This past week, The Remsen Group held the Southeast Managing Partner Forum in Atlanta.  Fifty-eight participants attended representing thirty-nine firms in the Southeastern region.  According to 23% the participants, marketing and business development was the most effective way to improve long-term profitability.  This eclipsed raising rates, which was rated as the most effective way to improve long-term profitability by 21% of respondents.

According to the 2007 Law Firm Economic Survey from LexisNexis, marketing and business development was second only to rates as the most effective way to improve profitability.  Yet only 3% linked compensation to marketing and business development activity.  It is apparent that firms consider marketing and business development as important keys to improving profitability.

In our 2008 Survey (currently accepting submissions - please click here if you would like to participate), we dedicate 19 questions on business development.  We hope to be able to flesh out what works for firms and what isn't working to improve profitability.

In a year where the majority of economic news points to an economic downturn, how a firm invests now will determine what opportunities open for it after the economy recovers.  It's worth reviewing some past posts that help firm's manage down cycles and prepare for the eventual upswing:

• RVs, Bananas and Recession-Proofing the Law Firm;
• Planning Helps Law Firms Weather A Bad Economy;
• Information-Driven Business Development For Law Firms;
• Management ABCs: The Hawthorne Effect;
• Marketing Advice for Lawyers During Economic Down Cycles;
• Retained Earnings Prepare Law Firms For Unexpected.

Another interesting statistic that follows earlier surveys is that over 2/3rds of the attendees of the Managing Partner Forum in Atlanta did not follow a firm-wide strategic plan.  John Remsen, along with John Smock and Thomas Grella, Esq., have teamed up to provide a web seminar on Law Firm Strategic Planning.   John Remsen is the owner of The Remsen Group, a marketing consulting firm that is focused on the law firm market.  John Smock is a management consultant and partner with Smock Sterling strategic management consultants.  Mr .Grella is the Managing Partner of  McGuire Wood & Bissette, PA and co-authored the book The Lawyer's Guide to Strategic Planning published by the American Bar Association.  The webinar is scheduled for  June 10th at noon eastern.  To register, click here.

Related posts

• Survey Targets Business Development In Law Firms
• Law Firm Challenge Number 1: Get a Plan!
• Top 25% of Law Firms Earn Margins Above 40%
• The End of Generally Accepted Accounting Principles?
• The Case Against Income Partners

 

The Juris Law Firm Economic Survey of midsized law firms is a step-by-step road map for increasing law firm partner income.  The survey DISCLOSES FACTORS THAT INFLUENCE PARTNER EARNINGS. The analysis and commentary included in the 55 page report provides recommendations based on the survey findings.

 

As the year comes to a close, I suggested that Juris, Inc. make the 55-page report available to loyal morepartnerincome readers at a discount. They agreed. From now through the end of the year, you can purchase the survey for $187, half of its regular price, by clicking here for this special morepartnerincome  price.

PS:  On January 16^th and 17^th I will be speaking at Managing Partner Luncheons, first in New York and then Philadelphia, on the subject of increasing partner income. The luncheon meetings are hosted by Network Alternatives, Inc. and are by invitation only.  Space is limited, but if you are interested in attending, contact Janine Brown at 215.702.3800 x225, or email jbrown@network-alternatives.com.

 

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Related posts

• Top 25% of Law Firms Earn Margins Above 40%
• Survey Discloses Factors That Influence Law Firm Partner Earnings
• Law Firms Disappointed With Associate Hours
• Want To Have A Record Year For Your Law Firm?
• Too Busy to Increase Law Firm Performance

The recent Law Firm Economic Survey conducted by Juris, Inc. illustrated the relationship between the fees charged by midsized law firms and their per-partner income. While that relationship might seem unsurprising, it should be thought provoking.

The above chart divides surveyed firms into quartiles according to per-partner income and then shows the comparison between their average fees. The actual realized blended rates, as well as reported standard rates, were lower for each subsequent quartile. Partners of law firms in the first quartile earned twice the per-partner income of the second quartile and seven times the earnings of partners in the fourth quartile. Is this a blinding glimpse of the obvious—law firms that charge more make more?

Here are the important questions: Are the lawyers in the top 25 percent of surveyed firms better lawyers? Are they smarter? Did those firms pick more profitable practice areas? Have they done a better job at branding?

