“From there, the key point was when I was in the Public Defender’s Office, I had a lot of great legal mentors who really taught me how to be a very effective attorney, and I thought I did quite well. I’m a very good lawyer, but what I didn’t have is I didn’t have much business acumen. I’d never run a business; I didn’t have any mentors to show me the route,” he explained.

“So, when I opened my firm, I really struggled for a number of years. After a while, when I just got sick of it, I decided to actually engage some mentors and really go on a mission of learning how to run a business and particularly a law firm. And within a very short period of time, we turned it into a seven-figure firm that we were consistently very, very profitable. And then, at the end of 2021, I sold the firm to a guy that I only briefly knew, but I recruited him and he bought it, and now I am of counsel to the firm.”

Not understanding the business side of things is a fairly common tripe in lawyers who end up opening their own firms — and something which Mr Chastaine confirmed.

VIEW ALL

“They don’t teach this in law school. There really are very few resources to teach you how to run a firm. The state bar, at least in California, is very critical about running your trust fund. And so, they’ll just bar you in a heartbeat. That’s the place you can really screw yourself up, and they’ll give you a video, but none of that has anything to do with actually how to turn a profit and about the data collection and really understanding the value of your time,” he explained.

“There are more resources now; there are more people coming out who are teaching this skill. That’s what I do now, but most people, I think, go into it thinking they’re running a law firm and they don’t really understand that what they have is a business that provides legal services, and it’s a very different state of mind.”

To adopt this state of mind, Mr Chastaine said he adopted a number of steps that other boutique firm owners can follow, too.

“The first thing is that you’ve got to realise that you have to make that shift. You’ve got to start looking at what you’re doing as a business. And particularly for the small firms, separate yourself, and I was this way for many years. I was the firm, and the firm was me. We were one and the same. When I separated myself out and realised, OK, the firm’s a corporation, that is a separate entity and that needs to be profitable,” he added.

“I am a business owner, a stockholder, and I get a salary, but that pays for my legal work. So, realising that there’s a separation there, I think that’s the first step. The second step is that you’ve got to be willing to educate yourself, and that is engaging a mentor [and] a lot of reading. There are a lot of great books out there that every law firm owner should read about how to run a business.

“And then the third thing is you have to learn to delegate. You have to let other people work for you because you can’t do it all. So, I think those are the three big hurdles that people have if they’re not seeing the investment or understanding that this is an investment in time to learn this skill. They’re not willing to let go, and they still see themselves as being the firm. And I think those are the things you have to get past.”

This also requires a fairly flexible mindset, as well as being firm on your goals, Mr Chastaine opined.

“You have to set your goal, and that goal has to be very firm. It’s got to be a goal that actually matters to you, but you can be very flexible on the route. And I’ll tell you, for over a decade, I was an expedition length adventure racer, and I’ve raced in Australia up in Queensland, and we had to be very flexible about the routes that we took because that can be very difficult terrain.

“So, it’s the same idea, be wed to your goal, be confident that this is the goal that you want and the place you want to go, but be flexible about the route because sometimes opportunities show up that you didn’t necessarily expect. And then things happen, like COVID happened, and that puts a lot of firms in a tailspin. You had to be light on your feet to deal with that,” he concluded.  

“And the good news is, and maybe this isn’t good news for a lot of firms, is if you collect data on your firm, if you know what your true hourly rate is, if you know how long it takes you to do certain kinds of cases, if you know what your profit margins are, then it’s pretty easy to adjust. If you don’t know any of that, then you’re just going around the gut feeling, and that’s a risky move.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Mike Chastaine, click below: