Helping Law Firms Grow and Scale Profitably with Brooke Lively

Watch the YouTube version of this episode HERE

Are you looking for some financial strategies to make your firm more successful? In this episode of the Maximum Lawyer podcast, Becca Eberhart chats with Brooke Lively about key financial strategies for business growth.

Brooke provides some advice on how to value a firm to ensure it remains successful. Valuing a firm is knowing how much you as an owner are making a year multiplied by 4. It is important to think about valuing your firm to set yourself up for retirement in the future. As a law firm owner, you can increase the value of a firm by purchasing other firms or investing in the newest technology. This should happen when you are established and consistently bringing in more money each year. It will ultimately help when you are ready to sell in the future. 

It is so important for law firm owners to create a plan to value a firm, which is something Brooke provides as a service to attorneys. Part of the plan includes strategic improvement, which involves thinking about things to invest in prior to selling a firm. For example, if you really want to sell to a certain buyer, all you care about is timing because you have a short time frame to sell. If you know you need to invest in updating the technology of a firm first, that will be a priority before you consider putting the firm on the market.

Take a listen to learn more!

Episode Highlights:

• 13:14 Insights into valuing a law firm 
• 18:34 The significance of focusing on making a law firm sell-ready
• 26:23 Importance of strategic improvement in increasing the value of law firms

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Transcripts: Helping Law Firms Grow and Scale Profitably with Brooke Lively

Becca (00:03.077)
Brooke, welcome to the Maximum Lawyer Podcast.

Brooke Lively (00:06.826)
Thank you so much for having me on, Becca.

Becca (00:09.861)
Absolutely. So good to have you. All right, we're going to dive right in and tell us about what is CathCap and what is the number one pain point that you saw?

Brooke Lively (00:23.21)
wow, okay, I didn't know we were going this deep, this fast. All right. CapCap helps law firms grow and scale profitably. And we do this by serving as an outsource CFO. Most law firms, most small businesses in the US, which really is the backbone, small businesses are the backbone of the US economy.

Becca (00:26.757)
Right away.

Brooke Lively (00:49.29)
don't have access to the skill and expertise of a fractional or of a CFO. So we come in, we give law firms that strategic advice that really can drive profit.

There was something else you asked me and I totally forgot what it was.

Becca (01:10.117)
Nope, nope, that's great. So the second question was, what was the number one pain point you saw? So I think that you answered that. And then my follow -up question was going to be, why did you start catheter?

Brooke Lively (01:21.066)
Okay.

Brooke Lively (01:25.866)
wow. So through just a weird series of events and happenstance, I, after grad school, ended up running my family's law firm. And I hired someone to help with sales and marketing. And he only worked with law firms. And his client started coming to me and saying, can you do for us what you do for your family? And I was like.

you know, what are you talking about? And that was when I came to understand that lawyers weren't running their law firms based on data. They were running them on gut instinct, and that was causing stress and anxiety and frankly, a lot of lost profitability. And so I started CavCap.

Becca (02:20.581)
That's awesome. I love that origin story. Another thing that I love is from working with you with the couple of conferences that you attended at MaxLocCon, I just love how open you are with sharing. So what I would love to do is for you to start at the beginning of growing CathCap as a business and share a bit of your own business experience. So a lot of times product and service providers aren't that relatable. And we wonder,

What do they really know about starting a business from scratch and the challenges that they have to overcome to build a successful law firm? Can you share what building your business was like for you between that area of like 2012 to 2015?

Brooke Lively (03:04.554)
Yeah, I know exactly what you're looking for, Becca. So starting it was actually pretty easy. I found someone and we kind of started, you know, basically I said I would private label for him.

And so he became my client and I did what I was doing for my family. And as soon as I got seven clients through him, I left my family's law firm and I gave them an account like every day. Okay, I've got three, I've got four, I've got six. And so I walked into my brother's office one day, I'm like, I got my seven.

And he's like, okay, like, why does this matter? I'm like, because I'm out on Friday. Like, this is my last week and he got a panic. So anyway, so I left and that was that was all great. And I, I loved the way I started because it really was a low risk way to start. And then we had a three year agreement. And the agreement, it was time to renew.

And I said no, he was 94 .3 % of my business. Because leading up to that decision, I had of course blown up relationships with I don't know how many other clients that I had outside of him. Because I mean, I can think about it, when you have to make that hard decision, your whole life starts to upload, right?

Becca (04:44.325)
Yes.

