We are delighted to share a post from a terrific legal industry blogger – Alicia Norton.

The legal industry has done exceptionally well in response to the challenges brought by the global health crisis. According to a managing partner of a boutique legal search firm, many law firms were able to realize strong gains and profits throughout 2020 and 2021. This is due to the drastic changes that law firms have adopted in order to prioritize employee safety, as well as maintain workforce productivity. This includes allowing work from home arrangements, accommodating remote litigation, and being more proactive in reaching out to leads and clients.

Aside from the aforementioned practices, law firms have also made the most of available services to further their business. If you want your law firm to attain greater success this 2022, here are three important services that you should take advantage of.

IT services

If you want your law firm to remain fast and efficient, it may be in your interest to partner with a reliable IT solutions provider. Such services can ensure that all the technological aspects and resources your firm utilizes work smoothly and are protected from malicious software and cyberattacks. In addition, IT services can also boost the productivity of your law firm by setting you up with automation solutions. By using automation, you can free your lawyers and paralegals from menial and repetitive tasks, helping them remain focused on the more important aspects of their job. Such solutions are possible today thanks to algorithms and artificial intelligence programs that can quickly process and understand documents and records.

Accounting services

Leading a law firm is akin to running a business. Without proper accounting and good financial management, starting law firms can easily fail. However, many of those that lead small firms and solo practices make the mistake of doing their firm’s bookkeeping and accounting needs by themselves.

Many law firms today are realizing the benefits of outsourcing high value business functions, and this includes accounting and bookkeeping. Thankfully, outsourced accounting services are now more accessible today, as the accounting workforce is filled with professionals equipped with online degrees which has opened up the field to many more people. Today’s top universities have created online accounting degrees that help students develop a deeper understanding of business concepts such as managerial accounting business statistics, operations management, communication, and law without having to step foot inside a campus. This, in turn, has created a generation of freelance accountants who are more financially accessible for smaller law firms and independent legal practices ⁠— unlike accountants who come from huge firms. By outsourcing your law firm’s accounting and bookkeeping needs, you can focus more on the other critical aspects of your firm.

Marketing services

Another crucial service that your law firm should consider is a marketing service. Unfortunately, today, being recommended by traditional avenues may not be enough to gain the clients and revenue to keep your firm going. You have to actively market your law firm’s services in order to propel its growth and reach a target audience.

Partnering with a marketing professional can greatly benefit your law firm in a number of ways. For one, they can help you establish a unique brand image that allows your firm to stand out from the crowd. Furthermore, they can also create a foolproof digital marketing strategy that allows your firm to have greater visibility in the digital sphere. This is because most marketing experts today are equipped with a digital marketing degree that allows them to gain knowledge in key concepts such as search engine marketing (SEM), social media, paid advertising, data analytics, and content strategy.

To help your law firm grow its revenue and achieve more milestones this year, be sure to keep in mind what we’ve discussed above.

 

Article specially written for managinglawfirmtransition.com

By Alicia Norton

As we enter the New Year, chances are good you’re dealing with a predictable slate of demands on your time: setting compensation and budgets; managing details associated with the latest departure;  and interviewing this week’s lateral prospect. All important activities, and worthy of serious attention; but none of these is likely to make the firm fundamentally stronger, and better positioned to compete.

May I suggest something to spend a little time on that does stand a chance of making a real difference? Something that has a shot at making your firm better and stronger?

Spend some time really wrestling with this question: What one thing if accomplished this year will leave us a healthier, happier firm — better positioned to compete in 2022?

My wife exposed me to an interesting read The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results, by Keller and Papasan. The premise of the book is that we all face a tremendous number of distractions and demands on our time, most of which make no difference in our lives.

But if we take the time necessary to determine the most important thing to accomplish today, this week or this year, we can make a difference that really matters.

This isn’t a particularly complex concept; but it is one that far too few law firms (or individuals for that matter) seriously consider…much less, actually execute.

If you are in a law firm that doesn’t have a strong culture of planning, start by gathering the senior members of your firm for a discussion about the “one thing.” The dynamics will surprise you. Agree that you won’t be distracted…that you won’t attempt to solve every issue…but you’ll focus on one thing.

