Question:
I am the owner of an estate planning firm in Oklahoma City. I have four associates that work for me in addition to two billable paralegals and three staff support members. I am looking for ways to improve our business development and marketing. The majority of our business comes from past client referrals and referrals from employees and friends. We spend a considerable amount on advertising which includes our website, print ads, collateral materials, newsletters, etc. We would like to do more to increase client business. I would appreciate your thoughts?
Response:
I find it interesting that you did not mention referrals from other lawyers. I have many estate planning/elder law clients that receive a major portion of their clients from referrals from other lawyers. This should be a key component of your marketing plan. Your business development and marketing efforts should address this potential referral source. You should be investing targeted time:
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am the solo owner of a five attorney estate planning firm in Los Angeles consisting of myself and four associates. I am approaching retirement and looking at my exit options. Since there are no heirs apparent in the firm I am looking to sell the practice. However, the potential buyer that I have been speaking with is nervous and concerned about client defections, proper transition, etc. Also, I would like to continue to practice for a few years and don't want to run afoul of the rules of professional conduct. I would appreciate your thoughts.
Response:
You might want to consider a two-phased approach. Merge with the other firm, continue to work for a few years, work on transitioning relationships, retire and sell your interests, and continue to work as an Of Counsel after that if you so desire.
For Example. A sole proprietor was generating $500,000 in annual revenues with one full-time senior attorney, a full-time paralegal, and a clerical person while netting 40%, including perks and benefits. This owner wanted to work three more years full time and several more years in a part-time role thereafter. The firm interested in acquiring the practice was a three-partner firm generating $2.2 million a year working with similar clients, under a similar culture and fee range.
Phase One consisted of a merger with the retiring owner agreeing to retire in three years and sell his ownership interests for an agreed amount. At its inception, the two practices were combined. The successor firm provided the practice with the same amount of labor required in the past through a combination of retaining and replacing staff, as both were deemed necessary by the parties. The successor firm took over most of the administration, and the deal was announced to the public as a merger.
The transitioning owner was able to come and go reasonably as he saw fit, run his practice through the successor firm’s infrastructure, and retain significant autonomy and control. Because he historically generated a 40% margin, the successor firm agreed to assume all the operating costs of the practice and pay 40% of gross collections from the transitioning owner’s original clients as compensation. Phase One was set to terminate on the first of the following events: (1) the end of three years; (2) the death or disability of the transitioning owner; or (3) the election of the transitioning owner.
Phase Two was the buyout of the retiring partner's ownership interest, and it was set up in a traditional fashion. Phase Two kicked in at the end of Phase One. By deferring the buyout until the full-time compensation ceased, the transitioning owner could extend the period for his full-time compensation, and the successor wasn’t being asked to pay for the practice and full-time compensation at the same time."
Many firms have taken this approach and we have found that it increases the likelihood of successful client transitions, reduces the risk of client defections, and increases the value for the retiring owner.
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am the owner of an estate planning practice in northwest suburbs of Chicago. I have two associates and for staff members. I am sixty seven and would like to retire when I am 70 (3 years). I have no idea as to where I should start and the approach I should take. I would appreciate suggestions.
Response:
Sole owner firms and solo practitioners face a real challenge when deciding what to do with their practices. While many of the issues are similar to those faced by multi owner firms, sole owners and solo practitioners must also face the following additional challenges:
As with multi owner firms the key is to start early and not wait until the last minute. I suggest that you put in place your succession/exit plan as soon as possible – not just for retirement but for unexpected situations as well – so that your family, employees and clients are not left in the dark if something should happen to you.
Just because you have associates – don't assume they want to be owners and own a law firms. Look into this early as it may impact your hiring strategy as well as your overall strategy and whether it will be an internal vs. external succession strategy.
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am a partner and a member of the Executive Committee of a 250 attorney firm in the mid-west. We have had a succession plan in place for several years for our senior partners. Several have completed their phasedowns successfully and others are struggling. One of our challenges is many of our mid-career partners are simply not ready. I would appreciate your thoughts.
Response:
This is a common problem that many larger firms face as their senior partners phasedown to retirement and try to transition client relationships and firm managerial and leadership roles to the next generation. Often the focus of non-founders is on billable hours and working attorney fee collections as opposed to non-billable longer-term investment activities such as client development, firm leadership, and management.
Unlike smaller law firms most large law firms do invest time and effort in developing mid-career partners in these areas. However, often more can be done. Here are a few thoughts:
I would encourage mid-level partners to try to budget 70% of their worked time for billable client production and 30% for non-billable investment activities.
Click here for our blog on succession
Click here for out articles on various management topics
John W. Olmstead, MBA, Ph.D, CMC
Question:
Our firm, a 12 attorney firm, in Detroit, is having a partner meeting next week focused on thinking about what we can do different in 2011 in order to have a more successful year. While we have a few ideas what are your thoughts?
Response:
The economy is still posing challenges for many law firms and will continue to do so in 2011. Law firms must continue to be dilligent about managing costs but more importantly must really hone in on improving revenues. Here are a few ideas:
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John W. Olmstead, MBA, Ph.D, CMC
For the past four weeks I have been discussing the characteristics of successful law firms and introduced the following basic building blocks that successful firms typically have in place:
Partner relations, leadership, management, and partner compensation blocks have been discussed.
The fifth basic building block is planning. Successful firms have a long range business or strategic plan in place.
Based upon our experience from client engagements we have concluded that lack of focus and accountability is one of the major problems facing law firms. Often the problem is too many ideas, alternatives, and options. The result often is no action at all or actions that fail to distinguish firms from their competitors and provide them with a sustained competitive advantage. Ideas, recommendations, suggestions, etc. are of no value unless implemented.
Well designed business plans are essential for focusing your firm. However, don’t hide behind strategy and planning. Attorneys love to postpone implementation.
Failing to plan is planning to fail.
Click here to read my article on the topic.
I will address each of the other building blocks in upcoming postings.
John W. Olmstead, MBA, Ph.D, CMC
www.olmsteadassoc.com