Industry News Legal Management Updates

Cash Flow Can Help Your Firm Grow

Being a legal manager at a firm startup is exciting. Law schools don’t teach lawyers how to run a business, so this is where you can really dig in and play a vital role in the firm’s success. 

Omar Ochoa

When your firm reaches a certain level of stability, growth is the next natural step in its progression. The prospect of growth is undoubtedly exciting because it indicates you are experiencing a solid level of success. However, it can also be an intimidating process if you aren’t prepared to handle all the moving parts that go into growing a firm. But with the proper level of planning, you can help your firm realize its full potential.


The first thing that law firm managers need to keep in mind when managing growth is the cost of added salaries. These are the obvious, hard costs of expansion. When taking on more cases, you need more people to handle those cases, and you have to pay them. Your cash flow and caseload will determine how much you can grow. If you don’t have the level of work and, therefore, income to justify having a significantly larger staff, it doesn’t make sense to expand.

There are also other hidden costs that are much harder to quantify upfront. These costs — such as HR service, payroll service and supervision costs — are essential parts of running the business, but they can easily be forgotten or neglected as they aren’t the direct payment of staff. As you continue to add more employees, these products will be necessary.

“Perhaps the single biggest mistake that any law firm manager could make is to be afraid of spending money. You need to invest in your growth.”

Even further, there are physical costs that come along with growth. As the firm adds more staff, you’ll need to add office space. (Unless you are operating hybrid or fully remote. But that’s for another article.) It would be unreasonable to expect a team of eight lawyers to work in the same amount of space as a team of four. That also means you’ll have to provide more and better supplies for your office.

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Perhaps the single biggest mistake that any law firm manager could make is to be afraid of spending money. You need to work with your firm’s managing partners to help them see the importance of investing in the firm’s growth. Just like starting a business is risky, investing in your business’s expansion is risky. Some people are comfortable staying where they are at, which is great, as long as it is sustainable. But for those who want to accomplish more ambitious goals, growth is necessary, so it is vital to embrace it.

Do not cut corners. That will significantly drop your productivity and quality of service. Low-bandwidth internet may save you a couple of hundred dollars but might also cost you extra in time. Is saving a bit of money worth the inconvenience that it will cause? Probably not.

Another thing about growth that can be scary is hitting a wall. Sometimes managers hesitate to continue adding more staff, but without those extra hands on deck, the firm’s growth may not be sustainable. Once your staff is spread too thin, you run into an issue with the quality of your service. If you’re going to expand, you need to have the staff it takes to provide each client with the service and attention they deserve.

Growing your law firm doesn’t have to be intimidating. As long as you stay on top of your cash flow and continue to grow at a sustainable rate, everything can be manageable. Find the right balance between consistent growth and helping your firm keep up with the demand of your clients.