legal resource group presentation

January 26th, 2010

The New Business of Law:

Ideas and Solutions for Effective Management

Agenda1. New Business Development

Arthur G. Levin; President – AGL Associates2. 7 Habits of Highly Effective Insurance Programs

Uri Gutfreund; Law Firm Insurance Guru - Singer Nelson Charlmers3. Managed Services: “Onsite Outsourcing in the

Law Firm”John Imperiale; Sr. Vice President – GLC Business Services

4. Alternative Fee ArrangementsRick Puzo; Partner – J.H. Cohn LLP

5. Keys to Effective Accounts Receivable ManagementMartin Hali; President – Receivable Outsource Management

January 26th, 2010

The New Business of Law:

Ideas and Solutions for Effective Management

NEW BUSINESS DEVELOPMENT

A Cooperative Firm-wide Necessity

Presented by:Arthur G. Levin

PresidentAGL ASSOCIATES

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

1. The vast majority of all business coming in to law firms comes in as a result of Partner personal contact.

2. 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.

3. As a firm leader you have the responsibility to provide at least basic business development training to all lawyers.

Every lawyer must know:A. How to conduct themselves at a first

meeting with a potential clientB. How to give others a reason to direct

referral sources and potential business.

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

C. How to “ask for business” by telling the other person what’s in it for them

D. How to convey their expertise to others.

E. How to use the right words to convey the firm’s business development message.

F. How to properly encourage friends and family to help him/her develop business.

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

4. As a firm leader, you must assure that:A. Marketing efforts are well organized

and understood by the entire firmB. The firm compensation system

encourages and does not discourage business development

C. Lawyers are not penalized for legitimate time spent in developing worthwhile business

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

D. Business development results are monitored for effectiveness based on gross fees received reduced by actual overhead cost.

E. If you do individual partner Marketing Plans, that they are realistic and monitored for results and not just a waste your time.

F. Lawyers are rewarded for active client retention and fee growth.

G. EVERY LAWYER IN THE FIRM HAS A ROLE IN FIRM BUSINESS DEVELOPMENT.

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

5. Additional things you can do:A. Target specific clients and establish a

realistic strategic acquisition plan.B. Develop a comprehensive lawyer

connection questionnaire.C. Establish an understanding among all

partners of what every other partner does and establish a formal, continuous method for internal cross selling.

•  

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

6. Firm’s leadership must address the following in today’s highly competitive law firm environment:A. Encourage cross selling with other

professionals.B. Reduce partner internal competition and

create a firm atmosphere where lawyers think of clients as “clients of the firm”.

C. Foster innovation and create fun.

D. Utilize billing innovation to meet a client’s needs with strict firm control.

E. Strongly encourage client growth and succession by making it part of the firm culture.

F. Fire non-productive clients based on ROI.

G. Understand internal and client generational differences.

H. Maintain strong alumni relations.I. Visit clients regularly.

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

J. Use client surveys or independent client interviews.

K. Praise all business development success publicly.

L. Develop realistic firm differentiators and make sure every lawyer knows how to present them.

M. Utilize modern tracking technology.N. Create a strategic firm wide marketing

plan.O. Stay away from lawyers when you

market. Go to where potential clients are.

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

P. Use a case management plan and a budget when you initiate every significant matter.

Q. Eliminate “Stealth Marketing” where lawyers hide behind the firm’s general business development program.

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

7. A few things to think about:A. Do you truly understand all aspects of

your client’s business?B. 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?

C. Do you and your firm colleagues sit down and discuss how the firm may better serve your clients?

BUSINESS DEVELOPMENT AND CLIENT RELATIONS

January 26th, 2010

The New Business of Law:

Ideas and Solutions for Effective Management

7 Habits of Highly Effective Insurance Programs

Catch the mistakes before they catch you

Presented By: Uri Gutfreund

Law Firm Insurance Guru Singer Nelson Charlmers

Insurance - Who Cares? You Do – How’s 1m – 2m in New Business Competitive Advantage/ Disadvantage Won’t put you out of business – Avoid

