Preparing for the Future: Managing Partners Focus on Building Financial and Human Capital
As South Florida continues its economic recovery, law firms throughout the region see new opportunities on the horizon. “Although we have all seen several cycles in the economy over the years, the recent downturn was clearly the most severe,” said Geoffrey S. Mombach, managing partner, Mombach, Boyle & Hardin, P.A. in Fort Lauderdale. “On the bright side, however, we believe that the business community perceives that the worst is now over and expansion is in the offing.” Other managing partners agree and are looking at strategies to increase revenue, enhance profitability and deploy their financial and human capital most effectively. In candid interviews with South Florida Legal Guide, they discussed key strategic issues from marketing and technology investments to succession planning. Here some of the ways leading firms are preparing for the future.
Wicker, Smith, O’Hara, McCoy & Ford, P.A.
Wicker, Smith, O’Hara, McCoy & Ford, P.A. does a substantial amount of high-end tort defense, either directly or indirectly though insurance companies, says Nicholas E. Christin, managing partner of the Miami office. “Therefore, our work has beenrelatively steady all through the downturn. Of course, that also means we aren’t as affected by an economic boom.”
In the past two years, the seven-office firm has grown from 120 to 145 attorneys. “Our challenges include getting the right lawyers in place, along with the right mix of assistants and support staff to provide a high level of service to our clients,” he said. “Our most successful lawyers understand they are part of a team. We focus on that approach, rather than the superstar model.”
Christin says each of Wicker Smith’s offices was opened by transferring a lawyer from another office. “We have never acquired a smaller firm,” he added. “Our clients expect us to litigate a case in a certain way, and we want to be sure to have the same philosophy — and the same consistent service — in all our offices.”
While Wicker Smith doesn’t have a formal succession plan, the firm’s four managing partners make it a priority to monitor the development of office and divisional managers. “We can all get a good view of who’s doing a good job and might be our next managing partner,” he said. “We track financial performance carefully and see who is efficient in operating their segment. We know that that’s a separate set of skills compared with rainmaking activities.”
To boost efficiency, the firm uses case management software that provides a paperless office workplace and electronic billing service. “We want our lawyers to look at a file at their desks and see everything that’s happened to date,” Christin said. “I believe that law firms need to use technology effectively, especially in regards to e-discovery. We have made investments in our IT staff, who assist our lawyers with searching and the production of documents. We want to be on the cutting-edge here.”
Eisinger, Brown, Lewis, Frankel & Chaiet, P.A.
Eisinger, Brown, Lewis, Frankel & Chaiet, P.A. is known as a boutique law firm with respect to community association representation, developer representation, real estate, and related commercial litigation. “It is very important for us to monitor all recent developments and trends regarding our areas of expertise,” said Dennis J. Eisinger, managing partner of the nine-attorney Hollywood firm. “Since the practice of law is not static, we must also be prepared to address societal and legal trends and to pursue opportunities in new areas when appropriate.”
To prepare for the future, Eisinger says the firm tries to stay at the cutting edge with respect to technological changes, social media and other tools. Another strategy is to add paralegals who assist the firm’s attorneys and provide cost-efficient services to clients. “We presently employ approximately 10 paralegals and I fervently believe that we have been able to grow our practice, enhance profitability, and better serve our clients through this strategy.”
In addition, the economic downturn has stimulated the firm to closely examine its costs and to “cut out the fat” where appropriate, added Eisinger. “But because of our particular expertise and representation of approximately 600 community associations, we have maintained profitability throughout the downturn.”
As for financial capital, Eisinger says the firm has never borrowed money, nor does it intend to. “We do not rely upon services and support from any banker or lender — except for the terrific service that we receive from our banker with respect to our rather active escrow accounts,” he said. “With respect to an accountant, our firm is no different than other law firms and other businesses. We rely upon our CPA to guide us appropriately with respect to both financial and tax reporting.”
With five equity partners ranging in age from 55 to 42, the firm has a natural succession plan, according to Eisinger. “We also employ a couple of terrific associate attorneys who undoubtedly will eventually become equity partners with our firm.”
Overall, what distinguishes the 25-employee firm is its family atmosphere, according to Eisinger. “We try very hard to foster a happy and friendly environment for our staff, both during the workday and for special events,” he said. “We know that having employees who are both skilled and happy at work is the key to success in any business.”
Heller Waldman, P.L.
