Law Practice Management Asked and Answered Blog

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August 2011

Aug 31, 2011

Improving Law Firm Profits By Improving Processes


We are a five attorney firm in Detroit. Our firm does exclusively elder law and estate planning and most of our fees are based upon flat fees. Business has been steady and solid in spite of the recession. In an effort to improve profitability we are considering raising our fees but are concerned about adverse effects that it may have upon our competitiveness. We are already at the high end of the fee scale. Do you have any thoughts?


Raising fees is one approach to improving profitability. Clients are starting to push back more and more concerning legal fees. If you are at the high end of the rate scale I suggest that before charging off and raising rates you step back and conduct a process review by using an approach similar to the following:

  1. Pull a random representative list (by timekeeper and type of matter) of matters that have been concluded during the past six months. Say 10-20 matters.
  2. Calculate the effective hourly rates for each matter overall as well as by timekeeper class. (partner, associate, paralegal)
  3. Compare the calculated effective rate to your internal standard time billing rates as well as to external benchmarks. (Other firms from published survey data) How do they compare? What did it cost to staff the matter?
  4. Review the time detail for each of these matters and ask questions. You might want to flow chart and document the work flow. Is the firm working smart? Is time being dumped on these flat rate matters so that a timekeeper's hours look good on the production reports?  Is the firm using the right mix of paralegals and attorneys to staff the work? Is there wasted or duplicative effort? Is technology being used? Can work steps be eliminated or reduced? Should the firm consider a "limited representation" unbundled option?
  5. Pilot test a few new approaches and measure the impact upon profitability.

Keep in mind that raising fees is one way of improving profitability. There are other ways as well. In today's competitive environment. Working smarter, efficiently, and more effective is another.

Click here for our blog on competitive business models

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John W. Olmstead, MBA, Ph.D, CMC



Aug 23, 2011

Law Firm Client Development – Obtaining Additional Work From Existing Clients


I am the chair of our three person management committee. Our firm, now entering second generation, is a 17 attorney firm in Kansas City, Missouri. We represent businesses and other institutional clients. We have several of our founding partners in their 70s and as they phase back and slow down we are discovering that the younger generation of partners have not developed client development skills. What should we be doing to get more business? We are not sure we even know how?


Research conducted over the years by numerous research organizations has shown that on average it costs five times as much (dollars/time investment) to get new clients than it does to get more business from existing clients. It just makes good business sense to leverage existing relationships.

Institutional clients are reducing the number of law firms that they use. According to BTI Consulting Group, corporations in the Fortune 1000 list are using 20% fewer core law firms than they did a year earlier. As a result fewer firms will be getting work from these companies and they will likely be the firms that successfully cross-sell their practices.

Recommendation From a Fortune 500 Client

Recently I was doing a telephone interview with the general counsel of a Fortune 500 company for our law firm client and I asked him if there was an opportunity for the law firm to get additional work in a practice area in which the company had no experience with the law firm previously and if an opportunity existed what the firm needed to do to earn the business. Here is his response.

"Obviously we currently have other law firms handling that work. However, we have been evaluating those relationships and may be making some changes. There is room for other law firms to earn our business in the practice areas that you have discussed with me."

"I am aware that the law firm does other work other than what we have been using them for – but I am not sure exactly what those areas are."

"In order to begin to forge a relationship into these other service areas:"

  1. I need to know specifically what they do.
  2. I need to know who does it.
  3. I need to know how well the person( s) do it.
  4. I need to have a well established relationship with the person – trust, respect, like the individual, etc.
  5. I suggest that we start by having the partner in the firm that I have a relationship with begin educating me on the firm's other practice areas and begin introducing me to the other players in the law firm.

We hire lawyers – not law firms.

Click here for our blog on law firm marketing

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John W. Olmstead, MBA, Ph.D, CMC


Aug 16, 2011

Law Firm Acquisition Due Diligence – Using Client Surveys To Ascertain Client Retention


Our firm, a 22 attorney law firm in Chicago, has been contemplating acquiring a 6 attorney firm in the suburbs. We believe we have done an adequate job of due diligence regarding financials, people, culture, systems, and practice-mix compatability. Our concern is client retention. What are you thoughts concerning how we can determine if the clients will stay with us?


Why not ask the clients.

