Law Practice Management Asked and Answered Blog

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March 2018

Mar 28, 2018


Law Firm Growth Planning

Question:

I am a partner in a six lawyer firm in Jackson Mississippi. There are three partners and three associates in the firm. The firm is a insurance defense litigation firm. Our firm has been at its present size for many years, revenues have been flat, and profits have been shrinking. The partners have been discussing the pros and cons of growth and we would like to significantly grow the practice. A couple of our insurance company clients have asked us to open offices in other states and we are giving this consideration. Initially, we would open two other offices and we anticipate that this would require us to hire six additional attorneys. We appreciate any thoughts that you have.

Response: 

This is a huge step and I suggest that you give it careful thought. Here are a few of the issues you should consider:

  1. Firm Size – opening two branch offices and hiring six additional attorneys all at once is a major undertaking. This would double your firm size. A twelve attorney firm is quite different that a six attorney firm and requires a different approach to management, structure, etc. This would tough enough if the expansion were not in remote offices but in remote offices I believe the growth is too aggressive. I would start with one branch office and phase in the work and attorneys. Hopefully, you have a commitment from more than one client to send you work for a given location.
  2. Branch Office Staffing – staffing the office, especially with attorneys, will be a major issue. Unless you have attorneys in your office now that are licensed in these states you are going to have to hire local talent. How will you integrate the cultures of the two firms, prevent the remote offices from operating as separate silos, and keep the new offices from splitting off in a few years and starting a competing firm. Quality attorney talent will be hard to find and those that you do find will be reluctant to want to work for a small firm with no footprint in the local area. It is always preferable to staff a branch office, at least initially, with attorneys from the home office.
  3. Structure and Management – a larger firm will require a more sophisticated structure and approach to management. Will the attorneys hired for the remote offices be partners or associates? Will you need to create a non-equity tier? Who will manage the remote offices? Will you need to hire a firm administrator?
  4. Cash Flow – Growth will put a strain on the firm’s cash flow and will require additional working capital. Your partners will have to invest additional capital or the firm will have to take on debt.
  5. Systems – Growth will require you to examine your IT systems and software that you are currently using. They may not be sufficient. Consider how you will connect the computer system of the main office to the remote offices. How will phone systems be connected?
  6. Policies and Procedures – policies, procedures, and protocols will need to be developed and documented.
  7. Compensation – You present attorney compensation system may no longer be adequate. Consider whether a new approach will be required to attract new attorney talent.
  8. Financial Management – Your approach to financial management may need to be more formal that it is now. Budgeting will be a necessity.
  9. Facilities – Office space will have to be located and leases signed unless you start out with an executive suite type of arrangement, such as a Regus office. There are pros and cons to starting this way. One the one hand it provides a low risk way to enter a new market but on the other hand it signals that you are not committed to the market and you have just one toe in the water.

These are just a few of the issues that you will need to consider. Do your homework and due diligence on this before you jump feet first.

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

 

 

 

Mar 21, 2018


Law Practice Acquisition Proposal

Question:

I am a partner in a three partner six attorney in Chicago. We have been having discussions with another law firm in the city regarding us acquiring their practice. The owner is seventy years old and wanting to retire and exit his practice. My partners and I have looked over the numbers and believe this would be an excellent opportunity for us to expand our client base. The practice handles the same type of work that we do. We are unsure what our next step should be? Do you have any suggestions?

Response: 

I would start by asking for all the due diligence information that your can get your hands on. For example:

  1. Profit and loss statements and balance sheets for the past five years
  2. Income tax returns for the past five years
  3. Copy of office lease
  4. Copy of all equipment leases
  5. Copy of most recent malpractice application
  6. Equipment and furniture inventory list
  7. Personnel list with current compensation and benefits paid, length of time with the firm, current job duties, etc.
  8. Information pertaining to benefits offered employees.
  9. Copies of marketing and business plans.
  10. Reports showing billable hours, fees collections by timekeeper, etc. for past five years.
  11. Reports showing fees collections by clients and practice areas for past five years.
  12. Current work in process and accounts receivable report.

