A Survival Guide for Legal Practice Managers

A Survival Guide for Legal Practice Managers

5 Five Year Predictions

Tuesday, July 18, 2017

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By Joel Barolsky, Founder and MD of Barolsky Advisors and Senior Fellow of the University of Melbourne Law School

The two questions that every small and boutique firm needs to ask are:

1. Where is the legal market headed over the next five years; and

2. What should we do about it?

This blog post attempts to address the first question. The second will be covered during my 2017 ALPMA Summit presentation.

Before launching into my five-year predictions, it important to stress that I’m focusing on the market for legal services for individuals, families, and the smaller-end of SMEs.

Prediction #1: The market will be bigger than it is today

One of the major benefits of growth of online legal providers, is that it’s made the law far more accessible and affordable. Everyone can now access simple legal agreements, forms and advice for relatively a low cost. The experience of fast-expanding legal enterprises in the USA, like LegalZoom, Rocket Lawyer and AVVO, points to market growth coming from new clients seeking legal advice for the first time. Technology and scalable delivery models are unearthing the latent demand for legal services. I’d expect a similar trend here in Australia.

The rise in Australian property value is also likely to expand the market over the next five years. This means the stakes, complexities and risks are much higher for the majority of family law, probate/estate and property matters, as well as many commercial transactions. The role and involvement of lawyers is only likely increase when interested parties have more to gain, or lose.

Prediction #2: Strong retail brands will emerge

Over a lifetime, a typical family may need legal advice for property purchases, employment issues, insurance claims, marital disputes, estate planning and settlements. In Australia, there are no trusted ‘lawyer-agnostic’ retail legal brands offering a lifetime service relationship. By lawyer-agnostic, I mean clients buying a brand rather than an individual. To me, this is a major gap in the market that someone is likely to fill.

Slater & Gordon was on this path prior to their UK troubles. The other leading personal injury firms seem to be sticking to their knitting for the moment. The onliners, like Lawpath and LegalVision, are still relatively small and appear to be undercapitalised for a major brand assault.

This opportunity may be pursued by major service providers like the banks, insurers or super funds. It could also emerge as an adjacent strategy from leading accounting and financial planning firms.

Prediction #3: Costs will decline (for the innovators)

One of my clients, a 12-partner corporate and commercial firm, recently outsourced their entire IT function and moved almost everything to the cloud. The managing partner stated that this approach has more than halved the costs of IT and eliminated most of the headaches. They are now exploring other outsourcing solutions across their firm.

Another client has shifted one-quarter of her permanent workforce onto contract and now engages these lawyers as and when she needs them. By ‘chasing demand’ with a flexible talent pool she has shifted demand risk and lowered her costs significantly.

Stanford Law School’s TechIndex lists 716 technology companies currently developing solutions for law firms to become more efficient and effective. I predict a 5 to 10% per annum productivity gain for those firms open to innovation and willing to experiment with some of these new tools.

A simple example is the new proof-reading and document drafting application, jEugene. For a low monthly subscription fee, jEugene can potentially save hours in preparing and reviewing legal documents. As a SAAS solution, it has few entry and exit barriers and is perfect for small and boutique firms.

Prediction #4: Disputes won’t be disrupted

While technology can improve case prediction, discovery, research and other process elements of disputes, there is a very human role to play in handling the strategic and emotional nuances of legal conflicts and litigation. Not only is there a strong human element, it’s an area where lawyers have a natural advantage given the structural constraints of the judicial system and regulators. This advantage is likely to be sustained for many years to come.

Prediction #5: Invisible competition will grow

Thomson Reuters data suggests that the larger firms in Australia have reduced their overall headcount by around 7% over the past three years. Many of those leaving have continued to practice as freelancers.

At the other end of the career spectrum, this year, Australia’s 39 law schools will produce over 7,500 law graduates. A significant proportion of these graduates will enter the legal market in some form as freelancers or contingent workers.

The growth of the legal freelancer is the greatest threat to small and boutique firms. These freelancers operate with low overheads and maximum flexibility. They use the same powerful personal branding and social networking tools as everyone else. They can also access sophisticated practice management, legal research and CPD services for minimal cost online. The advantages of firm over freelancer seem to be less significant by the day.

In conclusion

With so much change and progress predicted, those firms that just stand still will go backwards. The market will reward the innovators and punish the laggards. Which one do you want to be?

PS. See you in Brisbane on Friday 15 September 2017 at ALPMA Summit for Part 2.

Editor's Note

ALPMA SummitJoel Barolsky will be speaking about the "State of the Australasian Legal Market and strategic implications for small, focus and boutique firms" at the 2017 ALPMA Summit, held from 13-15 September at the Brisbane Convention and Exhibition Centre. Registration is now open for the 2017 ALPMA Summit, and there are great savings for those who register early! Register now!

About our Guest Blogger

Joel BarolskyFor the past 28 years, Joel has helped law, accounting and other business advisory firms plan, innovate and grow.

In addition to heading up Barolsky Advisors, Joel is a Senior Fellow of the University of Melbourne and a former Principal of Beaton Research & Consulting. Joel has advised over 100 of Australia’s leading professional service organisations. Over 70% of his client are repeat clients or come directly from referrals from existing clients.

He is a recognised thought-leader evidenced by regular conference keynotes, press mentions and the global reach of his blog, Relationship Capital. Joel’s teaching roles at the University of Melbourne include delivery of an intensive subject on the Melbourne Law Masters program called, ‘Management for Professionals’.

He has in-depth expertise in the fields of strategy, culture, change, organisation design and business development.

Personal Reflections on 2016 by ALPMA President, Andrew Barnes

Tuesday, December 20, 2016

By Andrew Barnes, CFO, Lantern Legal Group and ALPMA President

When I think back on our year with ALPMA it is difficult not to dwell on the success of our Summit, held in September at Etihad Stadium Melbourne. The event is growing from year to year and this year to have record levels of attendees and trade exhibitors being added to an exceptional program was something we are very proud of as an Association.

On day one there was something for everyone, but many people still think back to the power of the speech given by Catherine McGregor about her life, her challenges, her opportunities. How she interwove so many relatable snippets into one incredibly moving story was a highlight. We were also fortunate to have:

  • The inimitable Ron Baker as MC
  • Dr George Beaton again reminding us that to stand still will probably mean we go backwards
  • Matthew Burgess taking us down the ‘Lean Startup’ path and challenging us to change and ‘fail fast'
  • Dr Bob Murray reminding us that ‘praise is the biggest weapon in a leader’s arsenal for change’
  • Steve Wingert and Andrew Price talking about change management in law firms in real, relatable language

In 2016 we have maintained our commitment to undertaking research projects aligned with our six pillars of Learning and Development and also the Thought Leadership Award presented annually at Summit. There is often so much that falls from these projects that it can all be quite overwhelming, but our position at ALPMA is that these are not one-size-fits-all and that there is something for every firm to take away and work with. Firms have different cultures and different life cycles and therefore do not fit neatly into the outcome synopsis in research projects. I suggest you have another read and choose something to work with … small steps are better than no steps!

Our research for 2016 is summarised here:

  • Finding quality staff remains the top HR challenge for law firms, more work to be done on diversity and inclusion at firms etc 

Any thoughts at this time of year always extend to thanking our fantastic team of volunteers on our Board and various committees across Australia and New Zealand. Thanks also to our support staff across the Association who do so much behind the scenes to bring our programs to life. We remain absolutely committed to ALPMA’s core promise to members. We are continually pleased with the way our membership engages with the association and enables us to remain aligned with their expectations. As our Board tries to navigate a way through an ever-increasing competitive landscape for professional development providers, we strive to balance immediate member needs with those of an Association who is more frequently competing to hold its’ profile and standing on a national and regional (international) basis. Thanks to everyone who have contributed in some way to us having a great 2016!

As we look forward to 2017 we can expect more than just business as usual. We have provided branches with extra budget funds to develop local initiatives and enhance the offering. This should ensure the core promise to members remains a focus and that there is a greater value proposition through the branch networks. Our National Learning & Development group is planning new workshops to complement existing programs. Our Summit committee has already commenced planning for Summit 2017 in September in Brisbane. We continue to work on collaborative relationships with groups such as the Australian Law Management Group (particularly after the success of our joint foray into Singapore in November), College of Law, CPD for Me and others in this space. It is a challenging time for Associations such as ALPMA but with those challenges come opportunities and we look forward to exploring these opportunities with our members.

Thanks for being part of ALPMA in 2016 and I wish you and your friends and families the very best for the festive season.

Editor's Note

This is the last ALPMA blog post for 2016. We look forward to the weekly posts resuming on January 3, 2017.

About our Guest Blogger

Andrew BarnesAndrew Barnes is the President of ALPMA. He is the financial controller for The Lantern Legal Group Pty Ltd, which practices under the firm names of Sladen Legal and Harwood Andrews.  He works closely with the principals to deliver strategic planning, reporting and budgeting initiatives and applies his robust commercial skills to drive continued business improvement.  Andrew worked in public practice, as well as financial services and broad industry roles prior to joining the firm in 2003

Business development for our changing times

Tuesday, October 11, 2016

By Ryan Smyth, Business Development Manager, Coffey Group

“Looking forward, 69% of firm partners expect to see negative legal fees pressure, 38% a downturn in investment and 46% disruption from low cost law firms.”  - Macquarie 2015 Legal Benchmarking

Makes grim reading.

However, as the saying goes, "every cloud has a silver lining". In that respect, I look at changing market conditions as a huge opportunity - no matter if you are a bull or a bear. 

Change presents opportunity…period!

So how can we access this opportunity? How can we be ready? What steps should we take? When should we take them?

Hopefully your practice is performing well and there are no clouds on the horizon. 

Even if this is the case, my experience across multiple businesses and geographies is that the following basic steps provide a platform for growth (and the start of a journey), either against a declining market or to significantly outperform a bull market - if you are lucky enough to be playing in one.

Set your vision

“Vision must remain constant.” Sally Carbon - Australian Olympian

What is the collective vision for your firm that will remain constant in the face of any market, no matter how difficult or dynamic? 