Known for providing personalized legal services to business and individual clients, Heller Waldman concentrates on complex commercial litigation and estate and tax planning. “In preparing for the future, we have taken two primary steps,” said Glen H. Waldman, managing partner of the Coconut Grove firm. “First, we have solidified our dual-language capabilities in our core lawyers to be flexible to continue to handle the influx of business from the Americas. Second, we have embarked on a strong educational program for our attorneys in the area of employment litigation, as we believe this will be a strong growth area of business for the firm in the next few years.”
Waldman says the firm’s growth strategy focuses on expanding current relationships and developing new ones. “With regard to current relationships we have made a conscious decision to not increase rates in the foreseeable future,” he said. “ We understand the challenges that businesses are facing and will face in this economic environment. By continuing to be properly priced we want to encourage them to leverage our services more — not less — in the near term. The best way to do this is to be consistent with our service and not increase price.”
To develop new relationships, Waldman said the firm uses marketing professionals who keep Heller Waldman in the news. “That has traditionally led to new business opportunities,” he added.
Waldman sees profitability enhancement as an outgrowth of those business development efforts. “An increase in work requires us to bring on additional attorneys, first on a part-time hourly basis, while we insure that the demand remains constant,” he said. “Then, we add more full-time attorneys, which enhances profitability based on greater billing units and hours.”
In addition, the firm’s solid revenue base opens the door to taking on a contingency case with a large upside, Waldman added. “Success in such a matter, would of course have a significant impact on the bottom line, while we continue to have a consistent revenue stream from our core client base.”
Waldman notes that the firm has no debt, but relies on its bank for excellent day-to-day service. “We also meet with our CPA regarding proper methods of accounting but due to the size of the firm, most of the key economic decisions are made in-house,” he said.
Waldman says the firm has already implemented a succession planning program. “Eleanor Barnett, my younger partner, is assuming more of a leadership role with the firm at large and taking on greater responsibilities,” he said. “It is my expectation in time that she will assume many of the roles as leader of the department while I continue to be the primary business generator.”
Looking ahead, Waldman said, “We believe service to our clients is at the forefront of our success model, and we do not want to do anything to jeopardize that level of service.”
Cantor & Webb P.A.
Cantor & Webb is focused on providing concierge-like legal services to wealthy multinational families/individuals who have cross border tax and estate planning issues, says Steve L. Cantor, managing partner of the Miami firm. In that regard, the firm helps clients with tax compliance, pre-residency tax planning and a wide range of other matters.
“Over the last five years, we have been able to grow despite the downturn,” said Cantor. During that period, the firm has expanded from three to six attorneys with further growth expected in the near future. On the financial side, Cantor said 2009, 2010 and 2011 have been the three best years in the firm’s history. “We are hoping to beat those records in 2012,” he added.
Cantor’s growth strategy has focused on building a global network of personal contacts and referral sources, and playing an active role in high-profile global organizations like the Society of Trusts and Estates Practitioners (London) and Geneva Group International (GGI), a network of law firms, accounting firms and business consultants now entering the U.S market. Cantor is head of GGI’s global trust and estate planning practice group and the firm hosted a GGI regional event in June. “We also speak before professional groups and visit major foreign financial institutions that refer us work,” he added.
As for succession planning, Cantor said, “For me, retirement isn’t even on the horizon,” he said. I really enjoy helping our clients.” Noting that name partner Hal Webb is 20 years younger, Cantor said, “We also have many longtime staffers who have great institutional knowledge and contribute to our success.”
Financially, Cantor said the firm’s policy of “dinero primero o no trabajo” [money first or no work] means there aren’t any serious collection problems. Cantor adds that the firm has a close relationship with its CPA. “We have quarterly meetings to look at the financial side and see what issues we need to consider looking ahead,” he said. “A few years ago, we terminated a long-time banking relationship and are glad we made the change. Being friends with the head of the bank makes a real difference in our field. We can pick up the phone and they know our voices. I’d hate to be in a situation where you had to call an 800 number and press 1 or 2 for service.”
In preparing Cantor & Webb for the future, Cantor says the rise in affluence and stronger economies in the developing world, coupled with easy air transportation to South Florida, are likely to increase demand for cross-border legal services from high-net-worth clients. As he says, “That’s a wave that hasn’t crested yet.”
Mombach, Boyle & Hardin, P.A.
Mombach is optimistic about the future of South Florida’s business environment and his firm’s prospects for growth. “We are one of the oldest continuously operating law firms in the area,” he said. “We are prepared to grow without sacrificing the commitment to excellence and personal service that has been the key to our success over the years.”