Much can be learned by talking to the firm's clients. Structured telephone interviews and other forms of surveys conducted by a neutral third party can uncover many surprises as well as answers. Client satisfaction surveys can be one of the best due diligence tools that you can use. 

It is good business practice to see how clients might react to a acquisition or merger. Understanding where your prospective firm's clients stand and how they feel about service quality can be one of the most valuable inputs into your due diligence process that you can get your hands on. By finding out where your prospective firm's clients stand can tell you a lot of their future retention. 

Before you invest significant time, money, or effort in developing an overall acquision/merger implementation strategy, survey your prospective firm's clients to understand where their clients stand.   

You must be careful using this approach and insure that it is done with the permission and in concert with the prospective firm.  The approach must setup, communicated and coordinated properly. It must be sensitive to clients and done in a way to communicate and reinforce positive rather than negative signals to the clients involved. 

 Click here for our blog on mergers

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John W. Olmstead, MBA, Ph.D, CMC

Aug 09, 2011

Reducing Law Firm Employee Benefits


As the administrator of our 14 attorney firm I have been asked to present a plan to the partners for reducing employee benefits. We have had a difficult time during this recession. So far we have not had to reduce our employee headcount – but this could change in the future. It is our hope that if we can reduce the cost of benefits we won't have to layoff or terminate any employees. What is the best way to handle/manage this difficult discussion and process?


As an "at-will" employer you have the right to change benefits whenever you please. However, you must be careful as employees will perceive a reduction in benefits as a reduction to their overall compensation package.

If you do decide to cut benefits it is advisable to plan carefully and communicate as much in advance of the changes so that people know what is coming in time for them to allow for changes in their lives. It is also a good idea to be prepared to clearly and concisely share comprehendible reasons for making these changes. If implementing this type of change will save jobs, present it this way. If you believe that you may again provide benefits that have been cut once the economic environment is better, that knowledge will make it more palatable to employees.

A key point here – do an overall examination of your benefits and cut once and be done with it -don't keep reducing benefits every month or so.

You might want to examine your overall benefit costs – especially medical insurance – and strategically think about best approaches. It might make sense to cut here rather than a day of sick time or vacation.

Food for thought – According to a Society for Human Resource Management Poll taken in March of 2011 in the last six months 20% of employers reported that they had reduced benefits – the highest level since the fall of 2008. "Employees continue to scale back on health care coverage for employees (91%) and dependents (89%), and the amount of leave that an employee can accrue (54%).

So proceed with caution – but go for it if it makes strategic sense for your firm.

Click here for our blog on HR ideas

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John W. Olmstead, MBA, Ph.D, CMC

Aug 02, 2011

Key Documents Needed to Launch a Law Firm Merger/Acquisition/Sale Initiative


Our firm is a 5 attorney firm in Detroit with three partners and two associates. The three partners are 79, 72, and 67 respectively. All three are considering succession and exit options. While internal succession is an option the firm has had a few merger chats with larger firms – on isolated unplanned occasions. We are having problems getting focused and generating interest from other firms. Is there a suggested process and or documents that we should prepare to generate interest and properly package our firm?


Suggest that you start by preparing an offer package that can be provided to other firms that you may approach directly or indirectly. A good offer package consists of the following:

  1. A firm profile (without identity for some presentations)
  2. Nondisclosure Agreement
  3. Detained Offering Memorandum (Confidential Descriptive Memorandum)

The Offering Memorandum

Tells the firm's story
Provides relavant facts other firms want to know including:

  1. Legal structure of the firm
  2. Ownership & Governance
  3. Key Management
  4. Organizational Chart
  5. Client Breakdown
  6. Practice Areas/Mix
  7. Marketing
  8. Historical Financial Performance

Potential Growth Opportunities
Potential Synergies or Economies of Scale
Proposed Deal Structure

The firm profile is the first point of contact with potential buyers/merger partners. It summaries the key points and describes the firm without revealing any identifying information. If an interested party wishes to go to the next step a nondisclosure agreement is executed an a offering memorandum with more specific information is then provided.

Using tools such as these can help you focus your effort, cast your firm in it's best light, and reduce wasted effort on the part of all parties.

Click here for our blog on law firm mergers

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John W. Olmstead, MBA, Ph.D, CMC





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