Your firm must have a vision. Every staff member should know it and it should resonate with them. Your vision should give staff the confidence that, as a collective, they are working toward something bigger, something better, something more exciting than just profits! 

Investigate and baseline your firm

‘Every battle is won before it is fought.’ – Sun Tzu, Art of War

In order to get where you want to be, you need to first understand where you are and where you’ve been.

Develop a set of baseline metrics and measures to understand exactly where your business is and where it is heading. Develop specifics objectives around your future desired state for 12, 24 and 48 months from now. This forms your starting point from which all progress will be measured.

With respect to business development, baseline your sales effort. Some of the key elements you may wish to understand are:

  • Win rate
  • Cost of sale
  • Client retention
  • Forward order book, weighted, unweighted, actual, book risk
  • Run rate
  • Commission size breakdown
  • Sales governance: Are you doing account planning, territory plans, sale call summaries, do you have a CRM, are you using it? What’s working for you, what’s not?
  • What does your business development team look like? Do you have one? Do you need one?

Strategy and tactics

‘Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.’ – Sun Tzu, Art of War

Strategically, where will you get the revenue you need to meet or exceed your desired state, over the next prescribed period?

spheres of strategy
One of the challenges of a changing market is that by the time we have a considered view,  the market has changed, our revenue has most likely suffered and we are looking at 3-6 months before we can successfully and sustainable acquire new clients. Three to six months of low billables is always going to be tough to swallow. 

You can mitigate this risk by undertaking a robust strategic planning process, including scenario planning at the start of each financial year.

You should also consider also how much time you are spending on strategy. 

A few years ago I met with Gary Stockport, Professor of Strategy at UWA, who challenged me about the amount of time I had allocated to strategic planning for our business.  As a key part of my role, I was reviewing our strategy each quarter, with the inevitable push at the end of Q3 to set up for the next financial year. I did the maths and I was spending less than 40 hours per year setting the direction for the businesses I led. I now spend three hours per week, every week, off site reviewing trends and strategy planning. It is absolutely at the top of my agenda.

Equip your firm with the tools for success

"If you know the enemy and know yourself you need not fear the results of a hundred battles." – Sun Tzu, Art of War

In the same way you would equip your team with IT, a technical library, a company car etc, you must give your firm the tools, the systems and the processes to undertake effective business development. 

This will not only give your team the ability to go and engage clients effectively but importantly it will give them the confidence to go to market, and when they have confidence, they’ll do it more and they’ll do it better. Some of the tools you may wish to think about include:

  • Account plans
  • Annual sales plans
  • Proposal capture plans
  • Sales call summaries
  • Zipper plans
  • Pursuit capture plans
  • Annual survey quality 

The nature of the tools you adopt should be uniquely bespoke to the clients you have, wish to retain and the clients you wish to acquire.

Execute with the right team

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently.” – Warren Buffet

It’s all in the deal, period.

At the risk of showing any prejudice at this point, I suggest you take a good look at your sales team or the team currently conducting your business development. 

Are they the right team to deliver on the framework you have set out, do they have the necessary, experience, capability expertise, do they have the necessary time? 

If not, now is the time to make the tough calls. In terms of business development, at the sharp end of the sales cycle what we ultimately do is binary - we either win or we lose - there is no second place. With that in mind, make sure that from the outset your team is up to the task and equipped to sell effectively. 

It takes decades to hone your legal skill, experience capability, intuition etc., and building business development and strategic capability is exactly the same. However, if you adopt perhaps some of the approaches above, your business should be in better shape and better placed to take advantage of the inevitable change that could be just around the corner.

Editor's Note

If you are interested in learning more about this critical topic, then register for ALPMA's upcoming livestream broadcast "Business Development for our Changing Times" presented by Ryan Smyth on Thursday Oct 20. You can attend the live event in Perth, or watch the livestream broadcast online.  Register now.

About our Guest Blogger

Ryan SmythRyan is a leading and highly respected consultant, with over 15 years’ international experience in senior business development roles with professional service firms. He recently held the most senior sales role with an ASX listed firm with revenues in excess of $500m and has closed deals in Australia, the Middle East, Myanmar, China, Kazakhstan and the United Kingdom.

Ryan studied strategy at the Manchester school of Business, is a frequent blogger of business development approaches and tactics, and retains an advisory capacity with a number of tech start-ups.

Ryan is passionate about the ‘right type’ of business development, from tier one giants to start-ups, with a particular interest in supporting firms through a turn around or those in recession markets.”

The prioritisation crisis in BigLaw business model firms

Tuesday, July 19, 2016

By Dr George Beaton, Partner, beaton 

In some ways I wish I had read Zone to Win: Organizing to Compete in an Age of Disruption, Geoffrey Moore’s most recent book (2015) while researching the content for my new book Remaking Law Firms: Why & How, co-authored with Dr Imme Kaschner.

On the other hand, it’s pleasing to have come to much the same conclusions as Moore about the urgency in resolving the prioritisation crisis, in our case the crisis faced by BigLaw business model firms. Chapter One of Moore’s book is titled 'A Crisis in Prioritization'. His first paragraph is masterful in succinctly capturing the essence the crisis, which applies as much to BigLaw firms, as it does to all businesses.

