Olmstead & Associates Law Practice Management Blog

Succession: Obtaining Maximum Value for Your Practice

Question: I am the sole owner of a 12 attorney practice. I am 55 years old and am beginning to think about retirement. The other attorneys are associates in the firm. What do I need to be thinking about in order that I can transition out of my practice and have money for retirement. While I have put some money in a 401k, I am not yet financially secure enough to retire.

Response:

You are not alone. As the baby boom generation ages - more and more attorneys are asking this question. Unless you have an appropriate Exit Planning Strategy and put in place a sound Exit Plan, it is doubtful that you will be able to cash in on the full value of the goodwill that you have created. To exit successfully you need:

• A plan - a roadmap - that outlines the process and helps you decide on where you want to go and how you will get there.
• Timeline - a disciplined implementation timetable keyed to your Exit Plan.
• Start Early - Getting ready for exit takes time. Start early 5 - 8 years before your are ready to retire or exit.
• Decide - When do you want to leave the practice.
• Decide - How much cash you need when you exit.
• Decide - To whom do you want to transfer the practice.

You will need to consider whether you should consider merger, sale of the practice to an outside buyer, or sale of the firm to the other lawyers in the firm. You need to find ways to institutionize the firm so that in additional to professional goodwill (your personal reputation and goodwill) you develop practice goodwill (goodwill of the firm that will remain after you have left the firm). Develop your lawyers and create a desire and motivation for them to want to be owners/partners in the firm. Develop your staff and practice systems. Diversify and stabilize your client base.

If you decide to sell to attorneys in the firm - begin the process early so that most of the buy-in is completed before your actually leave the firm. The longer the planning horizon - the easier they buy-in burden will be for others

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

Change

Question: I am a legal administrator with a midsized firm in the southwest. Our firm has recently lost two major clients and we have not acquired any new major clients for many years. Other problems regarding failure to innovate also exist. I am concerned that if the partners do not change their ways that we may not still be in business in the next few years. The firm need to change. Where do we start? How can I teach old dogs new tricks?

Response: This is a common problem being reported to us by several of our clients. Institutional clients are now shopping for legal services. They are looking for innovative solutions to their problems. They are looking for law firms that they can partner with and that becomes in essence a part of their team. The old ways of conducting business is no longer working with institutional clients. Law firms need to rethink their business and perhaps reinvent their practices. This will not be an easy task for many law firms. Change does not come easy and it cannot happen unless the firm sincerely desires to change and do things differently. In many cases law firms cultures will need to be changed to a client orientated model. This will take time and patience. Legal administrators will play an instrumental part in this process. The firm may want to start by getting out of the day-to day management rut and begin a process of long term strategic planning. Only then will the roadmap to change be able to be formulated. John W. Olmstead, Jr., MBA, Ph.D, CMC

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Management Ideas for 2008

As you begin 2008 here for getting started.

• Take a serious look at the firm's present position in the marketplace. Review financials, compare against financial ratios, compare with both firm past history and against law firm benchmarks. Examine how well the firm is competing. Is the firm too dependent on a narrow base of clients? Is the practice at risk? Conduct a client survey and obtain client feedback both on firm performance as well as possible unmet needs and opportunities. Consider a comprehensive management review.
• Formulate business goals and develop a strategic business plan as a roadmap for the future.
• Design and simplify business reports designed to measure the goals identified in the strategic business plan. Strive for a one page summary as the primary report.
• Require all timekeepers in the firm to submit personal one page business plans which in addition to outlining goals for the year provided fee revenue goals with an element of stretch. The goals should have a stretch component but yet be realistic and attainable. These plans should be approved by the Executive Committee, Managing Partner or the Partnership.
• In all of our client engagements we typically discover that the root cause of most problems is poor internal and external communications. Poor client service, staff competency and morale, interoffice conflict, and client defections typically can be traced back to poor communications. Work on improving internal communications with firm personnel and external communications with clients and prospective clients. Yes, you have to have meetings now and then. Devise systems to improve communications and implement properly. If a meeting is required - conduct it properly, use agendas and take minutes. Use your email systems. Match the richness of the communication method with the nature and depth of the message to be communicated.
• Improve relationships with your clients. Studies show that each year 'lack of responsiveness' has been the number one reason for client dissatisfaction.
• Find ways to focus the firm and foster accountability from all.
• Undertake a few projects at a time that can be realistically accomplished. Delegate tasks across the firm. All firm personnel should have marketing responsibilities - from the receptionist to the senior partners and everyone else in between. Databases must be maintained, newsletters and articles written, presentations given, clients to be wined and dined, etc. There is work for everyone.
• Law firms must adopt management structures that enables the firm to act decisively and quickly. Structures that do not support such a culture must be replaced.