Brooke Lively (04:44.874)
So I had blown up some of my other clients and he ended up at the time when I made the decision was 94 .3 % of my business. But we weren't a core value match. And I still knew that that was the right decision to make. And so I, one of my people left. I,

maxed out all my credit cards. I, you know, had two lines of credit that I had gotten in advance knowing this was gonna happen. Maxed those out, went through all of my savings. And I vividly remember applying for that last credit card. I applied for it, I got it. A whopping $2 ,000.

Limit.

I waited for that thing and it finally showed up and I was so relieved. And I waited till about 10 o 'clock at night and then I went to a bank on the other side of town where nobody would recognize me. And I did a cash advance because I needed all the cash I could get off of it. And there I was when the bank opened the next morning.

slide in that stack of $20 bills across to the teller because I had to make payroll and that was how I made payroll. And so yeah, I've been there and it took me from that low point, took me about two years to to pay off all of that debt and to get out of that.

Brooke Lively (06:43.47)
But I knew that I was doing the right thing. I believed in the company. I believed in our mission. I believed in what we were doing. And I knew we were doing it the right way. I knew we were helping clients. And I knew it was a matter of time. And because I had such faith in what we were doing, I was able to hold on. But it was hard.

Becca (07:14.565)
Absolutely. That's what I love about how you can work with businesses now though, business owners especially, and you can relate to them on more than just your expertise level. You can relate to them on a personal level as well. And I think that's super.

Brooke Lively (07:31.882)
You know, Becca, we all make the best decisions we can with the information we have at the time. Do we all make the best decisions end of sentence? No. Do we do dumbass things? Yes. Have I done dumbass things? Yes. But we do the best we can. And, you know, we extend that grace to our clients.

Was it the best idea to really take out a loan against your credit card processor? Probably not, but that's where we are. So let's figure out how to make it work. There's no blame. There's just moving forward.

Becca (08:20.773)
that that was a really great example. Yes.

Brooke Lively (08:24.714)
you know, and at the moment that was the only place they could figure out where to get cash and they needed that cash to make payroll. It was more important to make payroll than anything else. So you know what? That was 100 % the right decision to make them.

Becca (08:39.685)
Yeah, absolutely.

Brooke Lively (08:41.802)
fully support it. Now we're going to look for other ways that in the future we could make decisions that aren't quite so expensive.

Becca (08:49.733)
Yes. Such a good example. All right. So shifting just a little bit, because today we're primarily going to be talking about exiting your law firm and you recently published your sixth book, Exit on Top. All right. So my question is, what did you experience that you knew that this was the next book that law firm owners needed?

Brooke Lively (09:05.77)
I do it.

Brooke Lively (09:18.026)
I went to NTL, National Trial Lawyers meeting, and it's that one that happens every January. And I'm sitting in this panel about non -attorney law firms. And the woman who was head of the Arizona Ethics Bar was doing it. And I sat there, and I'm like,

This is it. I mean, Becca, you know, I had a hard time running my family's firm because I wasn't an attorney and there I was. I saw every way I could make it so much better. And, you know, they were being the attorneys they were and they were like, well, I don't know, let's look into that. Let's do a little more research and let's see if we can, whatever.

And so I'm sitting in that room and I'm like, this is it. I have been waiting for 10 years to be able to own my own law firm. I'm going to do this. I'm going to own a firm. This is going to be awesome. And then I sat back for a second and I thought about all of our clients. And I thought about what non -attorney ownership was going to mean for them and how that was going to change the landscape of the legal world. And…

you know, with private equity coming in. And I also started to think about the fact that all the baby boomers are retiring and what's gonna happen with their law firms. And I was like, okay, so I could go run a law firm. I could go run and own a law firm and I could like manage the crud out of that thing and make it really, really profitable. Or I could help all of our clients.

Becca (10:42.181)
Yes.

Brooke Lively (11:02.25)
with theirs, whether it's selling them or buying them, because buying law firms is a great way to grow your firm. And so I was like, okay, that's it. I'm not gonna own one. I'm gonna write about buying and selling them. And that's why I wrote the book.

Becca (11:21.221)
Awesome. Okay, so who exactly is this book for and then what are you sharing inside that will help law firm owners get the most out of their firm in the end?

Brooke Lively (11:33.162)
So, it is written for a seller that is just as useful for a buyer.