“What makes a modern business different? Simply put, speed plus disruption. Wave after wave of next generation technology is continually transforming the landscape of business, both inside the tech sector, where new offers are germinated, and everywhere else outside it (emphasis added), where they are largely consumed.

“This results in two imperatives for any established enterprise (in other words 99.9% of law firms built on the BigLaw business model – click here for an explanation of the BigLaw business model and its implications). In markets where you want to be the disruptor, where you want to play offense, you must catch the next wave. At the same time, in those markets where your current franchise is the incumbent and myself under disruptive attack, you have to play defense in order to prevent the next wave from catching you.”

Which way should BigLaw firms be looking to resolve the prioritisation crisis?

In the first instance, for the vast majority of firms, the answer is to play defence, that is avoid being swamped in the tsunami of change. I say this because incumbent law firms are risk-averse partnerships with no balance sheets, at least to speak of. This means the first priority is to survive in ways that assure their continued capacity to serve clients profitably.

My colleagues and I, as well as a growing number of others, Bruce MacEwen for example, have documented the reasons the environment of BigLaw is now an irreversible buyers’ market – see this post for an explanation. As little as a decade ago, all forces affecting the ability of law firms to extract superior profits for their work were benign, i.e. it was a sellers’ market. Now the there is hyper-competition, substitutes are growing in number, types and influence, clients’ have the power in setting prices, and lawyers willing to work in the tournament for partnership are becoming fewer and fewer.

Job #1: Remake your firm

We interviewed 40 people around the world in researching our forthcoming book. One of these is Stuart Fuller, Global Managing Partner of King & Wood Mallesons. Stuart used a memorable metaphor in explaining the challenge of preventing the next wave from catching you. Here’s an extract of what he said: “We are rebuilding it (the business model of King & Wood Mallesons) as we speak. I like to use an aero plane analogy; it’s like rebuilding a 787 mid-flight as we continue to fly the plane and that creates challenges”.

So it’s not just the media, advertising, travel, hospitality, retail, automotive and transport industries that are being disrupted by Netflix, Google, Airbnb, Amazon, Uber and Tesla. It’s law too with Axiom, IBM’s Watson, Riverview Law, and Neota Logic – to name just a few of the 100s of substitutes for law firms and lawyers.

Substitutes are not always competitors. Many are also complements for those firms that see the opportunity and grasp it. For example, read this article ‘An industrial revolution is coming to law‘ by Michael Mills. And this analysis I wrote last year ‘10 reasons BigLaw managing partners are not sleeping very well‘ setting out the opportunities and threats.

How much time do BigLaw firms have?

For globalising firms, Stuart Fuller suggested it was no more than five years in our interview, positing that there were only 15-20 firms likely to achieve leading global status and scale. 

For BigLaw firms taken as an industry, I think the answer is ‘It depends on what your expect to achieve before your firm is severely affected’. By ‘severely affected‘ I mean a halving or more of the profit per point of equity that the firm currently enjoys. The reasons for this assertion that profits are likely to halve in the majority of firms are set out in my September 2012 post ‘PPEP levels are doomed without re-invention‘ (note the year this was written!).

The realpolitik prioritisation crisis for BigLaw

This is how I see the realpolitik prioritisation crisis for BigLaw. Changing a firm’s business (aka operating) model is not hard in theory. Yes, it’s a massive task, but the real challenge is managing the investment required. As Moore puts it on page 25 “Not only is this going to be expensive to undertake, but also the ROI will come entitle out years, making a highly unattractive dent in the current years’ performance“.

There’s the rub for firms whose partners expect every feasible dollar of profit (and sometimes more) to be distributed every year. That means virtually every firm, with a handful of notable exceptions.

Some BigLaw firms are showing the way

It’s not that all BigLaw firms are sitting on their hands and waiting for the tsunami. Thankfully there are publicly acknowledged pathfinders such as Seyfarth Shaw, Allen & Overy and Gowlings WLG.  And there are perhaps less well-publicised examples of smaller firms, ranging from Inksters (Scotland) to Valorem (Chicago) to Hive Legal, McInnes Wilson and more in Australia.

The prioritisation crisis in BigLaw firms can be avoided. It takes an acute understanding of the environment, clarity of vision, leadership, and change management competence.

Editor's Note

Interested in learning more? Dr George Beaton is a keynote speaker at the 2016 ALPMA Summit, 'A Blueprint for Change' which will be held at Etihad Stadium, Melbourne from 7 - 9 September. His presentation, 'Why it's time to remake your firm's business model' will elaborate on this theme and provide compelling insight on how to tackle this challenge.

Register now for fantastic early bird savings!

About our Guest Blogger

George BeatonDr George Beaton is a partner in beaton.  George is a Senior Fellow, Melbourne Law School in the University of Melbourne. His book, “Remaking Law Firms:Why and How" was published by the American Bar Association in March 2016.

Dr George Beaton has guided clients through a wide variety of strategic decisions in his 25 years as an advisor and consultant. Today his practice is focused on corporate advisory, performance improvement and problem-solving assignments for Boards and CEOs of professional services firms.

