About the Client
Midlands Firm,4 Partners, over 50 Staff, two offices
The Challenge
To reduce their reliance on government-funded work, and become an ‘employer of choice’ in their area.
Actions
We helped to train some of the firm’s key people in rainmaking and management skills, in addition to improving financial disciplines and management reporting.
Results
The firm has almost trebled in size and has become significantly more profitable
This case involves a relatively young firm that was seeking to become more stable and develop a more diverse portfolio of work, and was prepared to put in the work to build solid foundations from which it could grow and change its focus while retaining its strong values.
The Challenge
A five partner firm with around 50 people working from a single office in outer London, this client had a work profile that was heavily dependent on Legal Aid – including family, crime and litigation and supported by Private Client and property practices. With turnover just over £2m, profitability around 30% below benchmarks, and borrowings of around two months’ revenues, the partners (all of whom are relatively young) were looking not only to address their financial challenges, but to get a clearer sense of direction, reduce their reliance on government-funded work, and become an ‘employer of choice’ in their area.
Following a recommendation from another satisfied client, we met and agreed to conduct our usual thorough analysis of their financial data, supplemented by interviews with key people. This was followed by a partner workshop in which we explored and helped them to evaluate the options available to them, and we identified that their current business model would not allow them to meet their objectives – and that they would need either to shrink and focus on their core strengths, or grow and build on their undeniable strengths. We also helped to train some of the firm’s key people in rainmaking and management skills, in addition to improving financial disciplines and management reporting.
The firm then spent two years improving and refining their operations, with our occasional support when required. Having done so, the opportunity to acquire a struggling local practice presented itself and we used our integrated Law Firm Financial Model to evaluate the opportunity and produce a paper for the bank to support the funding of the acquisition. We also assisted in the preparation of the brief and evaluation that led to as successful evaluation on terms acceptable to all parties.
The Managing Partner subsequently undertook training at one of the country’s leading Business Schools and produced a business plan, based in part on our advice of two years previous, requesting our assistance in refining the plan and turning it onto reality. As part of this process, we helped to evaluate a further small acquisition, which has been a success, and a number of additional opportunities that together we have judged to be lacking in sufficient value to merit pursuing. This is an ongoing process, with further potential acquisitions continuing to present themselves, and we are helping to evaluate the value to the business of these propositions.
Further steps have been to conduct a process of growth through selective recruitment in certain departments identified as possessing far greater strategic strength than any of their acknowledged competitors, and to implement extensive improvements and additions to their management information. The firm has more than doubled in size, and these changes have allowed them to fund most of this growth without recourse to external finance.
From facilitation and technical financial support, we have become providers of strategic advice and helped the partners to move away from operational issues and focus on creating ways of adding ever more value. They now have a vision and a strategy to become the pre-eminent form in a significant area, and we have helped them develop the means to achieve this.
Our Impact
Since our initial involvement, the firm has almost trebled in size and has become significantly more profitable but, in spite of this remarkable growth, their borrowings are now lower than when we started. Furthermore, the firm now has nine partners (from five) and five offices (from one), and is no longer dependent on Legal Aid.
Perhaps most tellingly, the firm has succeeded in recruiting and retaining a substantial number of new fee-earning staff, in a very difficult recruitment market and area. The business has grown its turnover from £2m to £6m, and the partners retain ambitions to continue growing both revenues and profitability.
Lessons Learned
None of the growth of recent years would have been possible had the partners not taken the time to ‘put their house in order’, and they have subsequently been able to capitalise on the abundant opportunities now that their reputation as progressive and aggressive has been secured. Indeed, the challenge now is to select which opportunities to pursue.