Legal Resource Group Presentation


Published on

law firm professionals present on The New Business of Law: Ideas and Solutions for Effective Management

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Legal Resource Group Presentation

  1. 1. The New Business of Law: <br />Ideas and Solutions for Effective Management<br />January 26th, 2010<br />
  2. 2. Agenda<br />New Business Development<br />Arthur G. Levin; President – AGL Associates<br />7 Habits of Highly Effective Insurance Programs<br />Uri Gutfreund; Law Firm Insurance Guru - Singer Nelson Charlmers<br />Managed Services: “Onsite Outsourcing in the Law Firm”<br />John Imperiale; Sr. Vice President – GLC Business Services<br />Alternative Fee Arrangements<br />Rick Puzo; Partner – J.H. Cohn LLP<br />Keys to Effective Accounts Receivable Management<br />Martin Hali; President – Receivable Outsource Management<br />
  3. 3. The New Business of Law: <br />Ideas and Solutions for Effective Management<br />January 26th, 2010<br />
  4. 4. NEW BUSINESS DEVELOPMENT <br />A Cooperative Firm-wide Necessity<br />Presented by:<br />Arthur G. Levin<br />President<br />AGL ASSOCIATES<br />
  5. 5. BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />The vast majorityof all business coming in to law firms comes in as a result of Partner personal contact.<br />Some partners have a natural ability to interact with others in such a way as they attract business, all others need some degree of training and/or assistance.<br />
  6. 6. As a firm leader you have the responsibility to provide at least basic business development training to all lawyers.<br /> Every lawyer must know:<br />How to conduct themselves at a first meeting with a potential client<br />How to give others a reason to direct referral sources and potential business.<br />BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />
  7. 7. How to “ask for business” by telling the other person what’s in it for them<br />How to convey their expertise to others.<br />How to use the right words to convey the firm’s business development message.<br />How to properly encourage friends and family to help him/her develop business.<br />BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />
  8. 8. As a firm leader, you must assure that:<br />Marketing efforts are well organized and understood by the entire firm<br />The firm compensation system encourages and does not discourage business development<br />Lawyers are not penalized for legitimate time spent in developing worthwhile business<br />BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />
  9. 9. BUSINESS DEVELOPMENT AND CLIENT RELATIONS<br />Business development results are monitored for effectiveness based on gross fees received reduced by actual overhead cost.<br />If you do individual partner Marketing Plans, that they are realistic and monitored for results and not just a waste your time.<br />Lawyers are rewarded for active client retention and fee growth.<br />EVERY LAWYER IN THE FIRM HAS A ROLE IN FIRM BUSINESS DEVELOPMENT.<br />
  10. 10. BUSINESS DEVELOPMENT AND CLIENT RELATIONS<br />Additional things you can do:<br />Target specific clients and establish a realistic strategic acquisition plan.<br />Develop a comprehensive lawyer connection questionnaire.<br />Establish an understanding among all partners of what every other partner does and establish a formal, continuous method for internal cross selling. <br /> <br />
  11. 11. BUSINESS DEVELOPMENT AND CLIENT RELATIONS<br />Firm’s leadership must address the following in today’s highly competitive law firm environment:<br />Encourage cross selling with other professionals.<br />Reduce partner internal competition and create a firm atmosphere where lawyers think of clients as “clients of the firm”. <br />Foster innovation and create fun.<br />
  12. 12. BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />Utilize billing innovation to meet a client’s needs with strict firm control.<br />Strongly encourage client growth and succession by making it part of the firm culture.<br />Fire non-productive clients based on ROI.<br />Understand internal and client generational differences.<br />Maintain strong alumni relations.<br />Visit clients regularly.<br />
  13. 13. BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />Use client surveys or independent client interviews.<br />Praise all business development success publicly.<br />Develop realistic firm differentiators and make sure every lawyer knows how to present them.<br />Utilize modern tracking technology.<br />Create a strategic firm wide marketing plan.<br />Stay away from lawyers when you market. Go to where potential clients are.<br />
  14. 14. BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />Use a case management plan and a budget when you initiate every significant matter.<br />Eliminate “Stealth Marketing” where lawyers hide behind the firm’s general business development program. <br />
