Law Practice Management Asked and Answered Blog

Category: Uncategorized

Sep 04, 2019


Merger vs Transitioning Our Firm to Our Associates

Question:

I am one of three founding partners in a twelve attorney insurance defense firm in New Orleans. The three of us are in our early sixties and contemplating retirement in the next several years. The three of us have been discussing our succession plans and are wondering whether we would be better off merging with another firm or transitioning the firm to our associates. What are your thoughts on this matter?

Response: 

A majority of firms prefer transitioning to the next generation of attorneys within the firm whenever possible. Many founding partners at this stage of their career are often not ready to move to another firm unless they have to.

Advantages of transitioning to associates in the firm include:

Disadvantages of transitioning to associates in the firm include:

I believe that you should start by taking a critical look at the demographics of your associates and raise the following questions:

  1. What are the retirement timelines for each of you? Will you be retiring close to the same time?
  2. Do you have the bench strength – your present associates – to serve your existing clients if the three of you are no longer with the firm?
  3. If the three of you were no longer with the firm could your present associates retain your existing clients?
  4. Do any of your associates have the leadership and management skills to lead and manage the firm?
  5. Do any of your associates have the will to take over the firm and buy-out your interests?

Your answers to the above five questions will determine whether you should consider a merger strategy. It is often difficult to get a “founders benefit” (goodwill value) in mergers with other firms.

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

Jul 17, 2019


Law Firm Succession – Pros and Cons of Hiring an Associate as My Succession Plan

Question: 

I am a sole practitioner in San Diego, California. My practice is mostly general practice with some emphasis on commercial real estate. I am 64 years old and am looking for a way to transition and exit my practice in the next three to five years. I am the only attorney in the firm however there are three legal assistants that work for me. I have been considering hiring an associate so that I have someone to sell my interests to in the next three to five years. I have never had an associate so I would appreciate your thoughts concerning the wisdom of hiring an associate at this stage of my career.

Response: 

In general I prefer an internal succession strategy when the firm has an attorney or attorneys in place that are willing to step up to ownership and take over the firm. Often this is easier said than done. Issues you will face will include:

  1. Unless you are loaded with work that you are unable to handle or you hire an attorney that can bring work with him or her you will be increasing your expenses and reducing your income/compensation.  Since you have operated all these years with just one attorney I assume that there is only enough work to support one attorney. If you are ready to slow down to a reduced work schedule and take less compensation that is another matter. If not, you may want to look for an experienced attorney with some business rather than hiring a lawyer fresh out of law school or wait a little longer till you hire someone.
  2. Associates require care and feeding – in other words training, mentoring, etc. A certain amount of training and orientation will be required even with an experienced attorney. Revenues may lag from one to two years and your will be saddled with their compensation and other related expenses. You have no experience with mentoring attorneys and this may be something that you are ill equipped to do or don’t want to do.
  3. You may end up hiring and training in an associate only to have them leave the firm in a year or so to join another firm and possibly take clients with them.
  4. The associate you hire may only be looking for a 9-5 lawyer job and have no interest in owning a law firm.
  5. The associate you hire may expect to have you hand them your practice for free and he or she may be unwilling to pay you for your practice.

Many firms have had positive experiences with transitioning their firm to associates. Just be aware of the possible pitfalls. You may be better off going a different direction.

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

Oct 31, 2018


What Law Firms Must Do to Remain Competitive in the Internet Age

Question: 

I am the managing partner of a twelve attorney family law firm in Kansas City, Missouri. We have been in practice going on thirty years. Over the last ten years we have shifted more of our advertising from print directories and advertising to the internet. Today virtually all of our work comes from the internet. While to some extent this has been a blessing it has also been a curse as we must continue to make investments in search engine optimization, update the website, pay to be included in online directories, etc. It is a vicious circle and we are losing business to new attorneys just starting out that are putting up first class websites and making online investments.  I would appreciate your thoughts.

Response: 

The internet as well as advances in information technology has and will continue to be the key driver forcing change in the legal marketplace as well as other segments and our daily lives as well. Shopping malls are disappearing from our communities and department stores are struggling for survival. Being the king of the hill or the biggest is not the strategic advantage that it once was. The internet is leveling the playing field in many industries as well as law firms.  There are new opportunities and new competitors. Consider the following:

  1. Everything is being commoditized. More practice areas are moving down the value curve and prices are becoming more price sensitive.
  2. Disintermediation of traditional delivery channels. The internet provides new access to information and is eliminating the middleman. It is impacting how we shop, bank, conduct business, and pay our credit cards and taxes. It is also impacting how clients locate and select lawyers and how legal services are delivered.
  3. Our society is becoming – more and more – a DIY (Do it Yourself) nation.
  4. Lawyers competitors are just a click away whether they be legal process outsourcing providers (LPO) in India, other lawyers in your state – but further away and servicing clients remotely, legal publishers, or online form providers.
  5. New client opportunities for your may also be just a click away.

Challenges and Questions to Think About

  1. How do you deal with commoditized transactions?
  2. How do you tie yourself to your client in an online world?
  3. How do you compete with new models and approaches to the delivery of legal services?
  4. How do you compete with virtual law firms?
  5. Would you consider adding a online delivery component to your traditional brick and mortar practice?
  6. Should you consider other practice areas?
  7. Should you consider expanding your geographical reach in areas where you are licensed and other areas by forming relationships with licensed attorneys in those areas.

Here are a few suggestions:

  1. For your practice area you should continue what you are doing and maximize your online and electronic marketing investments.
  2. Online reviews are becoming more and more important. Have a protocol in place that asks clients for reviews upon completion of their matter. Make it easy for them by providing them with appropriate online links.
  3. Your website does not do enough to demonstrate expertise. I do not see any evidence of attorneys publishing any articles, serving on law related committees, or chairing such committees pertaining to family law. There are no testimonials from past clients or others on the website. Get your attorneys writing articles, get them published where you can, and get them posted to your website. Get testimonials from past clients and referral sources and post them to your website. Also get your attorneys involved in bar and other law related associations. Do more to build the brand of the firm and the individual attorneys. Many of my family law firm clients still receive a bulk of their business from past client referrals and referrals from other attorneys.
  4. Consider satellite offices in some of the suburban communities in Missouri and Kansas. I have family law firm clients that have been quite successful with multiple offices – staffed and not staffed.

Even in the age of the internet expertise, professionalism, and reputation is important. Do all you can to convey this through your website and your initial communications with clients.

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

Jun 12, 2018


Law Firm Strategic Planning – Culture as an Essential Ingredient

Question: 

Our firm is a twelve attorney firm – eight partners and four associates in Phoenix, Arizona. The firm was founded by the present partners twenty years ago. We are an eat-what-you- kill firm – partners are allocated their fees, overhead is allocated, and their compensation is their individual profit. While we have a firm administrator that handles the day-to-day management of our operations, we have done a poor job of long-term management and planning. One of our partners has suggested that we develop a strategic plan. However, I believe this would be difficult for us given that we never meet, have different ideas of our future, have never been able to agree on any major decisions, and unwilling to be accountable to each other and have a general attitude of mistrust. I don not believe we even have a firm culture – in essence we are eight separate practices operating under the guise of a partnership. Your comments are most welcomed.

Response: 

It is very hard for partners in an eat-what-you-kill firm to come together and implement a strategic plan when the partners have no common values, goals, or objectives. Eat-what-you-kill firms more often than not have no culture at all. Three components that are linked, reinforce each other, and must be balanced are strategy, compensation, and culture.

Culture is the outcome of how people are related to each other in a law firm, thrives on cooperation and friendship, and defines the firm’s sense of community. Culture is the glue that holds a firm together and is built on shared interest and mutual obligation. A firm’s culture boosts a firm’s identity as one organization and prevents disintegration and decentralization. Without a common culture a firm lacks values, direction, and purpose.

