8. Alvaro Arauz, 3a. Law Management Scaling Law Firms Through Awareness, Aptitude, and Accountability

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Alvaro Arauz founder of 3a. Law Management, knows how to run a law firm. For nearly 15 years hes helped practice owners launch and develop their firms using his signature 3a principles: awareness, aptitude and accountability.

Join us today as we discuss what the key to turning attorneys into elite attorneys is, how to get delegate work so you can focus on your critical tasks and why its important to keep up your marketing efforts now more than ever.

Transcript

Chris Dreyer

We know that hard work pays off, but there’s always a part of us. That’s looking for that secret formula or special sauce to achieve success. While my guest today, isn’t touting some, get-rich-quick life hack. He has certainly discovered a reliable recipe for growth, which he’s all too happy to share.

Alvaro Arauz

It’s awareness, aptitude, and accountability. And that’s really the cornerstone of the business where it’s, awareness is, I feel, if I, have knowledge, I can make an educated, competent decision. And so I’ve been doing this 23, 20 some odd years. And so what I want to do is just give clients the awareness of the short version, how you want to try this? Well, here are the pros cons um, cost benefits, what to expect, what kind of technology you’ll need, what kind of people you’ll need. And then if they want to pull out and go down another rabbit hole, pros, cons, and so just enabling them to make a better decision. And then the second A is aptitude, once we know what we’re building, it’s a matter of what are the steps? What do I have to do today? How do I do it? What do I have to do tomorrow? How do I do that? How do I know if I’m doing it right? So it’s giving you the actual steps to implement. And then the third A is accountability. It’s making sure you accomplish the goals that we set out at the beginning and helping you. Get to that point where you have a quality of life balance. So those are my three As: awareness, aptitude and accountability.

Chris Dreyer

My guest today is the founder of 3a Law Management. Alvaro and his company had been helping law practice owners to grow their firms since 2007, by increasing performance and streamlining workflows. And as an adjunct professor of law at the University of Georgia, he’s also equipping the lawyers of tomorrow with the tools they need to run their own firms. Join us as Alvaro shares his insights on how to scale your firm. What the key to productive meetings are and why Alvaro values the knowledge of his peers so much. That’s coming up on The Rankings Podcast, the show where founders, entrepreneurs, and elite personal injury attorneys share their inspiring stories about what they did to get to the top and what keeps them there. I’m Chris Dreyer. Stay with us. Funnily enough, Alvaro hadn’t always planned to go into law and management consultancy game. And before he settled on this career path, he was considering some more scientific and creative options.

Alvaro Arauz

I was going to be a doctor and I used to work with my dad in his medical clinic. So I knew how to run a medical clinic and then wanted to be a… dropped out, wanted to be a writer instead, and met a lawyer here in Atlanta who was a solo. And she’d been in, been in business for awhile doing family law. And I got in there to review some boiler plate language. And then I said, well, why aren’t you running it like this? Or why aren’t you doing this? And she said, well, I didn’t know you were supposed to do that. I wasn’t taught that in law school. And so I said, well, let me help you with this. And, long story short, within five years we opened four offices, 20 staff, 15 attorneys. She essentially semi retired at 40. And so other attorneys started asking me for help. Hey, I saw what you did for her. Can you help me? And it was aspects of technology. It was, you know, going out on your own. And they were still open, you know, the people that would leave the firm open their own shop. So it was working because I was giving them steps. This is what you do first. This is what you have to do in compliance is what you have to do with your accounts is what you have to do with marketing. And then finally I started doing it. Part-time. You know, I had a really good gig. I was making six figures, 10 months of vacation and working full time. Uh, but there was this need lawyers, uh, were either getting laid off or they wanted a better quality of life. And so I created this kit to help them launch, you know, if you want to go out on your own, this is everything you need to do. And so I just took a chance. There was nobody really doing it in the legal field. There were a lot of coaches, but there was nothing that said. What do I do on Monday? And how do I know if I’m doing it efficiently and what do I have my paralegal do? And how do I know if that’s right? And when is it time to hire somebody and how do I know how I’m doing compared to other people? And so I just saw the void and then created that startup kit for lawyers. Um, it kind of backfired, um, because that’s right also when, when I went full time was right when the economy tanked in ’08. And so everyone was getting laid off and there was going to be this missing class of, Oh, Emory graduated, you know, 95% found jobs within six months and then it was 70% and then it was 40%. Um, But nobody wanted to go out on their own. And so my first year, I think maybe three clients and was really questioning, uh, what I was doin. Uh, also because I don’t have a graduate degree. I thought because I wasn’t a lawyer because I thought I needed to go get an MBA in business for them to respect me or to listen to me, um, to have long hair. And so, you know, I really thought I’ve really questioned, maybe this wasn’t the right idea. But, um, established firms started looking for me and they said, hey, we just made it through. We had to let some people off, but we can’t go through that again, help us be more efficient, help us market and be more profitable. And so I really started just branching out with existing firms and, and helping them kind of rebuild after that ’08, uh, disaster.