Strategies For Surviving In The Present Economy

As law firms begin to plan for the new year we suggest the following key strategies:

• Develop an ongoing brainstorming program to facilitate the process of identifying new business opportunities. Incorporate client surveys into the process. Consider small client advisory boards and focus groups.
• Get that business/marketing plan that you have been talking about for years done for 2008.
• Focus – Focus – Focus your firm

Research indicates that three of the biggest challenges facing professionals today are: time pressures, financial pressures, and the struggle to maintain a healthy balance between work and home. Billable time, non-billable time or the firm’s investment time, and personal time must be well managed, targeted and focused.

Today well-focused specialists are winning the marketplace wars. Trying to be all things to all people is not a good strategy. Such full-service strategies only lead to lack of identity and reputation. For most small firms it is not feasible to specialize in more than two or three core practice areas.

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.

We suggest the following:

• Recognize that unless your firm is a large firm - full-service may not be an appropriate strategy. Small firms should identify fewer areas of practice and specialize and aggressively market these areas.
• Limit your practice
• Consider industry niches
• Identify three to five key goals and strategies for the year
• Be selective in client acceptance
• Use your business/marketing plan as a tool to keep you on track
• Create an environment in your firm for effectively getting decisions implemented
• Increase your marketing investments. Research over several decades shows that businesses that continued to invest in marketing during a recession had greater growth and profitability than their competitors who decreased marketing investments during the down periods.
• Evaluate your image and your firm identity plan. Consider upgrading your marketing materials.
• Consider ancillary business opportunities.

Tips for Staying Energized and Productive

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

I am often asked to help law firms design and implement strategic business plans. I also coach many solo and small firm attorneys in career as well as personal and professional life balance issues. In both situations the starting point is the same.  Begin by taking inventory of your personal life goals. Only then can you effectively begin planning an effective career strategy or law practice. Unfortunately, may attorneys start with the law practice and take care of business first and fail to take care of their personal lives until it is too late. It is much easier to begin your life and career with balance that it is to try to bring your life back into balance later in life.

Ask yourself the following questions:

1. Do you find yourself spending more and more time on client and firm work-related projects?

2. Do you often feel that you don't have any time for yourself or your family and friends?

3. Does it seem that every minute of every day is always scheduled for something?

4. Do you sometimes feel as though you've lost sight of who you are and why you chose law as a career?

5. Can you remember the last time you were able to find the time to take a day off to do something fun -- something just for yourself?

6. Do you feel stressed out most of the time?

7. Can you remember the last time you used all your allotted vacation and personal days?

8. Does it sometimes feel as though you have never even have a chance to catch your breath before you have to move on to the next client project/crisis?

9. Can you remember the last time you read -- and finished -- a book that you were reading purely for pleasure?

10. Do you wish you had more time for some outside interests and hobbies, but simply don't

11. Do you often feel exhausted -- even early in the week?

12. Can you remember the last time you went to the movies or visited a museum or attended some other cultural event?

13. Do you do what you do because so many people (children, partners, parents) depend on you for support?

14. Have you missed many of your family's important events because of work-related time pressures and responsibilities?

15. Do you almost always bring work home with you?

If you answered with non-positive responses to more than five questions your life is out of balance and you need to take steps to correct the situation.

Here are some ideas:

Keys To Happiness

• You must take responsibility for your personal happiness, set clear goals, develop skills, become sensitive to feedback, know how to concentrate, and get involved.
• You must have an overall context within which to live.

Tips For Staying Energized And Productive

TIP #1: Develop a Personal Life Plan and a Career/Practice Business Plan.

TIP #2: Use and work your plan.

TIP #3: Work smarter not harder. Improve your time management skills.

TIP #4: Create your life balance expectations for you clients and your superiors in the firm. When interviewing for a new job or position let your future employer know your expectations upfront.

TIP #5: Tend to your physical health. Insure that you address prevention and treatment of diseases, weight control, physical fitness and stress management. Schedule and keep annual physicals. Exercise daily.

TIP #6: Begin looking for ways to implement alternative billing. Look for alternatives to billable hours.

TIP #7: Take time for yourself and family. Take vacations.

TIP #8: Define what is important to you and define your personal-professional life balance boundaries.

TIP #9: Enjoy life and get involved in activities other than the practice of law. Pursue hobbies and other interests.

TIP #10: Know your personal and professional goals.

TIP #11: Learn to relax. Take time everyday for meditation, prayer, yoga or some other activity that is focused solely on relaxation.

TIP #12: Schedule time for relationship building and maintenance.

TIP #13: Never eat alone. Use mealtime to network with referral sources, potential clients, and other professionals.

TIP #14: Turn off e-mail notifications, pagers, and cell phones.

TIP #15: Develop a personal and business budget and follow it.

TIP #16: Network, Network, Network both inside and outside of the firm.

TIP #17: Develop your conversational skills.

