Finance

Profitability Studies

A profitability study involves an overview of the firm’s operating policies and procedures, an analysis of the firm’s critical financial indicators and a determination of opportunities for reduced expenses and improved revenue. Our profitability studies comprehensively address firm overhead, client in-take issues, pricing of services, billing and collection issues, leveraging with paralegals and technology as a profit driver, all with a focus of maximizing revenue from existing clients with current firm resources.

Practice Group Probability Analysis

Initially, practice groups were developed to assist lawyers with the substantive aspects of a given practice area. Increasingly, law firms are looking to practice groups as a means for managing resources and achieving revenue budgets. We assist law firms in transforming their practice group structures to include taking on responsibility for managing resources and meeting revenue goals.

Partner Compensation System

The goals of a partner compensation system should be to provide fair compensation for each partner’s contribution and to provide firm leadership with a management tool as an incentive to partners, by rewarding desirable behavior and penalizing unwanted behavior. Most firms have either a formula system or a substantive system, and each has its own advantages and disadvantages. Some firms find that their system does not provide the proper motivations to the partners and is in fact creating a financially unhealthy situation. Although radical change to a partner compensation system is rarely desirable, firms should review its system at least every five years to keep the process visible to the partners and clearly understood, and, more importantly, to determine if any changes are desirable.

Associate Compensation Systems

Successful associate compensation systems are focused on rewarding quality performance and achieving individual career goals. In the process, firms need to strike a balance between remaining competitive with the marketplace and providing the necessary rewards and motivations that may be unique to the firm. We will assist in evaluating the firm’s present system and developing recommendations that will satisfy your associates while addressing the needs of the firm.

Succession Planning

Surviving the departure of any major revenue generating partner, perhaps the founder of the firm, can pose a serious challenge to the firm’s future success. Issues of the return of capital, unfunded retirements or entitlements, and the transition of important clients can be problematic. Many firms operate without these issues clearly addressed in their survival of the firm at stake. If your partnership agreement does not adequately cover these issues, we can assist the firm in putting appropriate agreements in place well in advance of any announced departure. If the firm is faced with an imminent retirement of a major partner, let us assist you through the necessary negotiations and transitions. We can assist firms to develop and implement firm transition plans, both unexpected imminent departures and future planned departures.

Crisis Management and Turnaround

A firm in crisis has probably ignored warning signs and slowly slipped into a troublesome situation involving insufficient cash flow and/or excessive debt. In most instances, there are several aspects of the firm’s operation that needs attention. While the better course is to take action at the first signs of trouble, more often than not firms wait until circumstances seem desperate. In order to assist in such a crisis, we evaluate the situation and provide leadership with an honest and objective assessment of the causes of the crisis and the development of strategies to get the firm back to the profitable operation. If you feel your firm is headed in the wrong direction, give us a call and let’s discuss how we would propose to help.

Buy In and Withdrawal Strategies and Structure

At the very core of the firm structure is its financial arrangement for partner buy-in and retirement return of capital. Some firm structures provide that new partners are required to make a capital investment in the firm, while others have eliminated that concept. We can assist in helping you evaluate whether there should be a buy-in and if so how it should be valued and what financing possibilities are available.

Alternative Billing Methods

Although billing by the hour may be a simple and easily employed billing method, it has come under attack for not serving the lawyers or their clients well in many circumstances. Some successful firms have nearly eliminated hourly billing. Most firms continue hourly billing for some work but have developed other pricing methods that work in a variety of circumstances. Let us help your lawyers learn to utilize other pricing methods where appropriate. Properly employed, alternative billing methods can improve firm profits, while providing clients with a predictable, cost effective method.