He is widely regarded as a leading independent authority on professional services industries and their firms. His work covers Australia, Asia, USA, Canada, and UK. He has a particular interest in the imperative for professional services firms to remake their business models. His thought leadership is published regularly and he is a regular keynote speaker in Australia, UK, Canada, and USA. George tweets at @grbeaton_law and @NewLawNewRules.

The firm of the future is in fact the firm of now

Tuesday, June 28, 2016

By Matthew Burgess, Director, View Legal

The evidence has been collected.

The submissions have been heard.

Judgment has been handed down - the incumbent law firm business model is broken.

The great lawyer bubble

One of the first people to starkly address the fundamental problems at the heart of the legal profession was Stephen Harper and his book 'The Lawyer Bubble'.

The book details why the legal profession, similar to most other professions, will struggle in the short term to reinvent core aspects of their business model, particularly in relation to time billing, in the short term.

While a myriad of reasons are provided, perhaps the most compelling is the fact that universities across the western world have become factories for producing professional service firm graduates, who specialise in the areas rewarded by time billing such as:

  • long hours;
  • rote learning;
  • technology adverse; and
  • engrained arrogance, particularly in relation to solutions that undermine the traditional personalised bespoke service offering (such as alternative business models, offshoring, outsourcing and automation).

Catalysts for change

Harper argues that any change to the 'BigLaw' business model from within the profession will require the university system to start rewarding students who are able to demonstrate more innovative attributes than those outlined above.

Just as importantly, the owners of the incumbent firms must themselves create a demand for this style of graduate.

Another leading thinker, Clayton Christensen (in The Innovator's Dilemma), predicts that the prospect of the incumbent firms having the vision to truly cannibalise their existing business model is at best remote.

Maister still matters

While much of Harper’s work was ground-breaking at the time, the framework for many of the answers to what law firms should be doing right now to re-engineer their businesses was provided a generation ago by another US consultant, David Maister.

Maister categorised the delivery of all professional services, including the law, into four broad categories, each of which has the prospect of being highly profitable.

The price is right

The price sensitivity goes from least to most through the following four components:

  • unique services (or as Maister describes them ‘brain surgery’);
  • experiential services (or as Maister describes them ‘physiotherapy’);
  • brand name services (or as Maister describes them ‘nursing’); and
  • commodity services (or as Maister describes them ‘chemist’).

Arguably, due to the internet, there are two further categories further down the value chain:

  • wholesale; and
  • online, with product produced only on demand.

Ultimately, the internet has increased the rate at which all technology disruption has historically taken place.

What the winners do

Winning firms understand that success ultimately depends on being:

  • differentiated or unique;
  • of demonstrable value; and
  • delivered in a way that is difficult to replicate.
Sustaining innovation is ultimately just as important as any disruptive one; the challenge is that both types require different visions, metrics and practices.

The disruptive business model requires funding, resource allocation and working environments that are significantly different from those of the traditional firm.

History doesn’t repeat; although it does rhyme

History shows the vast majority of traditional firms are unable to allocate resources away from the primary revenue source, because of their focus on short-term profitability and the need to avoid any perception that there is a 'cannibalising' of the core business model.

The key to a sustainable and successful business model is being self aware enough to know that unless they cannibalise their existing lines of revenue, competitors certainly will. Further, those competitors will have complete disregard for the ongoing profitability of the incumbent firms.

Primarily due to the embedded restraints of being a start up, innovative firms find ways to:

  • monetise ideas quickly;
  • minimise upfront cash expenses;
  • understand that a product in market is always better than a delay to launch in order to ensure the quality is better - in other words, if you are not embarrassed by version 1 of the solution, you have launched too late;
  • recycle and reuse what they have immediate access to; and
  • understand that everything can look like a failure during the 'middle part'.

What will the changes look like?

To give some insight to what we believe a ‘firm of the future now' looks like, 10 examples from our business are listed below – five that we have abandoned and five that we have embraced.

Five things abandoned

  • Timesheets – with timesheets, all we ever focused on was what was chargeable – without timesheets, we now focus on what is valuable.
  • No leave policies – leave policies are a hangover from the industrial age – it is time to move on.
  • No individual budgets – while we certainly have team goals, these are never broken down into individual monetary targets. Our targets are aligned around our performance in the eyes of customers. If we get those right, everything else flows (including money).
  • No performance reviews – again, a very poor hangover from the industrial age.
  • No diversity goals – seeking to mandate minimum percentages of certain genders, cultures, religious beliefs or sexuality disguise much bigger problems with the underlying business model.

Five features embraced

  • Guaranteed fixed pricing – the definition of a competent service provider is someone who can devise a scope of work and provide an upfront fixed price that they are willing to refund in full if the customer is not satisfied with the performance.
  • ROWE – if you do not know what this is, Google it or click here and join the movement.
  • Solution choreographed teams – we work with whomever and on whatever terms are best to achieve the client’s objectives.

  • AAR – again, if you do not know what it is, Google it or click here, and embed it into your business today.