Mombach, Boyle & Hardin, P.A. now has eight attorneys with recent growth in its litigation department in response to clients’ needs, according to Mombach. He added that several staff members have been with the firm for more than 10 years. “This consistency is appreciated by our clients and allows us to function with greater efficiency,” he said.
Mombach believes that technology will have an increasingly greater impact on the delivery of legal services. “With that in mind, we have recently upgraded all of our IT systems as we move towards e-filing in all courts and digital storage of transactional documents,” he said. “Technology, although essential, cannot replace personal service and we continue to emphasize the service nature of our profession.”
As the firm prepares for the future, Mombach said, “We strongly believe that the personal and partner-intensive service we provide to sophisticated business and banking clients, combined with committed and experienced attorneys, paralegals and legal assistants, allow us to be consistently rated among one of the top firms in the area.”
|A Banker’s Perspective....|
As South Florida law firms prepare for the future, it’s important to address the key financial and human capital issues that can make the difference between success and failure. “One of the best things attorneys can do is develop a team of advisors, including a CPA, banker, insurance expert, marketing specialist and investment manager,” said Dwight Hill, executive vice president at Sabadell United Bank in Miami. “Professionals should also plan ahead for achieving a financially secure retirement — on their own terms.”
In a recent interview with South Florida Legal Guide, Hill talked about some of the options available for law firms embarking on growth strategies. “There are several possible sources of new capital,” he said. “For instance, the partners can retain profits from the firm, inject capital from their own personal wealth, bring in new partners, or approach a bank to borrow the money,”
Since many firms lack surplus capital and the shareholders may be reluctant to bring in a new partner and diminish their equity interest, a bank loan can be an effective option even in today’s tighter credit market. “One suggestion is to visit your banker and discuss how you can borrow against your receivables or cases in inventory,” said Hill.
Financing a Firm’s Growth
Lack of capacity is another of the challenges facing many South Florida law firms. “If the firm has a growing number of clients and cases to service, the partners may want to consider bringing in new lawyers,” Hill said. “But whether it’s an experienced lateral hire or a young associate, it takes time before that newcomer becomes cash flow positive and then becomes profitable for the firm.”
While a new attorney may start working on cases on his or her first day, it may take 30 to 60 days to generate the first invoice, and another 30, 60 or 90 days to receive payment. The firm also needs to factor in the support staff for the new hire, as well as any additional space requirements. “That means you have to cover several months of overhead before you start seeing a return,” Hill said. “However, a banker can easily understand that type of situation and provide financing to support the firm’s investment in new people.”
For firms that operate on a contingency basis, having a bank line of credit to support those cases is essential, according to Hill. “You don’t want to have to say no to a new case because you don’t have the liquid capital to invest in the matter,” he said. “A savvy banker can look at your cases in the pipeline and provide appropriate credit so the firm can carry its overhead and pay its bills while still maximizing recovery for the client.”
Along with adding attorneys and staffers, finding the right office space is another financial challenge for firms. “In our current market, we’re seeing new start-ups, as well as expansions and mergers,” Hill said. “Other firms have mature leases and are exploring opportunities to move to new quarters.” When firms need to build out the office space with new furniture and equipment, term loans are available to cover those outlays, Hill added.
Once the right space has been located, many firms are finding that the prospective landlords are asking for some form of security, such as a personal guarantee from the partners. Hill suggests talking with a banker about obtaining a letter of credit as an alternative. “The partners would still have a personal guarantee to the bank, but the amount would be smaller since a letter of credit typically only covers a portion of the lease, not the entire amount, and over time the partners’ exposure will gradually be reduced.”
In addition to dealing with immediate challenges, South Florida attorneys and their firms should also plan ahead for an eventual retirement or exit strategy. “It’s important for a sole practitioner or a partner in a smaller firm to look at how to maximize the value of a practice that has been built through a lifetime of work,” Hill said. “I know many great attorneys in their 50s and 60s who don’t have a succession plan, such as bringing in a younger partner.”
Other highly successful attorneys rely on income from their practices to support an expensive lifestyle, and don’t stash away enough of that money for retirement. “Without those savings, it’s very hard to get off the merry-go-round,” Hill said. “I talk to attorneys who say they never want to retire. But they should have the financial security so that they don’t have to go into the office and move those cases every day. On a personal and professional level, planning ahead is the key to achieving your goals.”
South Florida Legal Guide 2012 Financial Edition
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