Errors Return on investment Increase profits to partnership of $100k -

$200k Professional Liability, Health, Office

Insurance

Which firm are you? No systems

programs Risking the firm Wasting money Leaving investment

under utilized Waste time

Process and Procedures

Saving Money, increasing your profits

Maximizing insurance dollars to get the most bang for your buck

Stop the contributions

7 Habits of Highly Effective Insurance

1. Process and Procedures2. Time Investment3. Partners4. Technology5. Morale Enhancing Benefits6. Learn the system7. Work the system

Uri’s TOP 10½ Quick Hits

1. Start Professional Liability process 90 days before renewal

2. Rule of 12 Companies3. Disability Insurance

policies with your partnership agreements

4. Valuable Papers5. Employee Benefit

Liability

6. Engage your employees in the process

7. Employment Practices Liability Insurance

8. Check your limits9. Interview your broker10.Stop Contributing to

insurance companies – they aren’t needy charities

10.5 Post Retirement Health Insurance

January 26th, 2010

The New Business of Law:

Ideas and Solutions for Effective Management

Managed Services: “On site Outsourcing in the Law Office”

Presented By:John Imperiale

Sr. Vice PresidentGLC Business Services, Inc.

Evolution of Managed Services

• 1980s – Data Centers, software development and IT support

• 1990s – Office Service support for mailroom, copy center, faxing, reception, facilities etc

• 2000s – Simple records management and document filing.

• 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.

Optimization of Core ActivitiesManaged Services provides back-office, on-

site support for law firms.

Services include:• Staffing, management, work process• Transition of existing firm employees• Records/File management solutions• Document imaging, Lit. support and e-Discovery• Copying, mail, fax, and general office support• Hardware, software & service• Accounting, A/R and financing• Single, integrated solution to the clients support

requirements

Optimization of Core Activities

Law firm focuses on:

• Practicing law

• Improving client relationships

• Gaining new clients

• Profitable revenue growth

• Improving productivity of billable staff

• Producing quality work product

Why firms use Managed Services• Improved capital utilization

• Better leasing and purchasing options• Economies of scale • Faster collections of A/R

• Reduce and control cost

• Labor, Off-Site Storage, Equipment

• Firms focus on core activities

• Increase efficiency

• Produce more work with fewer staff• Improve quality, consistency & turn-around

Why Firms use Managed Services

• Free up internal management resources

• Firm admin management transition from providers to customers

• Service providers are operational specialist

• Meet compliance requirements• Share risk with service providers

• Improve service levels

• Improve user satisfaction

3M Benchmark Study

• Each employee spends 10.5 hrs per year looking for lost data

Case Study: Cost of Non-Compliance

Our “Law Office”

• Firm has 50 attorneys and 20 Admin Staff at $20/hr.

• Attorneys bill at $400 per hour

• Each employee spends 10.5 hrs per year looking for lost data

• Annual cost of $216,000• Monthly expense $18,000• Very conservative estimate!

Signs that you might need help• Support staff not dedicated to core law office services.

• Staffing, Offsite storage, IT and other cost on an upward never ending spiral.

• No Records Management or Document Management System.

• Attorneys have their individual records departments within the confines of their offices and “claimed” conference rooms.

• Document filing is chronically backlogged; records/files frequently missing.

• Retention Policy not in place or not followed.

• Management of office copiers and printers a full time job.

• A/R DSO growing fast; collections are slow.

Summary

Don’t go it alone

Business improvements are priceless

Improve core competencies

Cost of Compliance vs. Cost of Non-Compliance

Provides an upward career path for current services staff

Help is available right here in this room

January 26th, 2010

The New Business of Law:

Ideas and Solutions for Effective Management

Alternative Fee Arrangements

Presented By: Richard Puzo, CPA,

PartnerDirector of Law Firm

Industry PracticeJ.H. Cohn LLP

Contents Why Alternative Fee Arrangements

(AFA) Common Alternative Billing

Structures Variables to Consider When

Changing to AFA Summary

Why Alternative Methods of Billing Preserving client relationships Economic component Delivering and communicating value and results

of services rendered Billable hours: “Third Rail” of the American Legal

profession Pair client’s needs and expectations with the

method that most equitably measures the value of the lawyer’s services

Common Alternative Billing Structures

Blended Hourly Rate Fixed or Flat Fee Plus Hourly Rate Task-Based Fee

Blended Hourly RateHybrid of hourly rate - one rate applies to all hours billed on a matter Advantages

