The Bar News

Bar News Sections

Best Practice Tips

  • June 16, 2014 | Practice News
    Best Practice: Selling a personal injury practice

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am the founder and owner of a personal injury plaintiff practice located in Lexington, Ky. I have two associates and four support staff members. All of our cases are handled on a contingency fee basis and our swings in fee collections from year to year can be substantial. I am 64 and would like to transition my practice and retire within the next three years. Both of my associates would like to take over my practice. I believe I am entitled to compensation for my practice and am desiring a fair buyout. I would appreciate hearing your ideas concerning a buyout approach.

  • June 11, 2014 | Practice News
    Best Practice: How to structure a general ledger of accounts

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am the newly elected managing partner of 12 attorney business transactional firm in St. Louis. The firm is trying to implement a more disciplined approach to financial management. I have been charged with developing our first budget and I am having difficulties due to the overall structure of our general ledger. Our system was setup by our outside accountant and the expense accounts lump too many expenses into too few categories. Do you have any suggestions?

  • June 4, 2014 | Practice News
    Best Practice: Law firm policies and procedures

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am a solo practitioner in Central Illinois. As my staff seems to expand, I feel a need to become more formal.  I have a question about nondisclosure agreements with staff? Also office procedures or rules? Also, in hiring, I am finding fewer candidates who have experience in a legal setting. The Illinois State Bar Association Law Practice Management Section may want to consider a half day program that is internet based to acquaint staff who have office experience but no legal experience with some of the basic issues including nomenclature, confidentiality, basic legal drafting, etc.

  • May 28, 2014 | Practice News
    Best Practice: Law firm mergers

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am a solo in Bloomington, Illinois. I have just completed my third year in solo practice. I have one full time secretary, a paralegal, and I office share with a group of attorneys. My overhead is low and my margin is 61%. I have been approached by a two attorney (2 partners) firm regarding merging with their firm. One of the partners is relatively new (joined the firm 3 years ago) and the other is the firm founder and is planning on retiring in the next year. On average the other firm's revenue per attorney and partner earnings is on par or even less than mine. Their overhead is much higher. The two partners have been operating on a handshake with no succession/transition plan for the senior partner and no understanding of retirement financial arrangements (buy-out). While I have some concerns and fears about merging I believe that merger would provide me access to mentoring, additional resources and staff, and ability to improve my competencies and handle larger more complex cases. I would appreciate your thoughts.

  • May 21, 2014 | Practice News
    Best Practice: How to compensate new associate who brings a book of business

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am the sole owner of a law firm in Walnut Creek, California. I have three associates and five staff members in the firm. I am looking to hire another associate. The associate I am considering has been out on his own for five years - no office and no employees. He would bring around 30 active matters with him. I was thinking of paying him a salary with a discretionary bonus based upon performance. Fees originated and generated would be a major component of the performance determination that would impact future salary increases, bonuses, and eligibility for partnership. However, I believe that I must do something with regard to the business that he brings with him. I would appreciate your thoughts and suggestions.

    1 comment (Most recent May 22, 2014)
  • May 14, 2014 | Practice News
    Best Practice: Succession/exit strategy for law firm owner

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am the solo owner of a six attorney insurance defense firm in Phoenix. The other five attorneys are associates - most of whom have been with me three years or less and had limited experience prior to joining my firm. I am 47 and am looking to start to wind down within five years and be totally out of the practice in 10 years when I am 57. I want to start thinking about my succession strategy early so I have time to execute it properly. I would appreciate your suggestions.

  • May 7, 2014 | Practice News
    Best Practice: Law firm overhead

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am the managing partner of an 8 attorney firm in Carbondale, Illinois. Recently I was talking with the managing partner of a firm in the area and we were discussing overhead ratios and we seemed to have different definitions of overhead and I am wondering if we were trying to compare apples to oranges. Can you share your thoughts?

    A. I consider overhead to be the operating cost required to support the producers in the firm. This is a different statistic than expenses. Typically in a law firm overhead is all expenses except for attorney salaries (associate and partners) and benefits. Often overhead is used as various benchmark surveys. However, when determining net income or profit (the profit pool) expenses would include associate salaries and associate and partner benefits. In a professional corporation where officer salaries are expensed we typically add shareholder salaries back to the net income figure to determine the profit pool for benchmarking purposes.

    Click here for our blog on financial management

    Click here for articles on other topics

  • April 30, 2014 | Practice News
    Best Practice: Associate training and mentoring

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. We are a three attorney personal injury plaintiff firm in Moline, Illinois. There are two partners and one associate in the firm. We handle a large volume of small PI files - currently we have 700+ open files handled by three attorneys and 5 assistants. We recently hired our fourth attorney - second associate - that came to us with 20 year's experience as an associate in several large firms (100 plus attorney firms). The attorney, who has been with us for about 8 weeks, has never handled personal injury cases and is having some problems getting organized. Do you have any suggestions?

  • April 23, 2014 | Practice News
    Best Practice: Profit is up - why is partner compensation down?

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. We are a 7 attorney firm in Evansville, Indiana - four partners and three associates. I am one of the partners in the firm. Each month we are provided with a profit and loss statement, a billable hours report, fees received reports broken down by lawyer, and accounts receivable reports by lawyer. In 2014 our fee collections are up significantly over 2013 - our expenses are lower – profit is up - yet the money is not there for partner draws and we are having to draw less than we did in 2013? What do you think is happening?

  • April 16, 2014 | Practice News
    Best Practice: What should I be considering when buying a law practice?

    Asked and Answered

    By John W. Olmstead, MBA, Ph.D, CMC

    Q. I am an associate in a law firm in Akron, Ohio. The firm is an estate planning practice consisting of the owner/founder of the firm, myself, and two legal assistants. I have been with the firm for ten years and this is the only firm that I have worked with since law school. The owner is 67 and has announced that he wishes to retire. He has approached me and provided me with a proposal to buy his practice via an arrangement where I would initially pay him a down payment of 50% of his asking price and after two years the other 50% would be paid over a period of five years. The arrangement would be structured as a partnership and for the two year period we would be 50-50 partners. Compensation would be based upon these ownership percentages. The owner's asking price is two times his average net earnings ($125,000) - $250,000. Average revenues - $210,000. I would appreciate your thoughts and suggestions.