And I think the big key, the big secret to this book is that, well, a couple of things. One, it takes three to five years to sell a law firm. It takes, actually it takes three to five years to get ready to sell a law firm.

Because there's a lot of work that you have to do internally to make it really profitable, to make sure you've got the right people in the right seats, to make sure that it is running in a way that doesn't require you as the owner to be the one that is turning the crank, making sure everything is functioning. And that takes some time to implement. The more you do that, the more valuable your firm is.

So you need to start in advance of when you want to sell.

But what's amazing is that a firm that's an attractive acquisition target, a firm that somebody wants to buy is the firm you want to own. Because it throws off a lot of money, it has happy clients and happy employees, and it doesn't take a lot of effort from the owner. So, I mean, to some extent, why do you want to sell it?

Brooke Lively (13:11.754)
It's giving you all the money.

Becca (13:16.005)
Yes. Okay. This is what I feel like we see a lot with people in the maximum layer community though. Most people aren't thinking about valuing their firm when they're using all of their mental and physical energy to get started or scale their firm right now. But there is a huge benefit to understanding how to value your firm well before someone is thinking of exiting. So what should they know now related to valuing their firm?

Brooke Lively (13:45.802)
Okay, well I think the first thing is the way to value a firm is a firm's value is between two and a half and four times what's called SDE. An SDE is seller's discretionary earnings and basically that's total owner comp. That's your salary, that's your draws, that's…

You know, all the stuff you run through, all the personal expenses you run through the firm, I know you do it, I do it, we all do it, I don't care, that's between you and the accountant, like whatever. But it's two and a half to four X that number. So basically, when you sell your firm, you're gonna get two and a half to four times the benefit that you would have gotten in a year.

I think why it's important to look at it in advance is a few things. I think, first of all, if all of your energy is going into growing your firm, it is an amazing way to grow your firm by buying other firms. So I had a client in El Paso and we were going to a conference in Mexico. We met up in the Dallas airport.

And we're sitting there and she kind of leans over. She's like, hey, Brooke, one question. I think I'm going to buy a law firm in Atlanta. I'm like, excuse me? You live in El Paso. You know that's not close, because let me tell you, El Paso is not close to anything. And I was like, how'd you find it? She said, I was cruising around on the internet. I was bored one Sunday afternoon. OK, so at this point, I'm starting to panic.

And it was an immigration firm, not exactly like her immigration firm, but complimentary to hers. And she wanted something on the East Coast. And she's like, I think it's great. And then they called and we boarded and she was sitting two rows ahead of me. And I had to panic all the way to Mexico because I didn't know what she was doing. Well, it turns out that I knew not only the broker, but I knew the law firm that she was buying.

Becca (16:15.077)
Wow.

Brooke Lively (16:15.402)
But it was a great way for her to get experts in what they do. This law firm was very specific and very much in this niche market. There was going to be a great referral relationship between her now two firms.

She has the experts in the industry. She has the location on the East Coast. She's increasing her revenue by about 50%. The firm is generating enough profit to not only pay for its own sale, but also she's going to make money off of it in the first year. Okay, so like, where's the problem with this?

Becca (17:08.005)
Right.

Brooke Lively (17:11.434)
It's a great way to grow her firm. So, you know, that's awesome. I think when you're looking at, we all need to look at retiring. I don't think we do it enough.

I think as attorneys, and especially if you're a PI attorney, you really don't look at it because you're always reinvesting, you're always buying that next set of cases, and I mean, they're the biggest gamblers on earth. So, you know, the next one's gonna pay out and then we'll use that to retire. This is part of your retirement planning. And there's so many people that are thinking, private equity's coming in, I'm gonna do that big, huge, you know,

Becca (17:46.309)
Sure.

Brooke Lively (17:56.842)
20 times revenue exit. No you're not. You're going to do maybe if you're lucky a 1x revenue exit. So let's be realistic so that you can look at the other parts of your life and know what you're doing. Know how you're going to get there because you may not be there yet but at some point you will be.

So don't think that your law firm is going to sell for 200, your $2 million law firm is going to sell for $200 million. It's just not.

Becca (18:36.869)
Yes. Okay. So you had said, you know, prepping a law firm to be cell ready might take between say three and five years. So why should a law firm owner focus on that now, especially if they're younger? So, I mean, they're not, not that they're not thinking about retirement, but they're not even close time wise. So why would that be a great priority for them to have right now?