– Same advantages as hourly method– Thought to be simpler to negotiate– May encourage delegation of work to individuals with lower hourly billing

rates Disadvantages

– Same disadvantages as hourly method– May endanger quality of work with improper delegation– Will be unprofitable if the blend in practice is at the high end of the hourly

rate structure Best use

– When the “mix” needed to do the work is reasonably foreseeable Recognition of value to client

– Generally unrelated to value to the client, which may penalize either the lawyer or the client

Fixed or Flat Fee Plus Hourly RateHybrid 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 Advantages

– Compromise or balancing in risk-sharing and predictability of fee– Provides client with an economic basis upon which to decide to

proceed Disadvantages

– Compromise or balancing in risk-sharing and predictability of fee– Combines and modifies advantages of the hourly and fixed/flat fee

methods Best use

– When some, not all, of the contemplated services can be defined Recognition of value to client

– Creates a compromise between the two methods

Task-Based FeeHybrid 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. Advantages

– Relatively easy to state terms – Allows sharing of risks and benefits between lawyer and client– Does not depend on time spent

Disadvantages– Set too high, may not be competitive; too low, may not be profitable– Requires lawyer to have a good understanding of work needed and the

costs associated with the work– Forces lawyer to bear risk if complications arise and extra services are

required Best use

– In situations above Recognition of value to client

– Provides the client a clear understanding of the service received in return for the fee

Variables to Consider When Changing to AFA

Clear understanding of the deliverables

Ability to accurately project the cost of services

The level of timekeepers and the levels of expertise, i.e., Partners, Associates, Paralegals

Work which can be delegated to less costly timekeepers without compromising quality

Variables to Consider When Changing to AFA (continued)

A budget prepared after you analyze the above

A system to monitor budget to actual

Clients’ budget constraints

Level of profitability that is deemed reasonable and within the firm’s realization guidelines

Summary AFAs are the rage of the moment General counsel must reduce and better budget

costs AFA considered for 20 years – Still just an

emerging trend Substantial increase in law firms’ profits 8.8 %

per year and billing rate increases approximately 12% per year mandates need for change

Although AFAs remain an emerging trend, it would be prudent to be proactive with your client base and consider Alternative Fee Arrangements.

January 26th, 2010

The New Business of Law:

Ideas and Solutions for Effective Management

KEYS TO EFFECTIVE ACCOUNTS RECEIVABLE MANAGEMENT

Presented byMartin Hali

PresidentReceivables Outsource Management, LLC.

PRESENTATION OBJECTIVES Discuss some facts and myths about

accounts receivable management as it relates to Law firms.

Present an overview for effective accounts receivables management.

Answer any questions you may have about accounts receivable management as it relates to Law firms.

MYTHS Law firms cannot manage their

receivables as normal businesses do. Law firms cannot have “set” credit

and collection policies. Law firms will lose clients if they

enforce their credit and collection policies.

FACTS Law firms ARE a NORMAL business! Law firms that have in place credit

and collection policies have IMPROVED CASH FLOW!

Law firms that enforce their credit and collection policies MAINTAIN THEIR PROFITABLE CLIENTS!

BACK TO BASICSBack to Basics!

THE CORE BUSINESS MODEL

OBTAIN THE ENGAGEMENT (Sales & Marketing process)

GET PAID FOR THE WORK (A/R Function)

PERFORM THE WORK(Production process)

THE A/R FUNCTION Determine the credit to be granted a

client.– Obtain a retainer? How much?

Billing the client per the fee agreement.– When to invoice, how often.

Collection of the fees due.– Dunning the client. How, when and how

often (FDCPA).BE CONSISTENT!!

THE CREDIT FUNCTION

ASSESSCREDIT RISK

CONTROL CREDIT RISK

MONITORCREDIT RISK

HOW DO YOU DETERMINE THE EXTENSION OF CREDIT?