Agreeing on the “one thing” is more than half of the battle; but you will still have to execute. Things are more likely to really happen with some accountability built into action items. I recommend a regularly scheduled monthly meeting with your partners during which progress towards the “one thing” is discussed.

With these simple tools you and your partners can take a giant step toward being in a different place when you take stock of the year to come.

What do you think?

 

 

Law firm succession planning as an imperative is a popular topic. Discussing and planning for succession makes great sense on many levels. Without a good succession plan, the theory goes, a firm may drive off the cliff with catastrophic results.

But what if your firm is not a good candidate for succession? What if its drive towards the cliff does not have to mean catastrophe? These questions should be asked by all law firms that worry about succession. If the answers suggest a firm is not suited for the passing of the legacy baton from one generation to the next, a firm can be wiser and more strategic about its future and, ultimately, its end.

No two firm are alike, and there is no definitive list of markers that militate against planning for succession. But if one or more of the following circumstances exist, dedicating time to building a succession plan may waste time, energy, and emotional capital. A firm should rethink succession planning if:

Not all Owners Care. Planning and implementing succession are significant tasks that require dedication and perseverance. The needed commitment won’t be present unless consensus in favor of succession exists among firm owners (or most of your owners). If a sizable portion of your firm’s ownership is indifferent to succession, more than likely succession will fail. When presented with owner apathy, a firm may be smart to direct its focus elsewhere.

There is No Legacy to Preserve. Not all firms enjoy a legacy built up over the years. Rather, some firms see personnel steadily come and go. Likely, those firms really represent the alter ego of an overriding personality (or two). Planning for succession at such a firm may make as much sense as looking for the secret to eternal life.

A “Next Generation” is Absent. Succession is largely about transitioning leadership and/or client relationships to the next generation. When a firm has no “next generation,” it is hard to conjure a succession strategy that makes sense. Be realistic. Is there really a next generation of worthy successors? If not, succession will be very hard to achieve.

The Firm’s Decline Likely Will Continue. In all honesty, a downward spiraling firm that can’t reverse its decline just might not be something worth preserving. If recent years have not been good and nothing suggests that things will get better, a succession of the status quo can’t be attractive to the people needed to make succession work. When a track record of decline can be expected to continue, an eventual closing with a soft landing may be the best to be hoped for.

Better Alternatives Exist. A clear assessment of a firm’s situation may show that alternatives to succession are more compelling. A merger or being acquired may end a firm’s legacy, but both may serve the firm and its people better than a continuation premised on succession. A wind-down and closing, handled with advance planning and care, can avoid disaster, and appropriately provide a good future for a firm’s clients and people. In many cases, looking for the alternatives to succession is the smart move.

Just because a classic succession plan is not in your firm’s future, planning for your firm’s future remains vitally important. Asking hard questions about succession, and acting on the answers (however disappointing), is the essence of planning for the future. Are you thinking about succession realistically?

Succession and succession planning is a subject that is being addressed in many law firm leadership forums. One statistic explains the intense focus on the topic – only about 30% of law firms make it beyond the first generation.

Why Do So Many Law Firms Fail?

Why do so few law firms make it to the second generation? Consider this progression of logic:

  • Few goals are realized by happenstance;
  • The greater the objective, the less likely it will be realized without serious intent;
  • A written succession plan reflects serious intent;
  • 95% of law firms have no written succession plan;
  • For a majority of law firms, 25% or more of revenue is generated by or closely associated with lawyers that are 60 or older;
  • Few firms will survive the loss of 25% of revenue in a short period of time.

So What? 

If you are a law firm leader, this reality should not surprise you. We regularly visit with managing partners and governing bodies that see the writing on the wall. With the exception of those who choose to bury their heads in the sand, most agree succession must be addressed. A comprehensive and workable succession plan is essential if a law firm hopes to survive beyond the current generation.

A 3-Step Path to Survival

Step 1 – Start now. As simplistic as this may sound, it may be the single toughest part of developing a plan. The day-to-day demands of managing a firm and a practice make it difficult to step back and consider the future. This reality is one of the biggest reasons many firms find themselves in their current predicament — years of not having time to address relationship continuity and succession.