You firm is a fragmented or confederation culture and as such will find it difficult to even get started on a strategic planning process unless you are willing to change. You might want to spend some time addressing the question of whether you want to continue operating as lone rangers or whether you want to become a firm-first law firm. This will require that the partners give up some independence and be accountable to each other.

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

Nov 15, 2017


Law Firm Marketing – Paid Seminars

Question:

I am a partner in a six-attorney estate planning firm in Dallas, Texas. For many years our primary marketing activity has been seminars that we put on for clients, prospective clients, and referral sources. These seminars have been either put on solely by our firm or in partnership with other organizations such as nursing homes, hospitals, etc. These seminars have been free of charge. We provide a lot of value at these seminars and have been wondering whether we should charge a fee. We would appreciate your thoughts.

Reponse:

Do not assume that you must offer free seminars to get a marketing-benefit spinoff nor that only free seminars produce other business. In some respects paid-attendance seminars are even more powerful as marketing media than are free seminars. For one thing, the attendees who pay to attend are serious prospects. They are prospects that are qualified at least to the extent of having demonstrated serious interest in the subject, whereas at least some attendees at a free seminar are curiosity seekers with nothing better to do that afternoon or evening.

This is balanced by the heavier attendance at the free seminar, which may produce a greater number of good prospects, if not a better ratio of good prospects to curiosity seekers. That is there is a presumption of heavy attendance, for there is no guarantee of heavy attendance even at a free seminar.

There is a compromise position possible. You may opt to subsidize your own seminars by keeping the cost of attendance low which should produce good attendance, while still screening out the idle curiosity seekers. This would enable you to have modest registration and attendance fees.

I suggest that you review your past attendance history, ratio of attendees that have become paying clients, and determine whether you have an issue of curiosity seekers. If you have been doing a good job converting attendees to clients and have not had a problem of curiosity seekers I would probably stay with free seminars. If you have problems with curiosity seekers and your costs are getting out of control – I would consider modest registration and attendance fees. I would not look to these seminars as being a profit center for the firm.

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

Sep 27, 2017


Associate Attorney Business Development – Becoming a Rainmaker

Question: 

I am an associate attorney in a ten attorney firm in Atlanta. The firm represents mid-size to small businesses – transactional as well as litigation. There are six partners and four associates in the firm. I graduated from law school two years ago and have been with the firm for two years. All of my work is given to me by the partners and since joining the firm I have not brought in any clients. When I joined the firm I was told not to worry about bringing in clients – the firm has plenty of work. I am paid a salary and a bonus if my billable hours are at a certain level. There appears to be no desire by the partners for me to spend time developing clients. I have talked with my peers in other law firms that tell me that this is short sided and that developing clients is a major factor in their firms for associates to be considered for partnership. I would appreciate your thoughts on what I should be doing and what direction I should take.

Response: 

I agree with your peers. Whether you are encouraged by your partners or not developing “rainmaking” skill is an important skill that you should develop and will be a major career success factor if you remain in the private practice of law. While your partners hired you to primary be a “worker bee” and work on their matters, down the road it will become more important for you to develop business. It takes time to develop “rainmaking” skills and a network of contacts and the sooner you start the better.

In spite of many of the marketing initiatives undertaken by law firms, a majority of the business that comes to many law firms is through personal and professional referrals – from people a lawyer knows. The more people you know the more opportunities you will get. The value of your network is worth more than the sum of its parts, and that value grows geometrically over time and with the size of your network.

Lawyers who consistently find a modest amount of time for client development and invests it wisely will have a much easier time later in their careers when they must bring in business to get promoted than those who wait.

One of the problems that many law firms are facing today is not enough business and not enough rainmakers. Don’t wait for your partners to encourage you or to be compensated or otherwise rewarded. Invest your time in developing your network of contacts even if it requires dedicating some personal time and consider it an investment in your career and future.

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

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