  15. 15. BUSINESS DEVELOPMENT AND CLIENT RELATIONS <br />A few things to think about:<br />Do you truly understand all aspects of your client’s business?<br />Do you take the time and effort to truly evaluate the service you provide to assure that it is holistic and serves the client’s needs not just his requests?<br />Do you and your firm colleagues sit down and discuss how the firm may better serve your clients?<br />
  16. 16. The New Business of Law: <br />Ideas and Solutions for Effective Management<br />January 26th, 2010<br />
  17. 17. 7 Habits of Highly Effective Insurance Programs <br />Catch the mistakes before they catch you<br />Presented By:<br />Uri Gutfreund<br />Law Firm Insurance Guru Singer Nelson Charlmers<br />
  18. 18. Insurance - Who Cares?<br /><ul><li>You Do – How’s 1m – 2m in New Business
  19. 19. Competitive Advantage/ Disadvantage
  20. 20. Won’t put you out of business – Avoid Errors
  21. 21. Return on investment
  22. 22. Increase profits to partnership of $100k - $200k
  23. 23. Professional Liability, Health, Office Insurance</li></li></ul><li>Which firm are you?<br /><ul><li>No systems programs
  24. 24. Risking the firm
  25. 25. Wasting money
  26. 26. Leaving investment under utilized
  27. 27. Waste time
  28. 28. Process and Procedures
  29. 29. Saving Money, increasing your profits
  30. 30. Maximizing insurance dollars to get the most bang for your buck
  31. 31. Stop the contributions</li></li></ul><li>7 Habits of Highly Effective Insurance<br />Process and Procedures<br />Time Investment<br />Partners<br />Technology<br />Morale Enhancing Benefits<br />Learn the system<br />Work the system<br />
  32. 32. Uri’s TOP 10½ Quick Hits<br />Start Professional Liability process 90 days before renewal<br />Rule of 12 Companies<br />Disability Insurance policies with your partnership agreements<br />Valuable Papers<br />Employee Benefit Liability<br />Engage your employees in the process<br />Employment Practices Liability Insurance<br />Check your limits<br />Interview your broker<br />Stop Contributing to insurance companies – they aren’t needy charities<br />10.5 Post Retirement Health Insurance<br />
  33. 33. Any Questions <br />Uri Gutfreund, RPLU<br />Singer Nelson Charlmers<br /><br /><br />212-826-9744<br />
  34. 34. The New Business of Law: <br />Ideas and Solutions for Effective Management<br />January 26th, 2010<br />
  35. 35. Managed Services: “On site Outsourcing in the Law Office”<br />Presented By:<br />John Imperiale<br />Sr. Vice President<br />GLC Business Services, Inc.<br />
  36. 36. Evolution of Managed Services<br />1980s – Data Centers, software development and IT support<br />1990s – Office Service support for mailroom, copy center, faxing, reception, facilities etc<br />2000s – Simple records management and document filing.<br />2010+ – “Needs Based Solutions” - Integrated electronic records and document management, document imaging, Lit support, e-Discovery, offsite storage, staff productivity and cost control. Accounting, A/R collections, equipment leasing and more.<br />
  37. 37. Optimization of Core Activities<br />Managed Services provides back-office, on-site support for law firms.<br />Services include:<br /><ul><li> Staffing, management, work process
  38. 38. Transition of existing firm employees
  39. 39. Records/File management solutions
  40. 40. Document imaging, Lit. support and e-Discovery
  41. 41. Copying, mail, fax, and general office support
  42. 42. Hardware, software & service
  43. 43. Accounting, A/R and financing
  44. 44. Single, integrated solution to the clients support requirements</li></li></ul><li>Optimization of Core Activities<br />Law firm focuses on:<br /><ul><li>Practicing law
  45. 45. Improving client relationships
  46. 46. Gaining new clients
  47. 47. Profitable revenue growth
  48. 48. Improving productivity of billable staff
  49. 49. Producing quality work product</li></li></ul><li>Why firms use Managed Services<br /><ul><li> Improved capital utilization
  50. 50. Better leasing and purchasing options
  51. 51. Economies of scale
  52. 52. Faster collections of A/R
  53. 53. Reduce and control cost
  54. 54. Labor, Off-Site Storage, Equipment
  55. 55. Firms focus on core activities
  56. 56. Increase efficiency
  57. 57. Produce more work with fewer staff
  58. 58. Improve quality, consistency & turn-around</li></li></ul><li>Why Firms use Managed Services<br /><ul><li> Free up internal management resources
  59. 59. Firm admin management transition from providers to customers
  60. 60. Service providers are operational specialist
  61. 61. Meet compliance requirements
  62. 62. Share risk with service providers
  63. 63. Improve service levels
  64. 64. Improve user satisfaction</li></li></ul><li>3M Benchmark Study<br /><ul><li> Each employee spends 10.5 hrs per year looking for lost data</li></li></ul><li>Case Study: Cost of Non-Compliance<br />Our “Law Office”<br /><ul><li> Firm has 50 attorneys and 20 Admin Staff at $20/hr.