  • Diversity of thought – when two people in business are constantly of the same opinion, one is irrelevant. Raise diversity in every sense of the word and arbitrary politically correct percentages become irrelevant.

Editor's Note

Interested in learning more? Matthew Burgess is a keynote speaker at the 2016 ALPMA Summit, 'A Blueprint for Change' which will be held at Etihad Stadium, Melbourne from 7 - 9 September.  Matthew's presentation will deconstruct why the 'Firm of the Future' concept is gaining such traction and provide an insiders account of how to create a true firm of the future someone who has twice in the last 5 years re-written the professional services firm rule book. 

Register now for fantastic early bird savings!

About our Guest Blogger

Matthew BurgessMatthew Burgess founded what is regarded as Australia’s first virtual law firm and more recently arguably Australia’s most innovative legal solutions platform (the law firm named View Legal).

Having been a partner and lawyer of one of Australia’s leading independent law firms for over 17 years, View was established in mid 2014 and has from this time been actively disrupting the traditional law firm model.

Matthew regularly consults to other professional service providers on business model innovation, with his business book ‘The Dream Enabler’ a key foundation to this offering.

Characteristics of a profitable firm

Tuesday, March 08, 2016

by Andrew Chen, Partner, Crowe Horwath

This year, law firm participants in the 2015 Financial Performance Benchmarking Study of Australian Law Firms were provided the opportunity  to rank, assess and rate their financial performance against peers using Crowe Horwath’s online proprietary tool, Open Measures. 

The study, which was conducted by Crowe Horwath in conjunction with the Australasian Legal Practice Management Association (ALPMA), demonstrates the way in which law firms can both improve their financial position through revenue growth and ensure a profitable, sustainable future.

Based on the findings, it is apparent that there are several key and comparable characteristics of profitable firms.

Here’s what the top 10 performing firms are doing:

  • Hiring for growth: One in two firms are hiring for growth -not for replacement of staff - being the predominant reason for hiring new full time fee earners across all participants. 

  • Retaining staff: Top performing firms recognise that success is achieved through having the right staff and retaining them.

  • Hourly-based pricing: Top performing firms implemented a pricing method primarily being based on hourly rates, with most intending not to change.

  • Debtor management: Debtor management was exceptional in top performing firms, with debtors over 90+ days accounting for only 17% of total debtors; the average across the study being 30%.

  • Low interest expense: Top performing firms demonstrated low interest expense, with the average in the top 10 being lower than the rest of the firms. 

  • Internal appointments: Five of the 10 top performing firms appointed partners internally, with three of the five appointing female partners. 

Additionally, and moving forward, here’s what profitable firms are looking out for: 

  • Talented lawyers to attract and retain.

  • Marketing opportunities through social media.

  • Under-performing fee earners.

  • Having excess office space.

The results of the study also revealed that of the top 10 most profitable firms, six held a traditional partnership structure, while the remaining four were incorporated. 

Recurring participants of the study will be able to visually track how they rank against the most profitable firms and how they have improved over the years, proving to be an invaluable tool to examine trends and revise their business strategy for future financial success. 

Editor's Note:

For further insight into the characteristics of profitable law firms and how they may apply to you, download the results summary from 2015 ALPMA/Crowe Horwath Financial Performance Benchmarking Study of Australian Law Firms. 

ALPMA members and research participants are invited to attend the results webinar "Anticipate your Financial Tomorrow" on Thursday March 10 at 1pm AEDT for free. Register here.

About our Guest Blogger

Andrew Chen leads Crowe Horwath’s Professional Practice Advisory team and has significant experience providing advisory and tax accounting services to businesses of all sizes. 

He specialises in advising legal and professional service firms on establishing business structures, financial management in areas of internal accounting, tax administration, financial reporting and KPI performance measurement; budget and cash flow forecasting; tax planning; salary packaging and preparing tax returns.

Having many payment terms - make it easy for clients to pay

Tuesday, June 23, 2015

By Glenn Tullia, Senior Manager, St. George Bank

Businesses today need to be more efficient than ever before.  

Embracing the changes in the payments industry, and adopting innovative payment solutions is important for efficiency, which is of course key to growth, profit and reach.

How many times has your business been faced with customers who only want to pay using card, not cash? Or perhaps over the phone or online rather than in person? 
It’s not surprising to see cash and cheque usage is reducing as more people embrace technology and look for quicker and more convenient ways to make payments. 

According to the Reserve Bank of Australia's research "The Changing Way We Pay: Trends in Consumer Payments", the use of cash in people's wallets had fallen from 62 per cent of transactions in 2010 to 47 per cent by the end of 2013. The RBA also predicted cheques would eventually be phased out as they would become too expensive to use. 

This could mean that sizable payments such as property sales will be completed electronically in a matter of years.

Payment alternatives

Having been in the banking industry for more than a decade, I’m familiar with a number of alternatives to cash and cheque payment solutions that will make it simple and more streamlined to safely and securely collect, monitor and manage your customer payments. For example, you could accept payments directly to your bank account, debit your customers accounts, allow online or BPAY payments or accept credit card payments from your office. 