To think too long about doing a thing often becomes its undoing” –Eva Young

Step 2 – Engage your colleagues in a series of discussions intended to yield a plan for succession. Inclusion is essential to obtaining the buy-in necessary for a plan to succeed. Conversations with those impacted (clients as well as lawyers) that focus on long-term benefits, continuity of representation of clients, and the value of legacy are critical pieces of the puzzle. Some of these conversations may not be easy; but without them you are reverting to a strategy of hope.

Step 3 – Execute and monitor the plan. Very few plans roll-out exactly as intended but the routine monitoring of performance to the plan provides a means of adjusting as necessary to achieve the objectives. Succession is about the future — and any conversation about the future must be on-going. Inside a successful firm, a good plan must be able to evolve.

A successful succession plan doesn’t necessarily mean future leadership comes from within your firm. The plan may include the recruitment of new talent in the areas of leadership, and/or client generation and servicing. It may mean that the core of your firm survives as a part of a bigger organization. The real key is that the result your firm ends up with is the result you desire. Without planning, the desired result is highly unlikely.

One additional note that many firms miss when it comes to the issue of succession planning—-Succession is likely on the mind of your clients. The issues of experience and continuity are likely being dealt with inside your client’s organization. A thoughtful collaboration between relationship partner, the client and firm leadership is an opportunity to demonstrate that level of client-centeredness all law firms proudly tout.

Our experience is that most firms wait too long and suffer the consequence of fewer or no options. Don’t let that happen to your firm!

Law firm merger is popular because, among other things, it can help a firm grab greater market share, enter new markets, bolster capabilities, or address succession challenges.  These results or outcomes can compel a firm to pursue merger enthusiastically.  Unfortunately, mergers don’t always guaranty success and in some cases can undermine a firm’s stability. To be successful in merger, a smart law firm takes a careful and disciplined approach.

Law firm leadership considering merger should keep five key elements in mind to maintain needed discipline.  By making its pursuit of merger touch upon these five fundamentals, a management team positions its firm for success. These fundamentals are:

Approach Merger with a Non-merger Strategy in Mind.  Merger is not an end into itself.  Rather, the tactic of merger should serve a distinct firm strategy that is advanced by merger.  The firm strategy may pertain to growing the firm’s substantive capabilities, building out existing expertise or adding market share in areas the firm already competes. But a merger not based on furthering a non-merger strategy is a hollow exercise, and one that is best avoided.  For this reason, firm leadership should clearly identify the firm’s strategy that is served by merger before embarking on the idea of merger.

Look for a Combination that Serves the Non-merger Strategy.  Once it is decided to further a firm strategy through the tactic of merger, it is only logical to confine the search for a merger candidate that fulfills the firm’s objectives.  For that reason, the firm should establish the essential characteristics of any potential merger candidate.   As the process goes on, many potential merger candidates presented may be bright and shiny, but do not have the characteristics previously identified. A disciplined firm is not swayed by otherwise exciting firms willing to merge if the essential elements needed for the firm’s strategy are lacking.

Only Pursue Compatible Firms.  Believe it or not, a merger candidate may meet all the strategic criteria but can still be a horrible choice.  Once a potential merger candidate shows that it meets the firm’s strategic imperatives, its compatibility must be carefully examined.  Determining whether a firm is compatible often requires focusing on five compatibility metrics: culture, finances, clients, compensation, and operations.  Upon testing those metrics for the two potential marriage partners, the compatibility of the two firms will become clearer.  If compatibility is not present, it is best to continue looking.

Make Integration a High Priority.  As hard as it can be to put a merger together and get to the closing table, it can be even harder to integrate the two firms once closing occurs.  Disciplined firms in the merger game thoroughly consider the idea of integration, map out steps to a successful integration, and discuss it with their merger partner-before closing.    If prior to merger the integration of the two firms looks to be too difficult, passing on the proposed merger may be advisable.

Be Selective.  Because merger discussions can be time consuming and create an excitement about the future, momentum in favor of merger sometimes can prove overwhelming. Letting deal fever force a merger is unsound.  Rather, any proposed merger, should be compelling for a firm to say “yes.”  If the match does not meet that standard, it is best that leadership step away from negotiations and wait until a suitable combination can be found.  Waiting for the right merger is not failure, it just means that further work needs to be done.

Merger for the sake of merger should not guide a firm.  Instead, being disciplined when pursuing merger is a recipe for a good outcome.  Are there other important steps your firm has followed in its mergers?