  65. 65. Attorneys bill at $400 per hour
  66. 66. Each employee spends 10.5 hrs per year looking for lost data
  67. 67. Annual cost of $216,000
  68. 68. Monthly expense $18,000
  69. 69. Very conservative estimate!</li></li></ul><li>Signs that you might need help<br /><ul><li>Support staff not dedicated to core law office services.
  70. 70. Staffing, Offsite storage, IT and other cost on an upward never ending spiral.
  71. 71. No Records Management or Document Management System.
  72. 72. Attorneys have their individual records departments within the confines of their offices and “claimed” conference rooms.
  73. 73. Document filing is chronically backlogged; records/files frequently missing.
  74. 74. Retention Policy not in place or not followed.
  75. 75. Management of office copiers and printers a full time job.
  76. 76. A/R DSO growing fast; collections are slow.</li></li></ul><li>Summary<br /><ul><li>Don’t go it alone
  77. 77. Business improvements are priceless
  78. 78. Improve core competencies
  79. 79. Cost of Compliance vs. Cost of Non-Compliance
  80. 80. Provides an upward career path for current services staff
  81. 81. Help is available right here in this room</li></li></ul><li>The New Business of Law: <br />Ideas and Solutions for Effective Management<br />January 26th, 2010<br />
  82. 82. Alternative Fee Arrangements<br />Presented By: Richard Puzo, CPA, PartnerDirector of Law Firm Industry PracticeJ.H. Cohn LLP<br />
  83. 83. Contents<br /><ul><li>Why Alternative Fee Arrangements (AFA)
  84. 84. Common Alternative Billing Structures
  85. 85. Variables to Consider When Changing to AFA
  86. 86. Summary</li></li></ul><li>Why Alternative Methods of Billing<br /><ul><li>Preserving client relationships
  87. 87. Economic component
  88. 88. Delivering and communicating value and results of services rendered
  89. 89. Billable hours: “Third Rail” of the American Legal profession
  90. 90. Pair client’s needs and expectations with the method that most equitably measures the value of the lawyer’s services</li></li></ul><li>Common Alternative Billing Structures <br /><ul><li>Blended Hourly Rate
  91. 91. Fixed or Flat Fee Plus Hourly Rate
  92. 92. Task-Based Fee</li></li></ul><li>Blended Hourly Rate<br />Hybrid of hourly rate - one rate applies to all hours billed on a matter <br /><ul><li>Advantages</li></ul>Same advantages as hourly method<br />Thought to be simpler to negotiate<br />May encourage delegation of work to individuals with lower hourly billing rates<br /><ul><li>Disadvantages</li></ul>Same disadvantages as hourly method<br />May endanger quality of work with improper delegation<br />Will be unprofitable if the blend in practice is at the high end of the hourly rate structure<br /><ul><li>Best use</li></ul>When the “mix” needed to do the work is reasonably foreseeable<br /><ul><li>Recognition of value to client</li></ul>Generally unrelated to value to the client, which may penalize either the lawyer or the client<br />
  93. 93. Fixed or Flat Fee Plus Hourly Rate<br />Hybrid method where the portions of services that have a definable scope are charged on a fixed-fee or flat-fee basis, and the portions that cannot be defined are charged on an hourly or a time-rate basis<br /><ul><li>Advantages</li></ul>Compromise or balancing in risk-sharing and predictability of fee<br />Provides client with an economic basis upon which to decide to proceed<br /><ul><li>Disadvantages</li></ul>Compromise or balancing in risk-sharing and predictability of fee<br />Combines and modifies advantages of the hourly and fixed/flat fee methods<br /><ul><li>Best use</li></ul>When some, not all, of the contemplated services can be defined<br /><ul><li>Recognition of value to client</li></ul>Creates a compromise between the two methods<br />
  94. 94. Task-Based Fee<br />Hybrid of the fixed-fee arrangement, in which the fee is based upon identified tasks such as a loan amount or tasks of a litigation matter. <br /><ul><li>Advantages</li></ul>Relatively easy to state terms <br />Allows sharing of risks and benefits between lawyer and client<br />Does not depend on time spent<br /><ul><li>Disadvantages</li></ul>Set too high, may not be competitive; too low, may not be profitable<br />Requires lawyer to have a good understanding of work needed and the costs associated with the work<br />Forces lawyer to bear risk if complications arise and extra services are required<br /><ul><li>Best use</li></ul>In situations above<br /><ul><li>Recognition of value to client</li></ul>Provides the client a clear understanding of the service received in return for the fee<br />
  95. 95. Variables to Consider When Changing to AFA<br /><ul><li>Clear understanding of the deliverables