Chris Dreyer

Yeah, I love that there’s ton tons of nuggets there. I see a lot of individuals they’ll highlight, you know, social proof and, and the awards and things like that that’s seen in, but, but ultimately the best form of social proof is when someone else. Says that you’re exceptional. Hey, he provided these results for me. So, you know, was it, did it start, did that moment and pick up when you started to develop these evangelists for your, for your services?

Alvaro Arauz

I think maybe about six years ago, there was really that kind of turning point where, because we don’t advertise every, you know, 90%, if not more are referrals. And then the other 10% is from speaking around the country for, you know, The different, uh, bar sections. And so, just all that momentum just finally caught up about, I feel like six years ago and it was just, you know, you have faith that it’s going to happen and that people are going to put out a good word for you, if you do good work. And, uh, and it just did it just started getting, Hey, I’m in Montana, I heard about you or, Hey, I saw you speak, you know, in Vegas, I’m in Oklahoma. And it just kind of, you know, I got a buddy in San Francisco, can you help him? And it just snowballed.

Chris Dreyer

Alvaro’s bread and butter is giving attorneys the skills they need to become elite attorneys and transforming average law firms into great ones. So how exactly does he do this? I had to ask him what the core principles were that he instills in those law firms to take them to the next level.

Alvaro Arauz

It’s in three parts. Um, you know, the first part is having the right processes in place, because what happens is when you do it yourself, you know how you want it done. And then the key to growth is delegation. You have to be able to delegate otherwise, you’re, you’re going to stay stagnant. And so what. Stops people from delegating is, “well, they don’t do it. Like I do it”, or “it took them twice as long” or “they don’t, they don’t get it”. Right. And so I say, well, have you taken the time to communicate and what you want done, how you want it done, how their behavior impacts the success of the firm and eight out of 10 say no. And the ones that say yes are the ones that are able to scale and delegate to more and more people because they have. There processes in place. Um, marketing is another key factor. You never, ever stop marketing. I always say marketing an hour a day. Um, even if you’re crushing it and if you’re slow, you obviously have more time to market, but you never take your foot off of that pedal. And the clients who don’t get lackadaisical about their business development are the ones that are just always trying to get to that next level. What, I want to one up. And it’s, and it’s really fascinating, especially with, with what’s happening now, how clients are reacting all over the country and obviously based on their practice area to this situation. And I have some guys who are actually really taking advantage of it from a marketing perspective, and I can tell their efforts are going to keep them through the, this slow time. And probably the last part is utilizing technology. Um, the ones that utilize technology, you can streamline your process. You can automate your marketing, you can get the critical analytics and data that you need to see if it’s working or if you need to modify behavior. And when clients will say, Hey, should I hire an attorney? And, well, what are these metrics and what are these metrics and what are these metrics? I don’t know. We’ll go figure it out. And then it takes them three or four hours to figure it out. They come back to me and they’re like, okay, here they are. And I look at it. I’m like, no, you don’t need to hire anybody. Yes? Right! And if you just wasted three or four hours, if you could just press a button, see the report, you can make better decisions in real time. And so I think having processes, always marketing and utilizing technology, you know, to automate and streamline the practice are, if you’re doing one of those three things or all three of those things, you’re really going to set yourself apart.