For law firm leaders, continuing a firm’s success is about constant monitoring, clear vision, perspective, and the willingness to act.

Well-run businesses, including law firms, stay abreast of changes in the marketplace by monitoring shifting client needs. Successful businesses track the initiatives of competitors and seek to secure the premium assets needed to compete. For law firms, that means keeping clients, getting new ones, and preserving the talent in the workforce.

There are many ways to achieve this, but for nearly all law firms it includes staying focused on the bottom line. If a law firm operates profitably, it can be more responsive to its client’s needs, it can respond to its competition, it can innovate where appropriate and necessary, and it can retain its most valuable attorneys. Call it “staying focused,” “being on top of things,” or “keeping your eye on the ball”—each speaks to operating as if nothing is assured. Yesterday’s success is no guarantee of tomorrow’s survival.

A successful law firm is a busy one. New clients are landed, matters are opened, and legal advice gets delivered. The success enjoyed may be traced to the principles that drove the firm’s formation, the drive of the lawyers that came together as a firm, or a little of both. A brisk practice might also be due to increasing client demand. Whatever the impetus for the good fortune, few law firm leaders are naïve enough to assume that present success is a guarantee of future prosperity.

But if the fleeting nature of success is recognized, why do some firms fail to sustain the momentum they worked so hard to build?

Sustaining a law firm’s success, or even just ensuring that a firm survives, is a challenge faced by every law firm—every day of every year. And wherever the significance of the task is understood, focused and dedicated leadership can act and plan in firm-sustaining ways. For some firms, however, finding a way to continue the good times escapes leadership’s attention. And a struggling firm is an unstable one, less and less able to sustain its reputation and market position and increasingly putting itself at great risk.

Four fundamental lessons, if followed, can reduce risk and improve a law firm’s chances of surviving. Continue Reading Thoughts on Building Long-Term Law Firm Health

If you practice law, there is one eventuality that should be added to that familiar duo of Death and Taxes. No one talks much about it, but it warrants the same attention to detail. The subject? The end of your practice. 

As is the case with its two more familiar rivals for attention, ignoring it will not prove wise. 

The fact is that that for most the end of your practice will probably be the most significant professional transition of your career — the transition of one’s practice to someone else. Drivers generating this change include:

  • Pursuit of another profession or passion;
  • An unforeseen health circumstance; or the most often,
  • Retirement

A critical part of practice management is planning for the future. In its most productive form, career planning includes a deep-dive into both short-term and long-term possibilities. And this kind of planning can be the difference between a smooth and profitable transition, and disaster.

There are a number of issues to consider. And as is the case with respect to your personal taxes or the distribution of a personal estate, expert counsel can help you avoid pitfalls. leverage every asset, and end up in successful transition.

Some of the most common issues include:

  • Defining personal objectives
  • Compliance with local bar rules
  • Practice valuation
  • Finding a buyer
  • Negotiating the transaction
  • Transitioning client relationships

In this post we’ll explore the first three issues; and we’ll tackle some ideas around the remaining three in the next post.

Defining Personal Objectives

This first and most important step sets the stage for the entire process. It outlines what constitutes success, and sets parameters that will facilitate decision-making. What must be accomplished, and in what time frame? Do you want to completely step away from the practice, or keep one foot in? Do you want the transition to be prompt, or take place over time? Those variables dictate your strategy.

Compliance With Bar Rules

The ABA provides for the sale of your practice as long as certain conditions are met.  In Rule 1.17 sets forth the following conditions:

  1. a) The seller ceases to engage in the private practice of law, or in the area of practice that has been sold, [in the geographic area] [in the jurisdiction] (a jurisdiction may elect either version) in which the practice has been conducted;

(b) The entire practice, or the entire area of practice, is sold to one or more lawyers or law firms;

(c) The seller gives written notice to each of the seller’s clients regarding:

(1) the proposed sale;

(2) the client’s right to retain other counsel or to take possession of the file; and

(3) the fact that the client’s consent to the transfer of the client’s files will be presumed if the client does not take any action or does not otherwise object within ninety (90) days of receipt of the notice.

