Where do you want to be in five years?
Strategic planning has been on the agenda for years but sadly most firms ignore this essential tool for defining their futures, explains Viv Williams
Many solicitors seem to have concluded that they need to do something with their practices. This does not come as a complete shock as many knew this seven years ago but have continued to practise in their own way. The reality seems to be slowly dawning that the partners are seven years older and the fundamental issues with the practice are still there.
All firms should have considered an exit strategy years ago and it should be something all firms have already implemented. Most lawyers when they become partners continue to work ‘in their practice’ rather than ‘on their practice’ and never seem to have a clearly defined strategy to enable them to see where the growth might come from and formulate an exit plan.
When fee earning dominates the agenda and collecting cash to remain within the overdraft facility also preoccupies partners, there is little wonder that there is no time for strategy.
Without a clearly defined exit and succession strategy, firms are doomed to fail. It should define the key salient points required in managing your practice as a business and developing your own strategy for growth, exit, and succession. Your strategy will include:
Business structure. Separating ownership from management;
Services offered. Pricing each department for profitability;
Skill set of people to deliver agreed services. By utilising workflows and other cloud-based solutions a number of services can be outsourced, de-skilled, and de-risked; and
- Managing your finances. Access to working capital.
Knowing who your clients are and what services they want is an exercise that should be undertaken – do not build your strategy on a base of sand. Understand what type of clients you serve and what they can afford to pay for your services.
I have recently been engaged by a firm I saw several years ago. Now several years older they have still not addressed an exit plan. They assume that several younger associates will borrow money and invest into the traditional partnership that they run. I interviewed each of the potential partners who told me a very different story. The assumed succession plan went out of the window.
Strategic planning for firms has been on the agenda for years but sadly most practices have ignored this essential tool in defining their future. Before we can even consider competing with the new entrants for market share we have to recognise who our clients and customers actually are.
Defining what you want
'‹Well before you contemplate what services you should offer and to whom, you need to agree the fundamental issues concerning your corporate structure.
Developing a simple model for explaining what you want both collectively as a business and individually as owners or partners is an essential tool in defining your future.
The partnership model is not fit for purpose in the current era. The collegial approach simply does not work and managing any business by committee leads to a lack of decision making and inertia. Hence, the move of many forward-thinking firms to convert into a corporate structure and seek professional management advice, invariably from someone who has not trained as a solicitor, but who must understand the profession’s nuances.
If your strategy is to retain your independence and develop a business model that is in line with current corporate thinking, then this seems your only realistic option. If you are thinking realistically about your future strategy then this should be one of the first items on your agenda. It solves numerous fundamental issues:
Buying your own goodwill. It may be your only buyer for the foreseeable future;
Succession issues. Younger owners do not want traditional equity but may take a directorship;
Exit strategies for partners who wish to retire;
Corporate governance. Planning to manage your business, not letting your business manage you; and
Potential of private equity funding to grow and develop your business.
Corporate governance drives performance in firms; it fundamentally changes the culture, especially when performance-related pay issues are involved.
Another client of mine is about to break up their practice because of disagreements between the partners. This traditional firm has some partners performing well above their billing targets, while others are woefully inadequate, yet no one has ever been removed from the partnership.
The number of partnerships where this is true is staggering – partners carry dysfunctional partners who should have been removed many years ago. They all talk about each other in hushed tones not daring to challenge the other’s performance and form groups of partners that become allies in this war of attrition.
By failing to plan now for exit and succession, you are planning to fail.
Viv Williams is legal services director of SIFA 360