Let me suggest a simpler answer. Midsized law firms with higher rates simply set them higher to start with! If we take a look at individual firms, we can find clear reasons why one firm can charge higher rates than others. But when I review the 2005 survey results, these reasons don’t appear to explain the aggregated results in the survey. The composition of each quartile appears to be similar mixes of practice classes and size.

Law firms regularly increase rates from year to year to cover increased operating expenses, including associate salaries. In most cases, such increases do not contribute to higher margins. They simply recover higher expenses. If a firm starts with lower fee rates, they tend to stay lower in spite of annual or periodic increases.

Midsized law firms need better information about competitive prices in the marketplace. Rather than think in terms of annual increases to the existing fee structure, they need to reset those fees based on market information. They need competitive and peer group intelligence. Traditional surveys provide some insight, but they are often 18 to 24 months behind the curve, and matching your individual firm to a meaningful peer group is an imperfect task. Better information is on the way through new benchmarking services such as those from Redwood Analytics, Peer Monitor and Juris Insight.

Even with better information, individual law firms can have a difficult time restructuring rates. Compensation plans often lead to partner resistance toward anything other than moderate increases. Partners dependent on origination credit for a significant portion of their income can feel threatened by possible client defections. The best approach may be an incremental one. Reset fee structures for new business and develop an incremental plan to rework existing relationships over time. A helpful guide to price increase implementation was suggested in the prior post Law Firm Rate or Fee Increase Letter.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• Top 25% of Law Firms Earn Margins Above 40%
• Survey Discloses Factors That Influence Law Firm Partner Earnings
• What Margin Should Your Law Firm Generate?
• Too Busy to Increase Law Firm Performance
• Law Firm Business Model: Margin

Friedrich Blase with Edge International penned an article appearing in the September issue of Law Practice Today titled “Beyond Today's Income – What Constitutes a Firm's Future Earnings Potential?” It is a great question but a difficult read. It is a question that is always on the mind of every partner and every partner candidate in the firm.

Answering that question in an ongoing fashion is a central function of firm leadership. Fail to answer it, and the firm loses the glue that binds the law firm together. Blase puts it this way:

“Eventually, all the potent partners realize that their firm has no positive answers ……..” “Their firm, they have decided, does not have enough future earnings' potential. As one administrator of a demised law firm's estate put it brutally, "Left behind are the old, the fragile and the idealists."

The word vision is often used when discussing the role of law firm leadership. While that vision is not exclusively financial, financial aspects must be a part of it. The leader’s role must include not only the steps to assure sound future financial performance but the steps to build internal confidence in that future.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

 

Related posts

• Top 25% of Law Firms Earn Margins Above 40%
• Survey Discloses Factors That Influence Law Firm Partner Earnings
• Leverage Rules When It Comes to Partner Earnings
• Juris and Ed Poll Team Up To Offer Managing Partner Roundtables
• Too Busy to Increase Law Firm Performance

Larry Bodine’s Professional Services Marketing Blog is well worth checking daily. In a recent post, he asks, "Is Your Firm’s Profit Margin 40%?” Then he points out that if it isn’t, it could be, based on his experience working with law firms.

Larry was one the folks who teamed up with Juris, Inc. to encourage midsized law firms to participate in the Juris Law Firm Economic Survey conducted earlier this year. The results are in and Larry Bodine and participants should receive copies of the 55-page survey results and analysis within the next two weeks. The report will be available to others after September 30 for $375.

Firms in the top 25 percent measured by per-partner income had an average margin greater than 40 percent. They didn’t get there by cutting costs or by having a higher than average realization. In fact, their cost per head is higher than the remaining 75 percent of firms. How can they spend more and still outpace other firms in terms of margin? They do it by concentrating on revenues rather than expenses. They generate more fee dollars per head through higher effective rates and better utilization of their legal team.

The Juris Law Firm Economic Survey of midsized U.S. law firms for 2005 identifies 10 important factors that influence law firm financial performance and partner earnings. For more information about the survey or to purchase the 55-page click on the image below.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• Survey Discloses Factors That Influence Law Firm Partner Earnings
• Too Busy to Increase Law Firm Performance
• Partner Income Related to Law Firms Fees
• RULES: Another Path to Law Firm Success
• Modeling the Law Firm's Financial Performance

In a previous post, I referred to a soon-to-be-released survey. Well, it has been released. Juris, Inc. just announced the release of the latest annual Juris Law Firm Economic Survey. The survey of midsized firms covers financial results for the year 2005.