Solutions such as mobile payments are becoming more popular because it allows businesses to take payments quickly and efficiently – and also keep track of those payments simply and easily. Mobile applications developed for smart phones and tablets allow small businesses to accept transactions on the go. Transactions can be authorised in real-time, providing you with guaranteed cash flow whilst keeping your customers happy by offering alternative payment options to cash and cheque. 

Having an effective payments system is critical for businesses to run smoothly, whether you’re a sole trader, a growing business using the Internet or a large business looking for integrated payments.  These days there is a range of products designed to help collect payments through a variety of channels.  With new developments happening every day it’s worth doing your homework to make sure you get the payment solution that meets your needs.

Editor's Note

St.George Bank is an ALPMA NSW Corporate Partner.  Check out their ALPMA member-only deal.  

About our Guest Blogger

Glenn TulliaGlenn Tullia is Senior Manager at St.George Bank.  Glenn has been with St.George since 2006 and focuses solely on the Professional Services sector. Throughout this time he has developed a keen interest in law firms, and enjoys every opportunity to assist his customers, and the wider industry in achieving their business goals, by offering a high level of service.

Are you ready for a competitive 2015? Profitable law firms investing for growth

Tuesday, February 24, 2015

By Andrew Barnes, ALPMA President & Financial Controller, The Lantern Legal Group

ALPMA and Crowe Howarth recently released the results summary of our annual Financial Performance Benchmarking Study of Australian Law Firms  – and I wanted to share with you my thoughts on the key findings, summarised in the infographic at the end of this post.

1.  Firm profitability continues to rise thanks to strong cost control

While average revenue per partner fell by nearly 6% for most firms in 2014, the successful pursuit of leaner operations significantly increased gross profitability.   

According to the study, the average profitability of law firms increased to 15% in 2014 compared to 10% in 2013, while gross profitability is up to 58%, compared to 55% in 2013.

Unlike previous years, when firms looked inwards and concentrated on cost cutting right across the board, firms are becoming more targeted in their cost reduction strategies.  Average overhead costs (excluding rent) reduced to 36% as a percentage of revenue, compared to 40% in 2013.  Average lock-up days (time taken to complete matters, invoice and collect fees from the client) reduced from 147 days last to 141 days. This indicates an improvement in internal processes for collecting cash and is a positive for firms’ cash flow.

The study’s Financial Resilience Index, which measures how efficient the generation of revenue is from the capital employed by the firm, also increased to 2.69, compared to 2.23 last year, showing an increase in financial resilience of more than 20%. 

2.  Growth is firmly on the agenda 

Firms are starting to shift their focus from cost savings to revenue growth – there’s really only so far you can cut costs before you start hitting bone.

Growth firmly on the agenda, with firms that participated in this year’s study intending to increase revenue in 2015 by an average of 10%, with larger firms indicating growth over 20%.

3.  Investment in business development and lateral hires

Australian law firms are starting to shift their focus from cost savings to revenue growth – as there’s really only so far you can cut costs before you start hitting bone.

They are opening their purse strings to invest in areas of business they believe will facilitate growth 

Firms are planning a greater investment in marketing and business development activities and focusing on lateral recruitment in order to be competitive moving forward.

4.  Firms transitioning from the billable hour

For the first time this year, the survey also sought to measure the basis of client billing amongst respondent firms, with the majority of firms' revenue (70%) still use the billable hour as their predominant billing measure.

What is noteworthy is that 30% of respondents advised that they use a method other than billable hours, such as fixed or value pricing.  I expect this number will increase over time as clients continue to demand value from their legal spend and firms either reinvent the way they practice or mimic the way their competitors do.

5.  Execution of strategies is key to success

Firms who succeed will be those who can execute their strategies, maintain a lean cost base and, importantly, retain key staff.

Has your firm been building its business development and marketing capability and managing staff engagement over the last 18 months or so?

If so, you will be well-positioned to manage in what is shaping up to be a very competitive market in 2015.

Readers  interested in learning more about the overall results of the study can download the ALPMA/Crowe Horwath Financial Performance Benchmarking Report Summary.  

Results Infographic

About our Guest Blogger

Andrew Barnes, ALPMA President

Andrew Barnes is the President of the Australasian Legal Practice Management Association (ALPMA) and the Financial Controller of the Lantern Legal Group, which incorporates the practices of Harwood Andrews and Sladen Legal.  

He has worked in the legal sector for many years and is a passionate advocate of 'letting law firm managers manage' and the Geelong Football Club.

Editor’s Note:

Anticipating your financial future? – Five key questions you need to ask

Tuesday, December 30, 2014

by Andrew Chen, Partner – Professional Practice Advisory, Crowe Horwath

If you could have all the answers about your financial future, what questions would you like to ask? 

What do you wish you knew but maybe just don’t have the time to find out? It can often be intimidating realising what you don’t know about your firm. But…finding answers to all of your queries and concerns will lead to a stronger practice! 

The financial future of your firm should always be on the forefront of your mind. The success and growth of any legal practice is built on anticipating the needs of the business and keeping your financial goals in mind. It is very easy to become complacent during good times, but a great law firm should always be looking forward, anticipating your financial future and putting processes in place to ensure that you’re on track. 