Chris Dreyer

I mean, you have to delegate right? Each of us, we only have so much time. We have to focus on our high value activities. I would say, you know, most of the elite attorneys, they ended up being the, the, the brand. They have this personal brand that drives the business. They have to, they have to do a lot of marketing. So many times they ended up delegating the, the, the case management type situations.

Alvaro Arauz

And that’s, and that’s easier to, I guess teach, you know, clients, they sometimes get frustrated. Well, this person doesn’t do it like I do, or they don’t work the same hours that I do. And I have to stop and explain to them. There’s a reason why you do what you do and they do what they do. If they were just like, you guess what? They would leave and open up their own practice. And so it’s okay to recognize what everyone’s role is because nobody’s going to sell the practice better than you. Nobody’s going to have the same conviction, the same passion. And so that’s one thing, marketing the practice. You can only delegate so much of that, you know, but ultimately it has to be your brand and your message that they’re hearing. And that’s not something your receptionist necessarily can advocate as well as you can.

Chris Dreyer

You know, it’s funny. I hear Gary V talk about it. Like, no, one’s going to care about your business as much as you do you own it. You know? So when I see core values and individuals, but like ownership, mentality, that’s… you can’t expect them to act like an owner. You know, you want them to be empowered, but…

Alvaro Arauz

And so… and so it’s a balance, right? You have to understand that they’re not going to have that owner mentality and that’s okay. There’s nothing wrong with that. And so just letting them know it’s okay, but then explaining how they can contribute in their own way to that brand, into that message. And so I think, again, having that processes, this is how we touch our clients. And this is why it’s important to us. Um, You know, to build that client campaign to build that client, uh, you know, like you said, uh, what’d you call them evangelists.

Chris Dreyer

Yeah.

Alvaro Arauz

Or disciples. Yeah. I mean, you need that stuff. And so it’s, it’s important.

Chris Dreyer

Yeah. So, you know, in terms of let’s, you know, what are a few tips? So let’s say, you know, you got this attorney, he’s just. He’s buried in paperwork. He’s he’s he needs assistance. You know, what are some of the easy, maybe 80 20 approach to process documentation for to help him delegate?

Alvaro Arauz

Sure. So what I, I say, which it, you know, it’s kind of, it takes a couple of weeks to get to it, but track your time for, for two weeks. You know, like from seven to eight, this is what I do from eight to nine. This is what I do. And what you’re going to find is this is where the accountability starts out. Because if you’re not starting till 10 30, You’re already, you’ve already lost half of the day. Right? So figuring out what you’re doing all day, and then was that the best use of your time? I tell all my clients assign yourself an hourly rate. I don’t care if you’re a flat fee contingency, assign yourself an hourly rate and then multiply what you’re doing during those two weeks.And you’re going to start seeing what was not the best use. I just spent, you know, if I bill $500 an hour, and I just spent three hours looking for a document that wasn’t, you know, that’s $1,500. I could have gotten a scanner for 200 bucks and intern for a hundred bucks and we can have a paperless office. Right. And so really the first thing to do is. Figure out what you’re doing and what are the top 10 things that was, that were not the best use of your time. And when you find those 10 things, write down how you would handle them. Oh, this is how I would respond to an inquiry, or this is how I would process the mail. Or this is how I would tell a client about a court date notice. And write that down all your 10 processes and then find somebody that can help you. It’s not necessarily, you don’t have to hire a full timer at $65,000. You can get an intern. If it’s admin work, look at the paralegal schools. They have interns that need hours. Go find them. If it’s more, you know, attorney work, motions, discovery, research, and go find a law student to intern. So you don’t have to take it all on yourself. Just figure out, Hey, for two weeks, I’m going to track my time. I’m going to sign myself an hourly rate and see what was not the best use of my time. And I would start there.