  96. 96. Ability to accurately project the cost of services
  97. 97. The level of timekeepers and the levels of expertise, i.e., Partners, Associates, Paralegals
  98. 98. Work which can be delegated to less costly timekeepers without compromising quality</li></li></ul><li>Variables to Consider When Changing to AFA (continued)<br /><ul><li>A budget prepared after you analyze the above
  99. 99. A system to monitor budget to actual
  100. 100. Clients’ budget constraints
  101. 101. Level of profitability that is deemed reasonable and within the firm’s realization guidelines</li></li></ul><li>Summary<br /><ul><li>AFAs are the rage of the moment
  102. 102. General counsel must reduce and better budget costs
  103. 103. AFA considered for 20 years – Still just an emerging trend
  104. 104. Substantial increase in law firms’ profits 8.8 % per year and billing rate increases approximately 12% per year mandates need for change
  105. 105. Although AFAs remain an emerging trend, it would be prudent to be proactive with your client base and consider Alternative Fee Arrangements.</li></li></ul><li>The New Business of Law: <br />Ideas and Solutions for Effective Management<br />January 26th, 2010<br />
  106. 106. KEYS TO EFFECTIVE ACCOUNTS RECEIVABLE MANAGEMENT<br />Presented by<br />Martin HaliPresident<br />Receivables Outsource Management, LLC.<br />
  107. 107. PRESENTATION OBJECTIVES<br /><ul><li>Discuss some facts and myths about accounts receivable management as it relates to Law firms.
  108. 108. Present an overview for effective accounts receivables management.
  109. 109. Answer any questions you may have about accounts receivable management as it relates to Law firms.</li></li></ul><li>MYTHS<br /><ul><li>Law firms cannot manage their receivables as normal businesses do.
  110. 110. Law firms cannot have “set” credit and collection policies.
  111. 111. Law firms will lose clients if they enforce their credit and collection policies. </li></li></ul><li>FACTS<br /><ul><li>Law firms ARE a NORMAL business!
  112. 112. Law firms that have in place credit and collection policies have IMPROVED CASH FLOW!
  113. 113. Law firms that enforce their credit and collection policies MAINTAIN THEIR PROFITABLE CLIENTS!</li></li></ul><li>BACK TO BASICS<br />Back to Basics! <br />
  114. 114. THE CORE BUSINESS MODEL<br />OBTAIN THE ENGAGEMENT <br />(Sales & Marketing process)<br />GET PAID FOR THE WORK <br />(A/R Function)<br />PERFORM THE WORK<br />(Production process)<br />
  115. 115. THE A/R FUNCTION<br /><ul><li>Determine the credit to be granted a client.</li></ul>Obtain a retainer? How much?<br /><ul><li>Billing the client per the fee agreement.</li></ul>When to invoice, how often. <br /><ul><li>Collection of the fees due.</li></ul>Dunning the client. How, when and how often (FDCPA).<br />BE CONSISTENT!! <br />
  117. 117. HOW DO YOU DETERMINE THE EXTENSION OF CREDIT?<br /><ul><li>Based on the three “C’s” of credit</li></ul>Character (of the client)<br />Capacity (of the client)<br />Collateral (of the client)<br /><ul><li>Large exposures and marginal accounts need to be monitored closely</li></li></ul><li>THE COLLECTION FUNCTION<br /><ul><li>PRIMARY</li></ul>Bring in receivable that are due<br /><ul><li>SECONDARY</li></ul>Identify accounts needing documentation<br />Identify disputes<br />Identify problem accounts<br />
  118. 118. THE COLLECTION PROCESS<br />35-DAY OLDACCOUNT<br />CLOSE FILE<br />INTERNAL<br />COLLECTION <br />PROCESS<br />COLLECTED<br />CLOSE FILE<br />OUTSIDE<br />COLLECTION<br />AGENCY<br />DISPUTED<br />COLLECTED<br />CLOSE FILE<br />IF SUIT IS NOT<br />APPROPRIATE<br />WRITE - OFF<br />LEGAL<br />ACTION<br />CLOSE FILE<br />COLLECTED<br />IF NOT<br />COLLECTED<br />CLOSE FILE<br />Copyright © 2009 by Martin Hali, all rights reserved.<br />
  119. 119. THE EFFECT OF A BAD DEBT WRITE OFF TO PROFIT<br />To Offset AIF YOU OPERATE AT A NET PROFIT OF <br />Bad Debt<br />Loss Of: 20% 25% 30%<br />These Additional Fees Are Required <br />$10,000 $50,000 $40,000 $33,334 <br />$20,000 $100,000$80,000 $66,667<br />
  120. 120. MISTAKES LAW FIRMS MAKE REGARDING A/R’S<br /><ul><li>Law firms “give up” too much in fee arrangements/retainers.</li></ul>They are so happy to have the work they forego the process of determining their credit exposure (RISK).<br /><ul><li>Most law firms fail to understand the importance of proper billing and collecting the fees due.</li></ul>They assume that once a client is billed, it’s as good as cash in the bank, thereby exposing their firm to loss and potential insolvency. <br />
  121. 121. MANAGING THE LAWYER/CLIENT ASSOCIATION<br /><ul><li>Effective communication and follow up by the lawyer is essential to maintaining a good relationship and getting paid.