If a client cannot be given notice, the representation of that client may be transferred to the purchaser only upon entry of an order so authorizing by a court having jurisdiction. The seller may disclose to the court in camera information relating to the representation only to the extent necessary to obtain an order authorizing the transfer of a file.

(d) The fees charged clients shall not be increased by reason of the sale.

Please note that not all states (including Texas, where we are based) follow Rule 1.17. So, check your local bar rules before moving forward.

Practice Valuation

Whether you literally sell your practice or transition it to a new owner through another means, the practice needs to be valued for fiscal reasons.

Fundamentally this is a matter of determining anything being transferred that is relevant to the generation of future profits. Portions of the practice relevant to valuation include:

  • Hard assets
    • Furniture
    • Equipment
    • Property
  • Soft assets
    • Cash
    • Receivables
    • Work in process
  • Business systems/intellectual property
  • Goodwill
    • Existing clients
    • Former clients
    •  Referral sources of firm
  • Liabilities
    • Actual
    • Contingent

Even though each of the above items can have a significant impact on the valuation of the practice, the most difficult and critical valuation issue is that associated with the goodwill. What future revenue stream is really being transferred based on this often difficult concept?

Transitioning out of practice is best accomplished when handled as a process — one that begins long before the eve of the desired transition.

More in my next post…

Competition among law firms is as brisk as ever. Gaining an advantage requires more than hard work-it requires strategic thinking that causes a firm to be different in a positive and noticeable way. Simply working harder or relying on strategies that performed in the past is not enough.

If business as usual is not sustainable and differentiation essential, firms must consider not being all things to all clients, must bring greater focus to their clients’ needs, become more efficient, cost-effective and value conscious.  Firms also must consider advanced technology solutions, master project management, and “think outside the box.”

Firms seeking to differentiate face their old nemesis: change.  To conquer change and drive differentiation, firms must have and/or use the following five things:

Courage.         Differentiation means moving away from comfort zones.  It means changing the way business is done with the possibility that there is no turning back.  And it likely means narrowing service offerings and investing in specialization not invested in before.  Differentiation can mean saying good-bye to practice areas and personnel that for years have been a part of the firm.  Pivotal change like that takes courage.  Without it, recasting a firm through differentiation is difficult.

Knowledge.    The idea behind differentiation is not change for change-sake.  It is focusing on a new direction that offers more promise.  No new direction can be pursued without knowledge about the firm’s existing strengths, the opportunities in its markets, and the cost/benefits from pursuing a new direction.  Mere hunches are not enough.  Without a factually based and analytically tested plan, knowing whether the current state should be replaced by a future-state amounts to guesswork.

Judgment.       When moving from the status quo to something else, forks in the road will be confronted.  At those forks, critical decisions will need to be made.  The exercise of sound judgment is essential if the path towards differentiation is to succeed.  A firm embarking on a new and more focused way forward must be blessed with decision makers that have exhibited wisdom in the past.  If leadership’s judgment is suspect or untested, outside advice should be sought to supplement in-house mind power.

Resolve. It goes without saying that a firm seeking to differentiate must believe in its strategy.  When possessed with that belief, it is essential that the firm have the resolve to follow through on its plan.  Because it will be moving away from the comfort of the status quo, and bumps in the road could be felt, the firm must remain confident it is new direction.  As challenges are confronted, the firm’s commitment to the plan must be demonstrated by forging ahead.  If resolve is lacking, for a whole host of reasons failure is more likely.

Leadership.     A strong leader or leadership group must be in place before differentiation is possible.  People being asked to invest in the new way, many less courageous or simply uncertain, will gain strength from leadership that believes in the path forward and acts in ways consistent with that belief.  Strong persuasive attributes will be needed constantly as doubters, opponents, and uninformed overreact to challenges along the way.

Making your firm stand out is greatly aided by courage, knowledge, judgment, resolve and leadership.  Does your firm have those attributes?

 

 

 

Growth through lateral additions is a hit or miss proposition at best. Numerous survey reports indicate that far fewer that 50% of lateral additions meet the expectations of the hiring firm. There are a number of reasons for this poor performance. Three that almost always foreshadow disappointment in the near term include:

  • Exaggerated estimation of portable business,
  • Lack of cultural fit and,
  • Lack of strategic fit.

All three of these can be addressed by taking two steps that most firms fail to take.