Chris Dreyer

I love that. So, you know, you’ve got, you know, I’ve been there myself, you know, you, you, you start to get busy and you immediately think to hire, and then you’re just kind of treading water with profitability. Right. You just keep carrying over. And, and so how, how do attorneys manage profitability and still maintain, you know, margins and, and avoid scope creep and things like that?

Alvaro Arauz

So one of the key metrics is net profit margin. It’s not about how much revenue we make. It’s about how much is left when we’re done paying all the expenses. Right? So focusing on net profit margin and also knowing what’s a healthy. Profit margin for my practice area. You know, I can, I see criminal family, you know, some of your billables around 25, 30% net profit, which is still higher than most businesses, but then you also have your contingency practices, which run a lot higher because they get these pops every now and again. Eminent domain is probably the highest, um, net profit margin practice area out there because it’s so lightweight, um, and yield so much, uh, revenue that you’ll normally see something above 80% when you’re dealing with eminent domain practices. And focusing on net profit margin also it encourages you to market because that’s where the revenue comes in from, but it also encourages you to track your expenses and to budget. So you don’t go too crazy over-hiring or overspending. Um, so I think keeping a healthy net profit, what’s my goal. How do I increase it by 2%? If I’ve got, you know, attorneys that I’m encouraging to originate, tell them if you helped me increase the net profit by 5% and I’ll give you an extra $10,000 or what have you. But focusing on net profit margin, lets you stay aware of marketing, but also what the expenses are.

Chris Dreyer

Yeah, I like that. And you also brought in there some niching tactics, right? So, you know, we, we focus with personal injury lawyers and that’s, that’s our niche and it helps us maximize our advertising expenditures because I’m not just throwing paint against the wall. It’s just going after personal injury attorneys. And you mentioned eminent domain. Well, They don’t have near the amount of competition. So, you know, doing SEO, doing pay-per-click, it’s gotta be substantially less than, you know, trying to bid for car accident.

Alvaro Arauz

That brings up a good point. There’s no magic answer for marketing, you know, it’s not a specific spend. It’s not a specific key word. It’s it’s, it’s really just, what am I trying to accomplish? Where am I trying to get to? What’s my practice area and then reverse engineer. Right. And so if this is my practice area and I tend to get my highest value clients from this source, how do I build a campaign around it? So when you’re thinking of marketing, you’re thinking about client cost acquisition, right? How much does it cost me to get this client? You’re thinking about conversion ratio. Meaning if the phone rings 10 times, am I going to sign up three people or am I going to sign up eight people? Right. You want to look at, um, Average case value. So if, you know, if it rings 10 times and three of them higher, and the case values are 5,000, whereas over here, if we’re doing something marketing wise and out of 10, eight, fine up, and the average case value is 16,000. Again, you start thinking about how am I making these decisions. So there’s no magic answer to marketing. It’s not anything on, you know, social or a spend or a keyword. It’s, it’s really, what am I trying to accomplish? What am I trying to improve? And then how do I reverse engineer to get to that goal? So if you’re at a million dollars and you’re trying to get to 1.5 this year, You’re short 500,000, you know, so divided by 12 months, then you’re short that amount and each case is worth this much, then that’s about, so it’s really just what’s my goal is that realistic. And if so, how do I reverse engineer it?

Chris Dreyer

We discussed plenty of methods that firms could implement to help them scale and grow, but without actually putting them into play positive changes won’t happen. I wanted to find out how practice owners could ensure the changes they were rolling out were adhered to. And how they could instill accountability in their employees to make sure they were following through on the tasks that they were assigned.

Alvaro Arauz

Meetings, you know, and we don’t have meetings just to have meetings. They’re very focused. They’re, they have an agenda and there’s a frequency to them. And so as soon as you express that to everyone in your office – Hey, we’re having quarterly partner meetings and this is what we’re talking. We’re having bimonthly marketing meetings, and this is what we’re talking about… and so what happens is. You have these meetings and they’re aware of what’s going to be discussed at the meeting. And so it’s either, “Oh crap. I need to hurry up and do it because they’re going to talk about it” or “I’m proud. Look, I have this information, how do we dissect it? And how do we make an actionable item out of it?” And so having these meetings and sticking to them. So it’s not just, you know, if the meetings are on Monday morning and you can’t make it. Then it’s somebody’s job to reschedule it the Monday afternoon or Tuesday morning, you don’t skip the meeting. And so what happens is if you don’t have these set agenda meetings, then people can get away with it. You know, and it’s, and people will I’m and it’s just the nature of humanity. So it’s not that that you have bad employees, but if you’re not keeping track of it and showing them that it’s important, then they’re not going to think it’s important. And so that’s why you have the meetings to enforce accountability.