Brooke Lively (19:05.706)
So I went to a, I was speaking about this book recently to a group of attorneys and about half the attorneys in the room had a second business. They were all really entrepreneurial and they totally got it. And they had done a lot of the work that I was talking about.

you want the firm you want to sell is the firm you want to own.

Becca (19:37.381)
I like them.

Brooke Lively (19:37.77)
It doesn't take your time. It gives you a lot of money and it doesn't take your time. So all these guys had gone off and they were mostly guys, there were a few women in the room, but they had gone off. They had optimized their law firms, gotten it to the point where it didn't require them to be in their law firm 60 hours a week.

You know, they're in their law firm 20, 25 hours a week, and they went and started these other businesses that interested them.

Okay, that sounds like fun. I have another client who has optimized his law firm so that he can coach his son in baseball. He went so far as to build a baseball field in the lot behind his office.

at a batting cage. He has a batting cage at his office. So, you know, it's a dual thing. A firm that's ready to sell is easy to own.

Becca (20:45.157)
That's awesome.

Brooke Lively (20:56.618)
So you wanna build it now. Do the work now, do the work now while you're young and energetic and reap the benefit for decades. I mean, why do you wanna run a bad law firm? Why? Why do we wanna do it the hard way? Let's push the easy button here. Do the hard work upfront and then be able to coast. Don't coast now.

and then try to cram all the hard work in at the end. You're never gonna catch up.

Becca (21:32.869)
That's a really great point. I love that. And I also love how you say that the firm that you can sell is the firm that you want to run. I think that's a really great point.

Okay, so let's dive into some of the common blind spots or misconceptions that law firm owners have regarding either the financial health or the value of their firm. I know you hit on, you might think you're going to exit at 20X or something like that, but is there anything else?

Brooke Lively (22:04.778)
Big misconceptions.

Brooke Lively (22:09.322)
I think one of the things that's coming that I am most excited about is non -attorney ownership.

Brooke Lively (22:19.53)
And I'm excited is probably the wrong word. I am also apprehensive about it. I think that it is going to create some great opportunities for some attorneys that want to get out of their firms.

Becca (22:35.717)
Sure.

Brooke Lively (22:37.674)
I don't think it's gonna be great for clients. I think it's gonna commoditize a lot of things, a lot of legal work. And I gotta tell you, all you attorneys out there, fight it for every moment that you can, because it has not done any favors to the dental industry or to the veterinary industry.

Becca (22:44.485)
Yeah.

Brooke Lively (23:04.49)
That being said, it will create a lot of opportunities. So I just, that, I just keep, I see that everywhere.

Becca (23:18.309)
You made a great point. and you kind of hit on, you know, the dental industry and veterinary clinics, things like that. That actually made me think of more like, consumer businesses. So it made me think of, you know, shopping small. That's something that I like to do. I feel like the quality of the product or the service that I get when I shop small is 90 % of the time better than anything that I can get from any like big box store or anything like that. So I feel like even if.

you know, non -attorney ownership is going to become legal nationwide or anything like that. I think that there's always going to be this opportunity there where the shop small version of going to an attorney owned law firm is always going to be there and they can always have that edge.

Brooke Lively (24:06.634)
I think there is, and I think we're going to find it more prevalent is in those niche down firms.

Becca (24:14.757)
Yes.

Brooke Lively (24:16.522)
I think if, well.

Brooke Lively (24:22.186)
I think there are a couple of firm types that private equity is going to go after immediately. I think they're going to go into PI because it's high risk, high reward. And I mean, they're already financing it, so owning it is the next step. I think they'll look at things like immigration because it's so forms driven.

Becca (24:34.277)
Yeah, not really intended. They'll just throw money at it.

Brooke Lively (24:50.538)
and relies so heavily on paralegals and legal assistance. I think they will look at bankruptcy, like consumer bankruptcy. Again, doesn't really take much attorney work. So I think all of that, those things are going to be like basically in -person legal zoom. I think that…

Becca (25:15.397)
Sure.

Brooke Lively (25:19.53)
specialized law firms in other types of law are going to be the shop local, shop small, because they're going to be different, because it's so specific, because they know that part of the industry so well. I think you're going to get that kind of industry knowledge and caring. Because, I mean,

If I owned a law firm, I probably wouldn't care as much as most attorneys do. I don't care about the law that much.

Becca (25:53.701)
Right.

Becca (25:58.245)
That makes sense.