Based on the three “C’s” of credit– Character (of the client)– Capacity (of the client)– Collateral (of the client)

Large exposures and marginal accounts need to be monitored closely

THE COLLECTION FUNCTION PRIMARY

– Bring in receivable that are due

SECONDARY– Identify accounts needing

documentation– Identify disputes– Identify problem accounts

Copyright © 2009 by Martin Hali, all rights reserved.

35-DAY OLDACCOUNT

LEGALACTION

CLOSE FILE

CLOSE FILE

COLLECTED

DISPUTED

IF NOTCOLLECTED

IF SUIT IS NOTAPPROPRIATE

CLOSE FILE

WRITE - OFF

CLOSE FILE

INTERNALCOLLECTION

PROCESS

OUTSIDECOLLECTION

AGENCY

COLLECTED

COLLECTED

CLOSE FILE

THE COLLECTION PROCESS

To Offset A IF YOU OPERATE AT A NET PROFIT OF

Bad Debt

Loss Of: 20% 25% 30%

These Additional Fees Are Required

$10,000 $50,000 $40,000 $33,334

$20,000 $100,000 $80,000 $66,667

THE EFFECT OF A BAD DEBT WRITE OFF TO PROFIT

MISTAKES LAW FIRMS MAKE REGARDING A/R’S

Law firms “give up” too much in fee arrangements/retainers.– They are so happy to have the work they forego

the process of determining their credit exposure (RISK).

Most law firms fail to understand the importance of proper billing and collecting the fees due.– 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.

MANAGING THE LAWYER/CLIENT ASSOCIATION

Effective communication and follow up by the lawyer is essential to maintaining a good relationship and getting paid.

Clients today are watching their costs/budgets.– Obtain a smaller retainer and replenish

more frequently.– Conduct quarterly reconciliations.

MANAGING THE LAWYER/CLIENT ASSOCIATION (cont.)

Clients do not want surprises.– Keep them informed of the costs on a

regular basis.– Be prepared to provide them with

details. Set up time and billing markers.

– If the assignment has reached a certain number of hours or cost, notify the client of such.

Clients respect a well run firm.

MANAGING THE LAWYER/CLIENT ASSOCIATION (cont.)

Be prepared to manage delinquent accounts.

Delinquent accounts usually are indicators that:

• The client is having cash flow issues.• The client is unsatisfied with the work

product.• The client does not expect to pay you, in

part or in full.

KEYS TO AN EFFECTIVE ACCOUNTS RECEIVABLE FUNCTION

Put in place formal and written polices and procedures that address:– Credit Extension– Fee Reductions– Accounts Receivable Servicing (billing,

collections)– Use of collection agencies and attorneys

Make sure your engagement letter spells out the terms that apply to the client.– The client needs to be aware of the

consequences of non-payment.

KEYS TO AN EFFECTIVE ACCOUNTS RECEIVABLE FUNCTION (cont.)

Set up a proper A/R department and staff it properly or outsource the process.– Set performance objectives.– Continually monitor performance

against objectives.– Aggressively manage all activities to

achieve objectives. Do not have a partner in charge of

this process.

KEYS TO AN EFFECTIVE ACCOUNTS RECEIVABLE FUNCTION (cont.)

A properly functioning A/R department has limited lawyer involvement.– Only involved to answer disputes.– Should be held accountable for loss of

fees. Have your A/R department function

independently or outsource the function.– A/R’s is not a core function.

DOES IT WORK?

ACTUAL RESULTS– A firm with billings (on average) totaling

approximately $12.3 million per quarter.– Days Sales Outstanding (DSO) was 113 days,

totaling $15.5 million– After making proper changes, within 6 months

they reduced the DSO to 53 days with an open balance of $7.2 million

– A reduction of 40 days or 47% of DSO and a reduction of $8.3 million in open A/R’s or 54%.

– Maintained a DSO of between 51 to 55 days

ACTUAL RESULTS (cont.)• OVERALL RESULTS:

– DSO was reduced from 113 days to approximately 53 days

– Unapplied cash were practically eliminated

– Client goodwill was enhanced– The firm had an additional $8.3 million

in working capital

January 26th, 2010

The New Business of Law:

Ideas and Solutions for Effective Management

Questions

DISCLAIMER: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.