Chris Dreyer

I love that, you know, it does, and it, and it shows who’s, who’s actually doing the work, right? So it puts them on the spot. And so, so with these meeting cadences, is it a situation, is it different for every firm? Is it it’s different?

Alvaro Arauz

Yeah. It’s different, you know? Well, Some meetings are all the same financial marketing partner. Um, but it’s, your team meetings are gonna fluctuate based on your practice area. But the idea is, Hey, here’s 10, here’s 10 things to do. This is how I want them done. Do you have any questions about how I want it done or the priority in that I want it done? Great. I’ll see you next Monday and knock out these 10 things. Call me if you have any questions. And so, you know, making sure that they know that you’re going to talk to them about what. Happening at the, at the meetings and what their weekly expectations are, I think helps, you know, keep the tight leash.

Chris Dreyer

You’ve developed these skills and these expertise over 20 years. So, you know, what are, what are some of your favorite business books? Uh, and do you have any mentors that, that kind of helped you develop these skills?

Alvaro Arauz

I don’t actually read a lot of business books. Um, people tell me that my method is very similar to other books, which I think is…

Chris Dreyer

I was gonna say that I was going to say, I was thinking traction, traction, traction. Yeah.

Alvaro Arauz

Never read an E-Myth. You know, I finally got around to reading that, but same sort of The Four Day Work Week, that sort of stuff, you know. It’s all kind of just, it’s the same theory. It’s just. What can you pick? That’s going to make you feel comfortable and help you get to that goal. That being said, I just finished, uh, Tommy Breedlove’s book, legendary, which is fascinating in terms of how to build. Your life around your passions and have financial freedom through that, and really being alive when it comes to your profession or your vocation. So I would say lately, you know, the last book would be Tommy’s a legendary, but then as far as mentors, you know, I’ve learned a lot from my client and a lot of my clients, mentors to me, you know, they accomplished tremendous success. And more so than me. And like way more than me, you know? And so they’ve been able to teach me over the years. Um, I had one mentor, or still, Art Italo, who’s kind of in the consulting space for lawyers as well. More theory versus theory and implementation, which is what I do. Uh, so he helped me, especially at the beginning, you know, I called him right when I went off, went out and he laughed. He goes, “so you’re my competition?” And uh, I said, yeah, can you give me some advice? And he laughed and he gave me advice for an hour and it was so valuable. And even still, we keep in touch, uh, you know, whenever I need some sort of advice or guidance.

Chris Dreyer

Absolutely. You know, and that those experiences you’ve had with, you know, over 20 years, you’ve got to see what works for firms and what not to do.

Alvaro Arauz

Correct

Chris Dreyer

And those are learning experiences too.

Alvaro Arauz

No, I know there’s a lot of, you know, my first firm was family law. And so, and it was a high volume family law. And so we saw a lot of divorces and in my twenties and thirties, people say, well, geez, you’ve seen 10,000 divorces. Does that make you not want to get married? And they said on the contrary, it shows me all the warning flags… flags leading up to something like that. So what I tell a lot of my clients is. I’m the cliff notes. I’ve seen it almost all at this point. There’s not a story I haven’t heard. Everyone has the same issues, the same concerns, regardless of practice they’re regardless of where they are geographically or age wise or financially. So I don’t think that changes, but I’m able to get that information, learn those lessons and then share them with everybody else without them having to go through the pain to learn that lesson.

Chris Dreyer

Yeah. I can’t remember the saying it’s it’s if you learn from your mistakes, um, you’re knowledgeable, or if you learn from other’s mistakes you’re wise. I can’t remember the exact saying, but that’s what kinda comes to mind there.