All right, you help law firm owners create a plan to increase the value of their firm using time, buyer type, strategic improvement. Can you walk us through the significance of those three things or even give us an example of how a law firm owner has increased value through those three things?

Brooke Lively (26:23.306)
Yeah, so let's start with time. Time is a big factor. There's a great saying in &A work. You can have your price on my timeline or my price on your timeline, but you can't have both. So if you want to sell fast,

Becca (26:45.477)
Yes.

Brooke Lively (26:52.49)
they get to pick the price. That's just the way it's going to be. If you have all the time in the world, you will have much more control over dictating your own price.

it so you got you got to choose one they're on opposite ends of the scale you want time or you want price when we talk about types of buyers there are different types of buyers that are going to want different things so let's look so that client that i mentioned from el paso that bought the firm in atlanta she wanted to buy

a specialty practice that was complimentary to her own, she needed that firm to run really well as it is, right? She knew she was gonna have to come in and do some work on technology.

Brooke Lively (27:58.794)
She also knew that she has the expertise in her firm to bring infrastructure in for things like billing and management. So she wasn't so worried about their management expertise. She just wanted their legal expertise and their reputation.

So if that person had been trying to sell and had spent an immense amount of time, you know, bringing in and training her management team, that could have been a waste of effort, right? If you are a, let's go into the future, we're private equity.

Becca (28:23.621)
Absolutely.

Brooke Lively (28:54.09)
No, let's not go into the future of private equity. Let's stay current and say that you own a personal entry firm and you do run -of -the -mill car accidents. And I'm going to use Morgan & Morgan as an example. Morgan & Morgan comes in and buys you. Not you join their firm, but they come in and they buy you.

I am assuming, I don't know this for a fact, but I do know how there's a guy named Jim Adler here in Texas. He was the first one that advertised when they let attorneys advertise. His attorneys run something like 1 ,500 cases each. That is an insane number. I think that's how many. I mean, it's just ridiculous.

Becca (29:51.077)
Yeah.

Brooke Lively (29:51.786)
In a case the people at intake decide whether they're going to file suit or not and it goes down one of these two tracks. Okay, if you're a PI firm and you decide that you want to sell and you're going to sell to Gem Adler,

and you spend a whole lot of time building up all of your policies and procedures about how you work cases, that is a waste of time. Jim Adler doesn't care, because he's got this infrastructure and this way that he works cases, and that's what's going to happen. Does he want your bodies? Possibly.

Brooke Lively (30:44.138)
You know, he wants your footprint. He wants your marketing. He wants to be able to come in and take your market.

convert it to his name and build on it. So you just have to look at who it is that you want to buy. If you want to sell to partners, if you're the single owner and you want, like my father wanted to make my brother a partner, okay, well that's great.

But that's a different way of doing it. I talk about a client in the book that his father gifted him 40 % of the firm. I talk about bonking people on the head with the magic wand. So he got bonked on the head with magic wand and given 40 % of the firm. You can't do that anymore. There are new ownership rules. And I think this is going to start causing a tax event.

He increased the value of the firm while he was working with us from 5 million to about 20 million. Okay, his father still owns 60 % of the $20 million firm.

His father's attacks on state people are slightly panicked that his father might die before they figure out some way to transfer the other 60 % of the law firm to him. And they're trying to figure out how to do it without making my client buy the other 60 % or create a tax of them. So you've got to be looking at it and looking for different things. How are we going to do this? So your buyer matters.

Becca (32:24.997)
Yeah.

Brooke Lively (32:34.57)
So what was the third one we were gonna talk about?

Becca (32:34.661)
Absolutely. Of course. So then you have mentioned strategic improvement.

Brooke Lively (32:42.602)
Strategic improvement, that really flows into what kind of buyer and how much time. So, you know, Jim Adler is buying your firm. We know that we want a Jim Adler to buy the firm. We're not going to spend time on policies and procedures. You know, we've got a short timeframe. We're going to put some lipstick on that pig and keep going.

We are not gonna bring any new technology in the short term because it's expensive, it takes a lot of effort from your team, and it doesn't show results quickly. But if we've got a long timeframe, yeah, let's bring in technology. Because if we bring it in, if we integrate it all, if we sync it all up,

and we're using 80 % of the CRM capabilities and our practice management system capabilities, then we can actually prove out with data all the claims we're making about the firm. And that's going to up the price.

Becca (33:55.269)
Absolutely. I love that. Okay. Can you tell us, are there key areas to fix before a sale or is this always going to depend on the specific firm?

