In this episode of Profit First For Lawyers, RJon explains the revolutionary concept of categorizing overhead expenses as either “static” or “dynamic” to better control costs and increase opportunity for growth.
RJon in the Studio
RJon goes into detail about the differences between Static Overhead and Dynamic Overhead. He explains Static Overhead as fixed costs like rent, utilities, and subscriptions. Dynamic Overhead expenses include marketing, staff training, and financial planning. While Static Overhead costs are necessary to conduct business, these types of overhead expenses do not directly boost growth or increase profits. On the other hand, Dynamic Overhead fuels expansion and increases growth opportunities.
A Cautionary Tale
To illustrate the difference, RJon shares a cautionary tale about a law firm with stalled growth. Upon investigating the firm’s tightly controlled marketing budget, it was revealed that a successful employee networking initiative delivering great ROI was sidelined by an overzealous controller. By capping the dynamic marketing initiative, the firm likely missed out on hundreds of thousands in profits.
- Categorize your overhead expenses as either static or dynamic
- Look for opportunities to invest more in dynamic activities
- Don’t let static caps limit areas of growth
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