The good news is that the outcome of your firm’s financial future is yours to determine, as everything that you do today, will have an effect on your tomorrow. You don’t just have to accept your current results, by improving your processes today, you can make your desired outcomes for tomorrow a reality. 

To help out, we have brainstormed our five key questions that you should be asking about your firm:

  1. What are the implications of the decisions you make today having on the financial future of your practice tomorrow?

  2. Are you maximising your business’s profits? Do you think your business should be more profitable and how would you go about increasing those profits?

  3. Are your financial management techniques helping you achieve the right outcomes and do you have the right data and information to achieve them?

  4. Do you have a strategy in place to grow your practice in 2015 and if so, what is your target growth?

  5. Is there a more simple way to ensure that you understand your financial future? 
While it is impossible to predict the future and have all the answers, the ALPMA benchmarking study could help you find the information that you may be looking for. We want to give you the best data to help you make the right choices for your firm’s financial future.

Changing the future 

In the absence of a crystal ball - are you making the right decisions to have the information you will need to anticipate where your firm will end up financially? 

How will you know what the result of your time and efforts?

Editor's Note:

If you want to gain a valuable insight into your firm's true 'financial' ability and explore the areas where you need to focus on and change, you can participate for free in the 2014/2015 ALPMA/Crowe Horwath Australian Legal Industry Financial Performance Benchmarking Study. The study closes at 5pm on 5 January, 2015.

The study reviews eight key measures including profitability, returns, working capital and revenues, and provides an excellent opportunity to get an objective view as to your firm's financial performance and how this compares to your peers. 

About our Guest Blogger

Andrew Chen
Andrew Chen leads Crowe Horwath’s Professional Practice Advisory team and has significant experience providing advisory and tax accounting services to businesses of all sizes. 

He specialises in advising legal and professional service firms on establishing business structures, financial management in areas of internal accounting, tax administration; financial reporting and KPI performance measurement; budget and cash flow forecasting; tax planning salary packaging and preparing of tax returns.

Anticipating your financial future. Are you in the dark?

Tuesday, November 18, 2014

by Andrew Chen, Partner – Professional Practice Advisory, Crowe Horwath

How many new clients can your firm take on before you run into financial stress? How many more new staff would you need to hire to meet your new demands? What would be the result of increasing your fees by 15%? In the absence of a crystal ball, how and at what point will you know?

In the legal industry there are common misconceptions around growth and cash flow. If your firm grows its client base by say 10%, the problem is cash flow will not necessarily increase by 10%...

A Case Study

Three years ago a mid-tier Australian law firm spontaneously decided to hire a new Partner and bring in 8 new high-fee clients. Very quickly, the new Partner needed to hire four new members of his staff to fulfill the needs of these clients. 

Having not budgeted for this, and with an overdrawn bank account, the Partners were forced to make payment arrangements from the ATO and Partner drawings were cut.

What steps could this firm have taken to mitigate this risk? 

In recent years, a similar sized firm participated in an annual financial performance benchmarking study. Once the firm received the analysed results, the management team presented them at a partners’ strategy session. 

When reviewing the benchmarking data, they were able to better understand their true position. The results revealed that when they compared their working capital to that of their peers, they had significant amounts of cash tied in work in progress (WIP) and debtors. They had no idea that their WIP was so large and were unaware of the impact this was having on cash flow. 

They were forced to reassess their strategic objectives and the decision was made to focus on optimising cash flow and general profitability. By re-defining the key focus areas, the firm was able to generate cash, a process which involved reviewing operations and staff processes to ensure they were gaining the best out from their resources. Partner drawings were, in fact, able to be increased (not cut). 

They were able to anticipate where the firm was going to end up financially.

After 12 months, the firm participated in the benchmarking study once again. They were able to track their progress and re-determine their strategic measures for success. The partners were able to see a direct correlation in the operational improvements within the firm – this proof of improvements in efficiency allowed the firm to get more out of less, demonstrating that profit is not always the bottom line. 

Changing the future 

Are you making the right decisions to have the information you will need to anticipate where your firm will end up financially? 

How will you track the results of your time and efforts?

In the absence of a crystal ball, benchmarking your financial performance can guide you to make better decisions for the future of your firm.  

Editor's Note:

Law Firm Financial Performance Benchmarking Study
Australian firms interested in benchmarking their financial performance to similar practices, are invited to participate for free in the 2014/2015 ALPMA Financial Performance Benchmarking Study, currently being conducted in partnership with Crowe Horwath. The study closes at 5pm on 5 January, 2015.

The study reviews eight key measures including profitability, returns, working capital and revenues, and provides an excellent opportunity to get an objective view as to your firm's financial performance, how this compares to your peers and gain insights to help you anticipate your financial future. 

About our Guest Blogger

Andrew Chen
Andrew Chen leads Crowe Horwath’s Professional Practice Advisory team and has significant experience providing advisory and tax accounting services to businesses of all sizes. 

He specialises in advising legal and professional service firms on establishing business structures, financial management in areas of internal accounting, tax administration; financial reporting and KPI performance measurement; budget and cash flow forecasting; tax planning salary packaging and preparing of tax returns.

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