Brooke Lively (34:12.458)
it's always going to depend on the specific firm. That being said, I actually have a quiz that people can go take to figure out what part of their firm needs attention the most.

Becca (34:29.093)
And where can they find that?

Brooke Lively (34:31.018)
exitontopbook .com.

Becca (34:34.853)
Awesome.

Brooke Lively (34:37.162)
Because yeah, I mean, there are a lot of different places where you can start. And it is, there are as many different places to start as there are law firms. So you just have to find what's right for you. And it's a matter of your firm, how your team operates, how you operate, who you're selling to, how much time you have, all of that.

factors into what you should be looking at.

Becca (35:10.853)
Okay, I feel like that might actually apply to my next question. So I was going to ask in your work with law firm owners, what are the most common challenges that they face when trying to implement the changes that they need to do to increase the value of their firm? You find that happening? Yes.

Brooke Lively (35:27.818)
They're people.

Absolutely. Nobody likes to change. And this is about change. And I think, gosh, the hardest thing for any business owner to nail is what we call RPRS. And this is an EOS thing. And I'm an EOS implementer, and I did that because…

It was our number one outgoing referral at CapCap. And for those of you that don't know, it's the entrepreneur operating system, entrepreneurial operating system. And we had done some research. The people who were just kicking tushy, because I'm trying not to cuss, all right. All right, the people who were really kicking ass were running on EOS.

Becca (36:21.355)
you're fine.

Brooke Lively (36:27.562)
And so that became, it didn't surprise us because we've run on EOS for 10 years. That was our number one outgoing referral. And we were getting like feedback from our clients going, they don't understand the legal industry.

And so finally we got tired of them complaining and I became an EOS implementer. But anyway, so this is part of what we've learned in with EOS is the hardest thing, the most important thing to nail is what's called RPRS, getting the right person in the right seat. And this is really a Jim Collins thing from good to great. And he talked about getting the right people on the bus.

Becca (37:11.589)
Yes.

Brooke Lively (37:12.714)
Are they a core value match? Are they right for the culture of your firm? And then the RS is, are they sitting in the right seat? Do they get the job? Do they literally understand what the job entails? Do they want the job? Becca, I can't tell you how many times I see people that are in jobs that they don't want.

Becca (37:41.893)
Of course.

Brooke Lively (37:43.018)
And do they have the capacity to do it? Do they have the skill set? And if it's not a yes, yes, yes.

They need to go out of that seat. And finding those people, getting those RPRS, those right people in the right seat, if you don't have that, if you don't have people who are willing to change, man, throw on the towel. It's not gonna happen.

Becca (38:13.317)
Yeah, that's a really great point. I feel like that is the biggest struggle. Okay. Do you ever see law firms having trouble balancing short -term profitability with long -term value building initiatives?

Brooke Lively (38:31.05)
gosh yes. That is, you know, that's hard because we talk about running a law firm on the rule of thirds. One -third of revenue should go to people, one -third of revenue should go to, you know, overhead or operating expenses, and one -third should go to profit.

Becca (38:54.501)
I feel like we hear that specific question so often and you might have been leading into this. Can you tell us where those numbers came from?

Brooke Lively (39:08.65)
Where did those numbers come from? Those numbers have come from a number of places. They have come from books, they've come from research, and they have come from what we have seen in the marketplace, just working with law firms. Yeah, lots of different places. Now.

We take that's a starting point. You know, we're going to adjust them if if your personal injury and you're only getting 30 % profit. We need to have a discussion because you got a problem that's too low. But anyway. That 30 % that one third that goes to profit. Doesn't always necessarily go.

Becca (39:40.837)
Right.

Becca (39:52.261)
Yes.

Brooke Lively (40:08.586)
to the owner. Sometimes you take that and you reinvest it back in the firm.

The biggest problem is that people often make that reinvestment without realizing it. They just keep spending the money and they don't have anything left over as opposed to kind of pulling it down below the line and then making a conscious decision. Okay, this is $10 ,000 of my profit and I'm gonna put it back in.

Becca (40:25.893)
Yeah.

Brooke Lively (40:48.362)
and I'm going to invest it, and I want to get a 4X return out of it. So I'm going to put $10 ,000 in, and I want to see $40 ,000 in revenue come back. People are rarely that disciplined. But that's what needs to be happening.

because otherwise they're putting that $10 ,000 in, they're not noticing that they're putting that $10 ,000 in, and they may only be getting $2 ,000 back in revenue.

