In the second of a new series on setting up a new firm, Steven Petty looks at the practicalities of implementing a strategic plan
In early 2014, along with my longtime friend and colleague Paul Harrison, I set up Feldon Dunsmore Solicitors, a niche commercial real estate practice. In the May edition of Managing for Success, I looked at strategic planning for a new firm. In this article, I look at how to put this planning into effect.
We began preparing our strategic plan several months before we were due to start trading. We decided from the outset that an important component of our planning would be to seek advice from managers of businesses outside the legal sector. Increasingly, the most successful law firms are turning to non-lawyer managers, and we were keen to adopt what we saw as a winning approach.
Writing strategy successfully is impossible without keeping the whole business in mind, as each individual action has knock-on effects in other areas
We therefore engaged a local businessmen to act as our mentor. But before we could start writing strategy, it was essential to carry out a SWOT (strengths, weaknesses, opportunities, threats) analysis. This is an essential precursor to writing strategy, as the assessment of these four areas should underpin the reasoning for the strategies you adopt.
As we worked through our analysis, we checked our views against those of our external adviser. Another mistake we wanted to avoid was falling into the trap of assessing our business simply from the inside, looking out. Our mentor was able to show us how our plans looked to an outsider, which was of invaluable assistance in accurately assessing our strengths and weaknesses.
Among the strengths we identified were the experience and reputation of our lawyers and our low overheads. Our main weakness was that our key income producers were also the managers of the business. Our best opportunity lay in mergers and acquisitions of smaller firms – a key trend, particularly in our local market. Our greatest threat was our decision to offer advice in only one area of law: property.
We then set about writing our strategy. As I outlined in my last article, a strategic plan deals with the ‘how’ and the ‘when’ of achieving your business goals.
One of the main conclusions we reached from the analysis of our strengths was that we wanted all of our advice to be provided by senior lawyers. We felt that this would set us apart from the increasing trend, particularly in larger firms, to utilise more junior / less-qualified staff. We saw our target market as closely held businesses, where a strong personal relationship could be developed with the owners of the business, which could best be achieved by avoiding the trap of senior lawyers winning the business, only for the work to be delegated to junior staff.
The problem with this strategy was how to attract senior lawyers to a firm which had not even begun trading – this had been identified as a weakness in our SWOT analysis. Our solution was to offer senior lawyers very attractive terms. This presented another problem, though. How does a start-up with low overheads as one of its strengths then adopt a strategy of offering senior lawyers attractive terms without its overheads ballooning? Writing strategy successfully is impossible without keeping the whole business in mind, as each individual action has knock-on effects in other areas.
Ultimately, we decided to offer senior lawyers roles as self-employed consultants to the business. They would be entitled to keep a large proportion of the fees they generated. We felt this model had been adopted successfully by other law firms, and was an elegant solution to the conflict we had identified.
Our SWOT analysis had also identified another issue which had the capacity to be both a strength and a weakness: our decision to offer advice in only one practice area. Firms in the legal sector appeared to be adopting one of two strategies: either grow in size to enjoy greater economies of scale, or concentrate on a niche area of law to position themselves as specialists.
As a start-up, the niche approach was the obvious one to adopt, but the SWOT analysis threw up a number of potential problems with that approach: obtaining professional indemnity insurance (PII) cover at competitive rates, as our risk was concentrated in property; being subject to the ups and downs of the property market; and clients needing to go to other firms for non-property legal advice.
Engaging a good insurance broker and setting our PII renewal date at the end of February, when the insurers were much quieter, effectively countered the first threat. We ultimately concluded in relation to the second threat that the property market is so inextricably linked to the wider economy that we were no more at risk from the ups and downs of the market than other firms. Our key strategy to combat the final issue was to develop relationships with other niche law firms, to ensure that our clients received good advice in other areas, without the risk of ‘poaching’ by those other firms.
In my next article, I’ll look at how our strategy panned out in practice, and outline some of the important lessons we have learnt in our first 18 months of trading.