The survey identifies ten important factors that influence law firm financial performance. You will find that the top performing firms excelled across all key performance indicators, not just one or two. Firms that understood those factors, set goals, measured performance, and held people accountable dramatically outperformed others. The disparity in per-partner income between the top performing 25 percent of firms and the rest of the pack is eye-opening. Partners in the top 25 percent earn twice the income of the next quartile and more than seven times the per-partner income of the lowest 25 percent.

The Juris economic survey, one of the largest in the legal community, is unique in targeting midsized law firms. This year’s survey results are compiled from 274 participating midsized firms in 142 cities spread over 40 states and represent 6,000 lawyers.

Midsized law firms can use the 55-page survey report to identify where they stand against their peers. They will find the accompanying analysis and recommendations of the Juris team a useful tool for increasing financial performance.

The annual Juris survey is shipped automatically to those firms who participated in the survey. This year’s survey is available to others for $375. For more information, select the link below.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• Top 25% of Law Firms Earn Margins Above 40%
• Benchmarking Services for Midsized Law Firms
• Too Busy to Increase Law Firm Performance
• Partner Income Related to Law Firms Fees
• Juris and Ed Poll Team Up To Offer Managing Partner Roundtables

Fellow blogger Ed Poll has teamed up with Juris, Inc. to conduct a series of managing partner roundtables around the country. Ed posted the announcement on his LawBiz blog over the holiday weekend.

The Juris® Managing Partner Roundtables are an extension of the company’s successful annual Managing Partner Forum. According to Stephen Collins, president and CEO of Juris, Inc., “The roundtables will extend the Juris Managing Partner Forum benefits by conducting focused monthly meetings in key cities throughout the United States.”

The idea behind the round tables is to provide a forum where managing partners can share best practices and discuss management issues with their peers from non-competing firms. Ed Poll, under the banner LawBiz®, has been successfully conducting similar roundtables in Los Angeles for a number of years. Rather than reinvent the wheel, Juris, Inc. formed an alliance with Ed’s LawBiz Management Company to jointly organize and conduct the roundtable sessions.

The schedule for the remainder of this year and for 2007 has not been finalized. When it is, I will post the schedule, or you can find it on Juris.com. If you are a managing partner, CFO, COO, CEO or equivalent and are interested in participating in a roundtable near you, e-mail me at morepartnerincome@juris.com for additional information.

As the leading provider of business systems and services to midsized law firms, Juris, Inc.’s business mission is to improve law firm financial performance and partner earnings. The company’s Managing Partner Forum and Roundtables are another way for the Juris team to contribute to the financial success of law firms.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• Managing Partner Forum Keynote Interview
• Survey Discloses Factors That Influence Law Firm Partner Earnings
• Top 25% of Law Firms Earn Margins Above 40%
• Leverage Rules When It Comes to Partner Earnings
• Law Firm Growth Prospects - 2005 Survey Results

 

A picture says a thousand words. The above chart based on a soon to be released Juris, Inc. survey of 2005 law firm financial performance confirms, once again, the important role that leverage plays in determining law firm partner earnings. The first quartile represents the top 25 percent of midsized law firms as measured by per-partner income. The first quartile earned more than twice the per-partner income of the next highest group. That top segment of law firms earned more than eight times that of the lowest quartile.

By now, the impact of leverage in determining per-partner earnings is well known and understood. So, it is surprising that 75 percent of midsized law firms are not successively implementing the strategy.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
 

Related posts

• Top 25% of Law Firms Earn Margins Above 40%
• Too Busy to Increase Law Firm Performance
• Survey Discloses Factors That Influence Law Firm Partner Earnings
• RULES: Another Path to Law Firm Success
• Juris and Ed Poll Team Up To Offer Managing Partner Roundtables

From the prospective of the midsized law firm, I agree with Ed Poll: “Don’t fire your clients—You need them!” Ed was reacting to Wesemann’s post about firing clients. Wesemann particularly emphasized the inherent unprofitability of small clients.

Wesemann cites the long-revered 80/20 rule in supporting his position that small clients are a drain rather than a contributor to partner earnings. He writes:

“In virtually every law firm 80% of the firm's revenues come from 20% or fewer of its clients. Or, conversely, if a law firm fired 80% of its clients it would only lose 20% of its revenue or less. Consider the impact on overhead expenses of eliminating 80% of the client base and focusing the firm's attention and service resources on the top 20% of its clients.”

Poll counters with, “So long as the work being done for clients is profitable or can effectively be used as a training ground for new lawyers, there is reason to continue to retain this business.”

