Law Firm Growth

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“Bigger is better.” In recent years, many law firms have subscribed to that maxim to grow through office launches, mergers, or lateral acquisitions. Grabbing market share, adding substantive expertise, and establishing geographic relevance provided the justification for many an expansion plan. For some firms, growth appears to have been partly in response to the rapidly changing legal service landscape.  Edwin Reeser recently has written two thoughtful pieces presenting a contrary view to some popular notions that stoke the enthusiasm for growth.

Mr. Reeser’s articles note that law firm growth is not necessarily a winning strategy.   Indeed, for every benefit gained from an out of the ordinary course growth strategy, the bigger law firm assumes some corresponding risk. Only time will tell whether the financial benefits from expansion will outweigh the intangible risks. For that reason, it is a good idea to consider some of the by-products of an expansion plan before diving deep into the growth plan pool.

The Results of Growth Can Disappoint or Backfire. Bringing into your firm new people, new offices, and new expertise causes change. Change can be good, but it also can be unsettling. Moreover, all the promise justifying the growth can play out poorly.  Indeed, as Mr. Reeser wrote in 2012 in an excellent five part series for the San Francisco Daily Journal about the economics of lateral acquisitions, there is an equal chance that the lateral acquisition won’t take (to review the terrific five part series, go to Mr. Reeser’s website).  If this is the case, the cost of failure will be borne by the existing owners.   Trying to maintain credibility among your partners once an acquisition struggles or fails is not an easy task.  Beyond credibility, financial burdens caused by failed acquisitions can de-stabilize the firm.

The Excitement of Growth Can Become Addictive. Let’s face it; growing a law firm can be exciting. It really gets exciting if there is a series of
Continue Reading Growing Your Law Firm–Some Cautionary Thoughts

Law firm growth through merger has been popular in recent years and does not appear to be abating.  Each consummated marriage had its reasons, ranging from client centered, substantively compelling or geographically helpful. Some combinations proved quite successful, others moderately so, while a few could be judged as failures.

Deciding whether to combine law firms requires intense analysis that will be dictated by the situation. Besides the usual metrics of revenues, expenses, headcount, practice expansion and the like, law firm leaders face more intangible issues, such as whether disparate practices can coexist, whether some clients’ incompatibility precludes their being served under one banner, or whether strong personalities can get along. These issues can be tough to resolve and it takes a great deal of work to sort through them successfully.

Other issues are not so tough to assess. In fact, there are certain issues, Danger Signs if you will, that augur against any combination if they cannot be resolved with adequate certainty and confidence. If these Danger Signs exist, be prepared to run away from the combination.

If You Don’t Know How You Will Integrate the Firms, Don’t Combine Them. One of the most difficult tasks in trying to make two law firms or
Continue Reading Thinking About a Law Firm Merger? If These Six Signs Exist, Give it Another Thought

Big is better. Size Matters. We hear those statements all the time and in all contexts. More than a few law firms agree and have adopted growth plans in order to enhance their present status and prospects for the future. Many have grown through mergers, no doubt because management believed that growing existing practices, adding practices or expanding the firm’s geographic reach fit within the overall strategic plan. Some of those combinations seem successful; others have accomplished little while a few have proved disastrous.  As for many of the recently merged, the jury is still out. Only time will tell whether the combinations will work.

Growth through merger is one way to grow. But because a potential merger is not readily available all the time or desirable for some firms, many firms instead turn to lateral hiring to fulfill their strategic vision.

There are a lot of reasons lateral hiring proves to be a good alternative to merger. A firm trying to hire laterally can narrow its acquisition to the most productive attorneys and ignore attorneys that add little. Romancing the lateral may be easier because the hiring firm can more intensely court the potential lateral by focusing only on the lateral’s desires and aspirations. By directing the discussion with the lateral to the potential for an improved platform, access to a broader client base and better compensation, the likelihood of sealing the deal becomes a distinct possibility.

The thrill of the hunt aside, the hiring of a lateral attorney, even with a strong book of business, can bring some negatives. Specifically,
Continue Reading Law Firm Lateral Hiring–A Double Edged Sword

 I think there is a world market for maybe five computers. – – Thomas Watson, Chairman of IBM, 1943

Enough with Prognostication

More than enough has been written about the state of the legal profession. Forecasts vary from projections of a terminal change to the old law firm model (see two recent interesting examples), to more moderate assessments that foresee limited but still serious pain for most in the profession.

Rather than further the debate regarding the magnitude of pain that the industry is going to experience, we want to generate a dialogue centered on turning around a troubled law firm. Specifically, we are looking to discuss what can be done to move a law firm from being in danger of collapse to being a healthy organization pursuing its aspirations.

Unique Creatures

In the world of business types, there is a universe of difference between professional service organizations and other business enterprises. That difference is particularly profound when we start talking about planning and executing a turnaround strategy. Other businesses can restructure around products or service lines. With professional service firms the turnaround process starts with people and their commitment to the organization.

Commitment
Continue Reading Two Keys to a Successful Law Firm Turnaround/Restructure – Part 1

future and pastLaw firms can be in different stages of transition, ranging from facing a business altering decision all the way to requiring an orderly liquidation. One of the stages of transition frequently observed is when a law firm requires a repositioning. Such a law firm is not in trouble, is not staring down the threat of crisis and certainly does not need to develop and execute a liquidation/wind-down plan. Yet a firm in need of a repositioning cannot ignore the change occurring within its midst. If it does, the more serious and dire forms of transition may begin to surface with potentially devastating effects.

On the continuum of concern, clearly a law firm that may be in need of repositioning has more time to react than a firm in trouble; but procrastination is dangerous.

Recognizing the need for repositioning is the first step to staying away from the more serious forms of transition. With that said, here are a number of signs that your law firm is in need of a repositioning.Continue Reading Signs Your Law Firm is in Need of a Repositioning

Growth for the sake of growth is the ideology of the cancer cell.― Edward Abbey, The Journey Home: Some Words in Defense of the American West

I thought about naming this post “The Curious Thing About The Way We Define Growth” because it is so curious to me how the typical law firm defines growth compared to other businesses.

How does your firm define growth? Most law firms define it in terms of increased numbers of lawyers, offices and/or practice areas. During the last two decades, virtually every strategy session we’ve been a part of  has revolved around a perspective of growth that centers on size of the law firm.

We prefer to define growth as:
Continue Reading Law Firm Trouble and How We Define Growth