Insure that you have done a thorough conflict of interest check and insure that you review the Illinois rules of professional conduct concerning sale of law practice. Give consideration to the value of the firm and what you are willing to pay for it and how? What assets do want to purchase – just the goodwill or will fixed assets be included? What about work in process and accounts receivable? Is there a building involved and if so do you want to purchase the building and real estate? Do you want to take on any of the employees? Do the numbers work for you? What terms would be acceptable to you?

The next step is to prepare and present a proposal. Some of the following elements would be included in a proposal:

Once you have prepared the proposal present it to the owner of the firm and go from there.

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

 

 

 

 

 

 

Mar 14, 2018


Attorney Career Progression – Competency Model

Question: 

I am a member of a three member executive committee with our twelve-attorney firm in San Antonio, Texas. One of our responsibilities is oversight of our career development program for associates and non-equity partners. We  have been discussing our policy of admitting associates to non-equity partner and non-equity partners to equity partner. Presently, we do not have anything in writing regarding timeline for consideration or what qualifies one to move to the next level. Associates and non-equity partners are unhappy with the present process. They want more clarity concerning their career advancement within the firm. You advise would be helpful to us.

Response: 

Several of my clients are developing career advancement programs that incorporate a competency-based approach that  outlines specifically what is takes to be successful and advance from associate to non-equity partner and from non-equity partner to equity partner. Rather than leaving the formula for success in the minds of the equity partners, a competency model gives each attorney in the firm an understanding of how he or she will need to perform in order to be perceived as progressing, an ultimately, as successful. Competency models offer transparency and clarity. The model outlines specific behavioral observations as the primary source of performance information. Benefits are as follows:

Associates are presented with clear information on expectations for their level of experience and a road map of what is expected as they progress. Specific expectations are laid out for progression to non-equity partner as opposed to a specific timeline.

Non-equity partners are presented with clear information on expectations for their level of experience and a road map of what is expected as they progress. Specific expectations are laid out for progression to equity-partner as opposed to a specific timeline.

Equity partners and senior lawyers benefit from a consistent description of performance standards that allow them to access performance, assign work effectively, and offer more meaningful career guidance.

The firm has a consistent methodology for making and compensation decisions.

In order to work, a competency model should be integrated with attorney recruiting, performance evaluations, training, and compensation systems. Associates and partners must invest time in attorney development.

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

 

Mar 07, 2018


Law Firm Marketing – Using Articles to Demonstrate Expertise

Question: 

I am new non-equity partner in a sixteen attorney firm in Phoenix, Arizona. My equity partners are telling me that I now have to do more than generate billable hours and perform quality work for clients. They now expect me to begin bringing in clients. I am not sure where to start.

Response: 

I often advise attorneys that while what you know is important what you want to be known for is more important. Just having your name known is pretty useless unless it is known for something. An outstanding personal injury plaintiff lawyer – not just a good lawyer. In law firms it is the reputation for expertise that matters, not just the reputation. Therefore, a successful marketing program must project and demonstrate expertise. This can be accomplished in the following ways:

  1. Byline Articles
  2. Authored Books
  3. Presentations
  4. Client Testimonials on the firm’s website.

While biographies on the website are important, prospective clients and referral sources are looking for proof of expertise. Articles, authored books, presentations, and client testimonials provide such proof.

One of the best and reliable ways of providing such proof is the article. In a byline article, you don’t have to say that your are an expert – the fact that you wrote the article, discussing a particular legal topic, says it for you. Its your expertise on display whether the article be in a print publication or posted on your website, blog, or other location.

An article is one tool that you can use where you have control – you can say what you want to say and say it in your way. In most cases, if an article is acceptable to a publication, an editor won’t change the thrust of it.

For most legal and business trade journal publications that accept articles you do not have to be a well known writer to write an article that will be accepted by these publications. You simply have to know what you are talking about. Editors will help with the formatting, style, and syntax.

If you retain the copyright to your article you can re-purpose your article and use it on the firm’s website, reprints, firm brochures, and as a future chapter in your first book.

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

 

 

 

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