Becca (41:20.357)
And it sounds like there's not that actual significant strategy behind, you know, the money is leaving, but there's no strategy behind it. Yes.

Brooke Lively (41:25.194)
strategy.

Brooke Lively (41:29.098)
Yeah. And they're not even really aware of why, well, there is a strategy, Becca. That's not fair. The strategy is hope and prayer.

Becca (41:40.549)
Sure.

Brooke Lively (41:42.538)
There is a strata. It's not a good strategy, but it is a strategy.

Becca (41:43.801)
Right. Yes. Yes.

All right, just a few more questions from me. Are there any non -negotiables in the selling process that our listeners should know about?

Brooke Lively (42:02.25)
There are always non -negotiables and absolutely, and they're different for everybody. Non -negotiables are those things, well, let me back up.

There was a Price Waterhouse did a study, and it was a while ago, but I don't think if they did it today, the results would be much different. And what they found was 75 % of owners profoundly regretted selling in the first year.

Becca (42:45.957)
Interesting.

Brooke Lively (42:47.338)
75%.

Brooke Lively (42:53.514)
Yeah, I know. You're speechless, right?

Becca (42:53.669)
kind of a loss for words. I don't. I am. Yeah.

Brooke Lively (42:58.826)
It is mind -boggling. And I look at that and I'm just, it makes me so sad.

because I can't imagine spending all that time, all that effort, all that energy, all that love.

Becca (43:21.893)
Your life.

Brooke Lively (43:23.242)
and then profoundly regretting selling it. So I think it's a couple of things. I think one, in general in our lives, we add to who we are. I'm a college graduate now. I'm now an adult. I now am a husband or a wife. I'm now a mother or a father, like you keep adding.

Becca (43:51.397)
Yeah.

Brooke Lively (43:52.074)
When you sell your business, it's the first time that you take something away.

Brooke Lively (44:00.106)
You don't get to say, I own a law firm anymore. Now it's, I used to own a law firm. I used to be an attorney. I used to be the head honcho. I used to have 10, 20 people that worked for me. I used to be, I used to be, I used to be. And that's hard. I think the other thing is, you know,

Becca (44:03.205)
Mm -hmm.

Brooke Lively (44:25.93)
Looking at those non -negotiables, those things that are really important to you, that you want to make sure…

happen. It's the things that are so important to you that you would walk away from the deal if they weren't included. And they fall into five categories. The first one is obviously price. You know, what price are you willing to take?

Becca (44:59.781)
Yeah.

Brooke Lively (45:00.81)
And sometimes that price is based on what you need to retire or what you need to get out of this venture to start your next one, because maybe you're going to start a different company. Sometimes the price is a vanity number. Don't care what it is, but there's going to be a non -negotiable price and you need to know what it is. The deal terms. So let's go back to…

you know, your price and my time.

You don't, this isn't like buying a house where you walk to the table, you sign the papers and the house is gone. No, no, no, no. You go to the table, you sign the deal, you probably get some of the money, not all of the money, and then there's gonna be a transition period where you're still working for the firm that you've sold. Yeah, but what do those deal terms look like? What are the things that are important about your team?

Do you want to make sure that some people get to stay? Do you want to, you know, are you concerned about their benefits? What do you want to ensure happens with your team? And then there's the transition. Now, some of this falls under the deal terms, but how long are you willing to work in that firm? What are you willing to do to make that transition go well? You got to know that.

Are you willing to fly all over the country with the buyer and introduce them personally to every single one of your clients? I don't know. And then the post sale. You know, what is it going to look like after you're gone? You know, what are you willing, what are you willing to do?

Brooke Lively (46:59.498)
So you've got to think about these things. And actually, if you go to that same website that I mentioned, we've got an exercise on coming up with your non -negotiables.

Becca (47:08.165)
Yes.

Becca (47:16.901)
I love that because that outline was so detailed and so on point. That would be incredible.

Amazing. All right. So if someone would like to grab your book, where can they do that? And if they want to reach out to you, where can they do that?

Brooke Lively (47:34.826)
So book is on Amazon, amazon .com. It's called Exit on Top. And if you want to talk to me, my email address is brooke, B -R -O -O -K -E at cathcap .com.

Becca (47:50.693)
Thank you so much for joining me today.

Brooke Lively (47:53.674)
Becca, it was awesome.

Becca (47:57.253)
Yes, thank you.