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  • April 3, 2013 | Practice News
    Best Practice: Where to start when merging/acquiring a smaller firm

    Asked and Answered

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

    Q. Our firm is a 26 attorney firm in Louisville, Kentucky. We are considering merging/acquiring a 12 attorney firm in the local area. This is virgin territory for us as we have not done this before. We would be interested in your thoughts as to where we should start and the process we should use to minimize the risk of making a mistake.

    A. While mergers can be a valid option making them work is often another matter. Research indicates that one third to one half of all mergers fail to meet expectations due to cultural misalignment and personnel problems. Don't try to use a merger or acquisition as a life raft, for the wrong reasons and as your sole strategy. Successful mergers are based upon a sound integrated business strategy that creates synergy and a combined firm that produces greater client value than either firm can produced alone.

    There can be a whole list of reasons for failure including poor financial performance, attorney defections, loss of key clients, and leadership and management issues. However, it has been our experience that most failures have been the result of poor cultural fit. The merging firms - after they have moved past conflict checks and excitement about new client potential - jump immediately to an examination of practice economics and the financials. They fail to perform proper due diligence on the people. It is critical that firms insure that cultural due diligence is a key component of the merger assessment process. Philosophies, personalities, and life styles should be generally compatible. The partners should like each other and the deal should make sense.

  • March 27, 2013 | Practice News
    Best Practice: Proper timing for the sale of your law practice

    Asked and Answered

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

    Q. I am a sole owner of a 4 attorney law firm located in Washington, D.C. Our practice concentrates on estate planning and administration. We have 6 support staff members. I just turned 60 the first of the month and am beginning to think about what I will eventually do with the practice. None of the associate attorneys are interested in partnership or in purchasing the practice - they just want jobs - they are not interested in owning a law practice. When is the best time for me to sell my practice?

    A. You really have to give some thought to your timeline - how long do you want to work? Do you plan on pursuing another career? Have you put enough money away so you can simply retire without concern about the need to generate additional income?

    If you need revenue for an additional 10 years and if you enjoy what you are doing - then it will not be in your interest to sell the practice too early. Let's say you could sell your practice for one million dollars - this might equate to two years of earnings. If you worked another 10 years - you could have earned five million dollars.

    To a large extent owning a law firm is in essence a job where you work for a living where you have provided employment for yourself. It might be hard to find a job that pays as well as your firm. So if you need revenue for another 10 years and your enjoy your work - you should probably plan on working another 10 years. Build you timetable to sell your practice around your future work timeline. Things change - you may find that your associates change their mind or down the road you may end up with new hires that will have an interest in partnership.

  • March 20, 2013 | Practice News
    Best Practice: What size book of business does a lateral partner need?

    Asked and Answered

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

    Q. I am a partner in a mid-size firm in Memphis. We have 250 attorneys in the firm and I am considering making a move to a smaller firm. While I have a client base, I am not sure how much business would go with me. I am currently making $600k in compensation. With my experience - 25 years plus -- how important is a book of business initially? How big of a book will firms be looking for?

    A. A portable book of business is critical - especially if you are looking to earn what you have been earning. A rule of thumb for many of the lateral moves that we have seen for compensation is 1/3 of book. You will need a book of $1.5 to $2.0 million to generate interest from major players.

    Click here for our blog on laterals and mergers

    Click here for articles on other topics

    John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.

  • March 13, 2013 | Practice News
    Best Practice: Partner compensation at a 2 attorney start-up

    Asked and Answered

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

    Q. I am a solo practitioner in Chicago. I've been offered by another solo to join him as a partner, and was wondering if you could suggest any articles or books I could look at to think about how to structure the partnership. We bill about the same number of hours, but his rate is 50% higher than mine ($300 vs. $200) and he has 20 years on me in age and experience.

  • March 6, 2013 | Practice News
    Best Practice: Ideas for resolving partner conflict

    Asked and Answered

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

    Q. We are based in Kansas City, Missouri. We have two partners, two associates, five staff members, and have been together for 6 years. The firm is the result of a merger of each of the two partner's practices a few years ago. The integration has not gone well. We are quite polarized. Each partner operates as a separate island, does his own thing without regard for the other partner, and staff follow suit. Each partner has very different practice values, approaches to practice, and goals. Conflict has escalated to the point when productivity and profitability has suffered and everyone is miserable. Would you share your thoughts?

  • February 27, 2013 | Practice News
    Best Practice: Mentoring associates - Getting the basics right

    Asked and Answered

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

    Q. I am the chair of our three member executive committee. We are a 20 attorney firm in Atlanta. We have 5 partners and 15 associates. We have done a terrible job of mentoring our associates and we need to do better. Do you have any ideas?

  • February 21, 2013 | Practice News
    Best Practice: How do I value my practice?

    Asked and Answered

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

    Q. I am the founder and owner of a law firm in downtown Cincinnati, Ohio. I have three other attorneys and 4 staff members. We represent primarily business and civic organizations. Our fee revenues are around $735,000 per year and I take home $175,000 to $200,000 from the practice. I am looking to sell the practice to either the associates in the firm or another law firm. Do you have any idea what my firm might be worth?

  • February 13, 2013 | Practice News
    Best Practice: Mitigating case portfolio risk with a firm contingency fee case selection system

    Asked and Answered

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

    Q. Our firm - St. Louis, Missouri - handles personal injury cases on a contingency fee basis. All 6 attorneys practice in this area and we do no work on any other type of fee or billing arrangement. During the last couple of years cash flow has been tough, we have lost some cases, and we are looking for ideas on what we should be doing differently. We would appreciate any ideas that you may have.

  • February 6, 2013 | Practice News
    Best Practice: Expanding your geographical reach through law firm expansion

    Asked and Answered

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

    Q. Our firm is a 14 attorney firm in central Iowa. We have one office in Des Moines and have been considering opening an office in another city. We represent business organizations and very few individual clients. I would appreciate your thoughts and suggestions.

  • January 30, 2013 | Practice News
    Best Practice: Managing cash flow in a contingency fee law firm

    Asked and Answered

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

    Q. I am sole owner of a law firm in Western Kentucky. My practice consists of myself, a legal assistant, a part-time bookkeeper, and a part-time contract attorney. The practice is limited to employment law - both plaintiff and defense side. Approximately 80% of my business is contingency fee and 20% is time-billed and or retainer. While the practice has done OK over the past 15 or so years, worrying about paying bills (cash flow) is a constant source of stress for me and my family. I do no marketing - all of my business comes from lawyer referrals. Do you have any suggestions?