TIP #18: Eliminate clutter at home and at work. Develop a filing system for your personal papers and business files and documents. Open and review your mail immediately and discard anything that you do not intend to keep.

TIP #19: Use technology to streamline your work.

TIP #20: Delegate work.

It takes 30 days or longer to form new habits. PRACTICE, PRACTICE, PRACTICE. Celebrate your successes, reward yourself, and continually strive for improvement.

Suggested Practice Tips For Today

1. Never eat lunch alone. Have lunch everyday with clients, prospective clients, referral sources or members of your team.
2. Take our time management self test. Begin working on your problem areas one behavior at a time. Time is money.
3. Enter you time daily into you time and billing system - both billable and non-billable - as you work. Don't go home until you have accounted for an entire day. You may be dropping 10-25% potential revenue.
4. Look for ways to brand yourself - dare to be different. With the internet you really can expand your base beyond your local community.
5. Set a few goals and hold yourself and your team accountable.

Business Identity Plans

Question: I have heard you speak about Business Identity Plans. What is a Business Identity Plan?

Response: A business identity plan is a communications design plan that insures  a consistent and professional firm identity and message is being conveyed through all of its collateral marketing materials and vehicles. It begins with identifying the firm’s core values, uniqueness, and essence which frequently is a result of a strategic planning process. Then designers create graphic identity scenarios depicting illustrative letterheads, business cards, web site, etc. Frequently logos and tag lines are developed. Once the firm selects an identity plan it is incorporated in a consistent manner into all marketing materials including:        

Letterhead & Envelopes

Business Cards

Web Site

Powerpoint Presentations

Newsletters 

Announcements

Press Releases

Skill Requirements for Office Managers/Bookkeepers in Small Law Firms

We are often asked about skill requirements for office managers/bookkeepers in small law firms. (Six attorney and under firms) Many law firms in the six attorney and under size have shared with us their frustration in staffing the billing and accounting function. Often their investment in computerized billing and accounting systems fails to yield desired results due to poor accounting and management skills. Many small law firms assume that legal secretaries also have requisite accounting and management skills. Our experience has been that often this is not the case. Training, skills, and work behaviors are often different. Bookkeepers/accountants and secretaries are different animals. Many small firms are better off creating a accounting/bookkeeping position and staffing the position with a qualified bookkeeper/accountant. For many firms under six attorneys that have fully automated the billing and accounting function and have distributed time entry, this is not a full time position. In such instances many firms have either recruited a part-time bookkeeper/accountant solely for the accounting function or have created a combined position of office manager/bookkeeper. This justified a full-time position. Look for the following skills when evaluating candidates. Professional training in bookkeeping and accounting fundamentals as well as management principles.

A basic bookkeeping class should be a minimum requirement.

While a college degree should not be a requirement for the small firm, some college courses in accounting and management is desirable.

Two years+ prior experience in a bookkeeping/accounting position in a professional services firm such as law, accounting, consulting, etc.

Prior experience in a law firm bookkeeping/accounting position is desirable.

Experience with computers and accounting software as well as spreadsheets. On hands experience with the accounting software that the law firm uses is a plus. However, this is often not possible.

Prior office management experience in a law or other professional services firm if this is to be a combined position.

Detail orientated

Professional and able to deal with multiple demands, multiple masters, and the politics of a law office.

Client Development/Marketing - Long Way to Go in Many Small Firms

We just returned from participating at a Solo Small Firm Conference which was held for solo and small firm practitioners in the mid-west. I spoke at two session and we had a booth there as well. A few statistics:

• Over 800 attended the event
• Of the 200 people that we met with - 70 had no business cards with them
• 60-70% did not have web sites
• 60-70% did not have internet domain names

Personal networking and relationship building is still one of the best ways to cultivate clients. Not having a presence on the internet is like not being in the phone book.

Solo and small firm attorneys need to use all of the tools available to project their image. It does no good to spend money on developing marketing tools and then not use them.

Problems With Office Staff Getting Along

Question: I am the managing partner in a three attorney firm and am having problems with office staff members getting along. Office conflict is rampant. Any suggestions?

Response: You must begin by identifying some of the causes. Poor communications often can be the root cause of such problems. Interview each of your staff members individually and probe. What do they think? Is communications a problem? Are roles, duties, and responsibilities clarified? Lack of clarity can in these areas can lead to turf wars. You may want to design job descriptions for each employee and clarify roles, duties, and responsibilities for each employee. Conduct short weekly staff meetings to enhance communications. Use agendas. Take minutes of the meetings. Advise everyone of your expectations including all members working together as team members. Let them know that working together as a team is a performance factor that will be considered in performance evaluations and reviews. Conduct periodic performance reviews. Counsel and take action against problem employees. John W. Olmstead, MBA, Ph.D, CMC

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