As a person who lives on the edge (short tail) of the normal curve, I understand well the buying power of the 20 percent of the population being written off by retailers. The whole foundation of the 80/20 rule is being shaken by the emerging realities of The Long Tail. Given the economic long tail attributes arising from technology and communication advances, we could see the emergence of firms that specialize in only small clients. It can be done.

But there is another side of this and it has to do with 1) the forward inertia of client volume; 2) the need to advance the development of associates; and, 3) available capacity.

First, about inertia: “An object in motion tends to continue in the same direction until acted on by an outside force.” Clients generate clients. Growth generates growth. While law firms do not obey the universal laws of motion, momentum is momentum. Take that away at your risk!

Regarding the development of associates, it is the lack of it that is the number one reason associates leave one firm for another. Reducing volume reduces the opportunities for on-the-job learning by associates.

Third, midsized law firms have both the current available capacity and the need to bring in more associates to increase leverage to a more efficient level. Their very survival as firms depends on a successful “farm team” approach where young lawyers learn the full-rounded skills of a legal professional and have the opportunity to become future leaders of the firm.

A soon to be released survey of midsized firms by Juris, Inc. found the following pattern of billable hours.

The chart clearly tells the available capacity story. Attorney hours in midsized firms are well behind those reported by mega firms. Across all quartiles of per-partner income, underutilized associates bill fewer hours than partners. In addition, midsized firms lag significantly behind the top 200 firms in leverage.

Ed Wesemann’s comments are likely to be good advice for law firms in a full capacity situation with a sound leverage level. And we all know that small clients introduce conflicts that may prevent a firm from taking on large client opportunities. However, Ed Poll’s warning is sound—think very hard before you start firing clients.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Related posts

• Survey Discloses Factors That Influence Law Firm Partner Earnings
• Billable Hour's Death has Been Greatly Exaggerated
• What Does a Paperclip Have to Do With Law Firm Management?
• Top 25% of Law Firms Earn Margins Above 40%
• The One-Person Planner Approach for the Law Firm

Daniel Lee Jacobson, a practicing attorney and professor at Pacific West College of Law, writes a scholarly and surprisingly objective review of the history of the billable hour in April issue of the California Layer. He notes that the billable hour may yet prove to be a transitory convention but objectively reports that the available statistics suggest it is not likely to disappear soon.  

 

Lawyers understand the income-limiting nature of the billable hour. They understand that removing this income-limiting governor on earnings capability means unlocking law firm revenues from the billable time of the owners and partners, either through contingency work, fixed fee agreements, or through the prevailing method of leverage off of others. So why is the billable hour so entrenched? 

 

There are two important influences at work. First, law firms are doing pretty well as is.  Yes, they have greater potential, but things may just be good enough the way they are.  Why risk a good thing for something that might or might not produce a better result? Sometimes “good” is just good enough!

 

Second, there is no significant counterinfluence from the legal consumer.  The Law Office Management & Administration Report (LOMAR) for March noted that almost ninety percent of all fees are still based on hourly rates. Businesses have invested significantly in systems and procedures for tracking and managing the traditional hourly bill.  The corporate world has too much invested sunk cost to move in a different direction at this time.

 

Not only are hourly rates still the prevailing norm, they are on the increase.  An Am Law survey of managing partners found that firms have raised rates for 2006 by an average of six percent.  According to LOMAR, midsized firms averaged a five percent increase nationally.

 

So while morepartnerincome.com is a proponent for taking advantage of every opportunity for fixed fee pricing at the matter and portfolio levels, you need not think you are out of synch if you depend on the billable hour in combination with leverage to drive the majority of your law firm revenues.  The billable hour is well and quite healthy, thank you!  

 

PS: Just because things are doing pretty well, doesn’t mean you shouldn’t kick them up another notch.  A copy of the Law Firm Business Survey results for the business year of 2005 will give you benchmark information to compare to your own results. The comparison will indicate areas to change for “More Partner Income”.  Participate in the survey today to receive your copy of survey results.

 

Morepartnerincome.com is sponsored by Juris, Inc.  For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Related posts

• E-billing Can Increase Law Firm Partner Incomes
• Web Site Now No.1 Marketing Tool for Law Firms
• The One-Person Planner Approach for the Law Firm
• Survey Discloses Factors That Influence Law Firm Partner Earnings
• Nine Steps to Improved Law Firm Financial Performance in the Coming Year