I was at a convention for another business I am involved in and one of our speakers was Robert Kiyosaki, author of the "Rich Dad, Poor Dad" series. Kiyosaki was able to retire at age 47, then came out of retirement to add to his wealth by investing in real estate and building businesses.
One of Mr. Kiyosaki’s themes is leverage. In fact, he says it is the key to wealth. If you are an employee, he says, you will almost never become wealthy. Aside from not having leverage, our tax system is rigged against you.
Being self-employed isn’t any better. In some respects, it’s worse. When you are self-employed, the more successful you are, the harder you have to work. Most self-employed professionals I know work longer hours than their employed counterparts.
In the income arena, leverage comes from owning a business or through investing, Kiyosaki says. If you think your law practice is a business, you may want to reconsider in light of Kiyosaki’s litmus test: You own a business if you can walk away for a year, come back and be earning as much or more as when you left. If you cannot, then you don’t own a business, you are merely self-employed, which means you "own" a job.
Ugh! Hits you in the gut, doesn’t it?
Michael Gerber, author of The E-Myth Revisited, says the same thing when he tells us that entrepreneurs (and that includes self-employed lawyers) need to build something that they can walk away from. Both he and Kiyosaki talk about creating "systems" to build a business and wealth.
Creating a system means taking yourself out of the equation. If you want leverage, You must be ruthless in your quest to make yourself obsolete. So long as your practice is about you and what you can do, you do not own a business, you do not have leverage, and you will never be able to walk away. Only in rare instances will you become rich.
The dichotomy is that as lawyers, the strength of our practice is directly proportional to the strength of our relationships with our clients and referral sources. When we take ourselves out of the picture, those relationships wane.
How do you reconcile the need for systems with the need for strong relationships in a personal service business? You probably can’t, completely. But here are three things you can do:
1. Create systems for every aspect of your practice except relationships. Make yourself obsolete with respect to the delivery of legal services and administration. Work toward delegating everything OTHER THAN the perpetuation of existing relationships and the generation of new ones.
2. Teach your employees how to build their relationships and incentivize them to do so. You will thus be able to compound your leverage by leveraging their relationships.
3. Use the time you no longer spend delivering services for building other businesses and investing.
This is what I have done. I leveraged my (former) law practice to build the attorney marketing business, and I leveraged that business to develop another business, and the latter, thankfully, does meet Kiyosaki’s litmus test.
