conversion mechanism. That would be totally different at the bottom of the funnel, bottom of the funnel being of course your capture, your search, your Google ads, your website components, your CRO. But once you start to understand the four forms of leverage, it's like when you want to buy the red SUV or the new car and then you start to see it on the road. So once you start looking at things from a different preview, so first the collaboration being a labor-based leverage component, then capital and how it can be deployed by time and then code how it can be deployed as an alternative to labor-based leverage. And then content from a distribution perspective, it helps you make decisions to grow your firm. It helps you identify opportunities that your competitors aren't taking. That's it. Once you start understanding these four forms of leverage, labor, capital, code and content, it completely changes how you view your firm. It's just like buying that red SUV. Suddenly you see them everywhere and you start identifying growth opportunities your competitors are completely blind to. If you haven't read the Almanac of DeVol RovaCon, definitely pick it up. I read it every single year and it's absolutely worth the investment of time. And listen, if you're loving these solo casts, I want to hear from you. If you want to jam on these leverage concepts or talk shop, track me down on LinkedIn, shoot me a DM and let me know if you listen to the episode. Link is in the show notes. For more resources on how to dominate your market, visit us at rankings.io. I'm Chris Strider and this is Personal Injury Mastermind. I'll see you next time.