  122. 122. Clients today are watching their costs/budgets.</li></ul> Obtain a smaller retainer and replenish more frequently.<br /> Conduct quarterly reconciliations.<br />
  123. 123. MANAGING THE LAWYER/CLIENT ASSOCIATION (cont.)<br /><ul><li>Clients do not want surprises.</li></ul>Keep them informed of the costs on a regular basis.<br />Be prepared to provide them with details.<br /><ul><li>Set up time and billing markers. </li></ul>If the assignment has reached a certain number of hours or cost, notify the client of such. <br /><ul><li>Clients respect a well run firm.</li></li></ul><li>MANAGING THE LAWYER/CLIENT ASSOCIATION (cont.)<br /><ul><li>Be prepared to manage delinquent accounts.
  124. 124. Delinquent accounts usually are indicators that:</li></ul>The client is having cash flow issues.<br />The client is unsatisfied with the work product.<br />The client does not expect to pay you, in part or in full.<br />
  125. 125. KEYS TO AN EFFECTIVE ACCOUNTS RECEIVABLE FUNCTION<br /><ul><li>Put in place formal and written polices and procedures that address:</li></ul>Credit Extension<br />Fee Reductions<br />Accounts Receivable Servicing (billing, collections)<br />Use of collection agencies and attorneys<br /><ul><li>Make sure your engagement letter spells out the terms that apply to the client.</li></ul> The client needs to be aware of the consequences of non-payment.<br />
  126. 126. KEYS TO AN EFFECTIVE ACCOUNTS RECEIVABLE FUNCTION (cont.)<br /><ul><li>Set up a proper A/R department and staff it properly or outsource the process.</li></ul>Set performance objectives.<br />Continually monitor performance against objectives.<br />Aggressively manage all activities to achieve objectives. <br /><ul><li>Do not have a partner in charge of this process.</li></li></ul><li>KEYS TO AN EFFECTIVE ACCOUNTS RECEIVABLE FUNCTION (cont.)<br /><ul><li>A properly functioning A/R department has limited lawyer involvement.</li></ul>Only involved to answer disputes.<br />Should be held accountable for loss of fees.<br /><ul><li>Have your A/R department function independently or outsource the function.</li></ul>A/R’s is not a core function. <br />
  127. 127. DOES ITWORK?<br />
  128. 128. ACTUAL RESULTS<br />A firm with billings (on average) totaling approximately $12.3 million per quarter.<br />Days Sales Outstanding (DSO) was 113 days, totaling $15.5 million<br />After making proper changes, within 6 months they reduced the DSO to 53 days with an open balance of $7.2 million<br />A reduction of 40 days or 47% of DSO and a reduction of $8.3 million in open A/R’s or 54%. <br />Maintained a DSO of between 51 to 55 days <br />
  129. 129. ACTUAL RESULTS (cont.)<br />OVERALL RESULTS:<br />DSO was reduced from 113 days to approximately 53 days<br />Unapplied cash were practically eliminated<br />Client goodwill was enhanced<br />The firm had an additional $8.3 million in working capital<br />
  130. 130. The New Business of Law: <br />Ideas and Solutions for Effective Management<br />January 26th, 2010<br />
  131. 131. Questions<br />
  132. 132. DISCLAIMER:<br />These slides are made available for educational purposes only, as well as, to give you general information and a general understanding of the content discussed, not to provide specific legal or professional advice. While we try to make sure that all information is accurate at all times, we are not responsible for typographical and other errors that may appear; however, it is your responsibility to verify with that all details listed are accurate.<br />