Transcript Marketing

Limerick Solicitors Bar
Association
Market Update
14th April 2011
David Rowe
Where are we?
Our ‘average’ client – comparison with peak
• Profits reduced 25% to 50%
• Fee income down up to 50%
• Expenses reduced by 33%
• Headcount down 25%
• 1 10% pay cut down, another done or looming
• See getting a good salary as a result
• Debtors up significantly
• Balance sheet management now an issue
The Market – by practice area
• 5 main situations
• Commercial, Commercial Property, Banking etc
down 70% to 90% off peak activity levels. Will
recover, albeit at tighter rates. These areas are the
differentiating factors, must keep investing in
• Litigation, Insolvency, Employment law up an
average 20%, issue is to get paid
The Market – by practice area
continued
• Private Client – Residential Conveyancing
changed forever, fee rates after recovery will be
irrevocably eroded below those which larger firms
can service profitably
• Family Law and Probate – fees lower but still
profitable in some circumstances
• State / tendered institutional work -20% / 25%
reductions where tendered, lots of work will be
retained – a big opportunity/threat
The Market – by practice area
continued
• Where are the opportunities:
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Commercial litigation
Corporate restructuring
Insolvency/Debt Collection
Employment law
Family law
Crime
Regulatory / professional indemnity
Construction disputes
Defence and plaintiff personal injury litigation
Commercial deals (small transactions only)
Estate planning / Wealth management / Probate
Limited commercial and residential conveyancing – now leases
The Market – by practice area
continued
• There is still work in the following areas but
less of it:
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Residential Conveyancing
Commercial Conveyancing
Company Commercial
Banking
The Market – Implications
• Firms have changed radically over the past 3
years, those actively repositioning doing the
best
• Repositioning/re-investing mean actively reorientating the firm to the areas still active
while keeping contacts where markets are
quiet
The Market – by firm size
• Small firms – huge distress, main practice areas
eroded (PI Litigation and Conveyancing) and
Professional Indemnity Insurance uncertainties,
many will fold their tents
• Mid-size – income back by 20% to 25% typically.
Very quick to react on the cost base and not as
economy dependent as large firms (good
litigation, probate, crime and some institutional /
State work). Some badly hit – developer / banking
practices
The Market – by firm size cont.
• Larger firms – huge challenge to reduce their cost
base and very economy dependent with fewer anti
– cyclical areas than mid-sized firms but started
from a position of high profits. Now picking up
high end advisory work, NAMA work etc.
• Overall –serious challenges to survive, trend of
work gravitating to larger firms
• Mid-sized space is best (with a strong litigation
department)
• Significant oversupply of solicitors to work
available – 5,000 to 7,500?
The Balance Sheet
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We now have firms struggling to stay afloat
Not a time to owe and be owed a lot
Banks tightening the criteria
Many firms still overdrawing – negative
capital accounts a no
• Getting paid demands a whole new set of
disciplines and follow up internally
Keeping cash flowing
The new rules
• Consider the credit risk before you take on
the work
• Do not finance outlays (some exceptions)
• Long term assets = long term finance
• Have a structured credit control system, this
starts at accounts level
• Know your breakeven and your profits per
hour figures
The Banks
• See solicitors as a mixed bag
• Many firms or partners over borrowed
• Want the following as a norm:
– Overdraft no more than 1 months fees
– Partners capital equal to or above lending facilities
– Capital items such as a goodwill payment, an office fitout or a building purchase are outside these tests
• Changing the rules on set off
• Still regard well managed firms as premium business,
the client account is a factor in this
What happens next?
• Currently work for 5,000 out of 7,500
solicitors in practice
• Litigation fees will come under pressure
• Litigation, crime, probate and institutional
work will carry firms through
• Slow recovery in the economy will lead to a
slow recovery in transactional work
• Fees per hour will continue to fall
The Cost Base
• Other overheads will fall where reductions
sought
• PI will remain high for 3-5 years
• Property costs will continue to fall
• Operating with good systems and
appropriate cost base will become part of
doing business
Structure of the Profession
• The profitability between will run and poorly run
firms will widen, poorly run firms will be
uncompetitive
• Amalgamations will happen from full mergers to
overhead sharing convenience co-operatives
• New and dynamic full service partnerships will
enter the market
• Many will leave the profession
• More space for those who continue
Surviving
• Its survival time
• It is still about the fundamentals
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Client service
Marketing
Good people
Effective management
Financial control
Client Service
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Going the extra mile for clients
Same return of calls
Prompt written response
See client’s as the lifeblood of your
business, not as a nuisance
• See transactions through the client’s eyes
Good People
• Recruit and retain the best
• Train and empower staff in a team
environment
• Communications key, weekly or fortnightly
meetings work
• Be hard on underperformers
Marketing
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It’s still out there, if harder to find
Starts with service levels to existing clients
About being visible and connected
Look at mutual referral points
Tenders are the order of the day
– 250 Partner rate max
• Don’t take your eyes off client retention
(more important than marketing)
Effective Management
• Now includes:
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Finance
Human Resources
IT
Risk Management
Managing work flows
Financial Control
• Can we do the work and make a profit?
• How do we make sure we are paid?
• What is the correct cost of running my
office?
• What do I need to bring in each month to
earn a living?
• What does it cost me to do an hours work
• Can I buy my overheads better?
Conclusion
• The profession is undergoing radical
change, size necessary to make a living is
increasing
• Earning a good salary is now a result
• The demands and skill sets needed are
higher in every sphere
• This phase will end, transactional work will
pick up gradually
The Survival Guide
• Recognise where we are – large fees not in the files anymore
• Look after clients with high service levels
• Bring your costs per hour down
• Get the cash in, up front where necessary. Do not fund outlays
• Consider a merger – will be right for some
• Run your firm on the basis current conditions will last 18 to 24
months
• Help available – Practice Advisory Service
For further information contact:
David Rowe
Managing Director
Outsource
Ph: 01 6788490
Email: [email protected]