Alvaro Arauz

I mean, I, since I was little, I always remember, I would love talking to older people, just, just get their insight, you know, and I always felt not that I could. You know, cheat the system. But if I can get this knowledge before I make those mistakes and the really it’s a function of time, which means you need experience to, to know some of these things. And so if I can find anybody can be a mentor, you know, just what have you learned, but then also share that information with everybody else so that they don’t make the same mistakes either.

Chris Dreyer

Yeah, I love that. I mean, this is great. It’s great tips. And it’s like, you know, the people that you’re congregating with that you’re hanging out with, if you keep elevating, you know, you keep learning new things and you kind of get immersed in that world.

Alvaro Arauz

I was going to say, I don’t know what the saying is. I think you’re the sum of the five people, you hang out with the most or something like that? So again, if you surround yourself with people who are always pushing the envelope. Oh, never satisfied. Always hungry. You know, that motivates you and motivates me.

Chris Dreyer

Absolutely. Absolutely. However, this has been amazing, you know, what questions or stories did we not talk about that you think would be important for our audience?

Alvaro Arauz

I think, you know, What’s going on right now. Uh, been actually very busy the last couple of weeks, um, with what’s happening, you know,. Are we going through another recession? How long will this last? My intakes are down. The phone’s not ringing. Do I lay off employees? So I think that’s a hot topic right now in terms of how do I deal with what’s happening and make my business not just survive but thrive, right? You want to thrive through this situation. So I think keeping from an HR perspective, keep your team. I always say I’m only as good as my team. Um, I, I got to where I am because of my team. I couldn’t have done it myself. And so, you know, don’t get in a situation where from a pride point of view, you’re just keeping everybody on and then you have to lay everybody off in June because you couldn’t slow your burn rate, right? Slow your burn rate right now, and maybe cut their hours by a day, right? Just, Hey, I don’t know how long this is going to happen, but for the next two weeks, we’re not working Fridays. We’re slow. We don’t have the work. And this way, I want to keep us longer. Look at those monthly expenses that you don’t even think about. That just come automatically deducted. What can you get rid of right now? Um, during this time. Always market right now. You know, it doesn’t mean just because you can’t go to lunch with somebody, and just because the conferences are canceled, doesn’t mean you can you stop marketing? I adapt to what’s happening. Put a presence out in social media. Do live feeds. Give, give them tips, but definitely market don’t stop right now. And again, keep, keep your core team. They’re, they’re important and you don’t want to get in a situation where you have to let them go because you couldn’t slow your burn rate. So I would say right now, I mean, that’s a hot topic.

Chris Dreyer

Yeah. That that’s phenomenal advice because you know, we don’t know how long this is going to last and everyone who says that they do, or, you know, is kind of full of it. Now, if you keep the full staff, you keep them rolling. Then, then eventually that’s going to hurt everyone. And the same for marketing, you can’t just quit marketing. Cause when this ends, you know, your, your funnel dries up.

Alvaro Arauz

Marketing-wise, generally. It comes to fruition three to six months later, right?. When I got asked to speak at Avvo Lawyernomics, right? They asked me nine months before the conference. I spoke at the conference and then I was getting clients still nine and twelve months later. So a decision I made two and a half years ago is coming to fruition. And so when people say things are slow, I always say, well, what were you doing for marketing through your six months ago? So, you know, just don’t stop.

Chris Dreyer

I couldn’t agree. More marketing is essential even during economic downturns, because when things do start to pick up again, you need to be top of mind for your clients. But as Alvaro says, you also have to be mindful of your expenses today, so you can be prepared for tomorrow. So don’t overdo it. You’ve been listening to The Rankings Podcast. I’m Chris Dreyer. A huge thank you to today’s guest, Alvaro for joining us. You can find all of the links from today’s conversation in the show notes. And we want to hear from you. What are the three cornerstones for developing your law firm? Drop us a review and share your thoughts. Thanks for joining us. We’ll see you next time.

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