Step 1

Clearly define strategic growth objectives. Strategic growth is growth that:

  1. Allows the firm to better serve current or emerging needs of existing clients,
  2. Allows the firm to capitalize on an emerging market opportunity of significance,
  3. Shores up a weakness that is limiting the firm in a material and defined way, or
  4. Strengthens the firm in an area in which it holds a strategic market advantage.

The strategic growth objectives should be enumerated in writing with specifics as to level of experience required, area of expertise needed, physical location, and any other characteristics that define a successful candidate for the specified strategic objective.

Step 2

Seek input from your firms attorneys. Depending on your firm’s size, solicit specific lateral recommendations from all attorneys — or, in larger firms, to an appropriate segment of partners/shareholders. A prioritized list of strategic growth objectives should be distributed along with a simple question – what attorneys do you know personally that would a) fill one of our strategic objectives and b) be someone you would really like to practice with?

Potential hires that meet strategic growth objectives and are personally connected to one of your attorneys greatly increase the odds of a successful lateral addition.

A friend and great thinker on this topic, Eric Fletcher, recently posted an article that is worth a read. The article includes a model for successful lateral pursuits. Do yourself a favor and check it out!

Merger is a tactic that never ceases to be popular with law firms. Among other things, a merger can create excitement, offer greater financial opportunity, provide a rescue, or promise a firm and its people a more promising future. As merger activity unfolds, a law firm leader may soon feel initial enthusiasm damped by unwanted attrition from portions of the firm.

Despite the perceived positives, merger can be unsettling to a firm’s personnel, including its key contributors. Uncertainty abounds and producers, non-producers, associates, and staff wonder whether a combined firm, from a personal standpoint, will be good or bad. Indeed, uncertainty can result in unanticipated departures that can tarnish a firm’s appearance and attractiveness. And in this frenzied time of law firms competing aggressively for lateral additions, this risk can be particularly acute. Without adequate advance preparation, departures can adversely affect the merger discussions and, in some instances, spell their doom.

Because merger discussions can foment anxiety at all levels, attention to dealing with that anxiety is a must. Most particularly, it is important to prepare for potential departures prior to diving deep into the merger waters. To do so, law firm leaders must:

Recognize that Turmoil May Arise. Before any merger discussions get started, leadership must understand that anxiety at the firm will increase in a multi-fold way. Contributors of all degrees will wonder whether a merged firm is a place they want to work. Once merger is in play, normally calm people can become skittish. Leadership must be sensitive to this potential and act to provide a calming influence.

Understand that Intangibles Matter.   Merger preparation means that data will be assembled to identify a firm’s strengths and explain its weaknesses. These analyses, especially regarding the firm’s producers, will focus on their economic contributions and downplay or explain away the negatives associated with some of the more challenged firm segments. Yet the firm’s real weakness can be the lack of glue or adhesion in its component parts. Leadership must identify where fissures might erupt and take steps to bond around them.

Negotiate Knowing that Departures are a Possibility. Nothing can hamper merger discussions more than experiencing lawyer departures after having touted those same lawyers as key pieces of the proposed combination. For that reason, no one component of your firm can be oversold. Negotiations should emphasize that the firm is greater than the sum of its parts and is an institution of great value.

Confront Departure Issues Head-on. If you have an idea that a departure is possible, deal with that risk directly. Visit the potential expat to address any disaffection that is fueling those thoughts. While this is where persuasive powers are critical, it is also critical that leadership address with other attorneys any fallout if departures do occur. For those that remain, a departure of one or more lawyers may create panic. Eliminate their concerns with a factually backed analysis of the firm’s remaining strength.

Provide Comfort to the Merger Partner. In instances when the departure cannot be averted, inform your prospective merger partner about the departure quickly with an analysis that emphasizes the remaining value of the institution. If you have been successful in tamping down any panic, consider informing your potential merger partner that additional departures are not expected and why. Finally, if your firm’s original pitch presented the firm as an institution more valuable than the sum of its parts, a leader’s ability to comfort a potential merger partner is enhanced greatly.

Pursuing merger is a high risk/high reward proposition.  It should not be pursued without understanding that lawyers may leave the firm in the midst of the initiative.  Can you firm withstand departures and make a merger work?  Can you firm continue if merger discussions cause departures, and no merger is consummated?