Success Stories

Serious Cash Flow Crisis Threatens Mid-sized Law Firm

          A medium sized law firm in a major metropolitan area settled a major client lawsuit causing fees to decline by approximately 20% overnight. By failing to act quickly the firm’s leaders found themselves in a perplexing situation. The firm’s credit facilities were maxed out; financial obligations to creditors were seriously overdue; and the bank’s line of credit and term loans were in jeopardy of being called. The partner compensation system did not incentivize partners to work hard or cross-sell their partners’ services. Write-downs and write-offs were out of control - totaling more than 25% of the firm's annual revenues each year, but financial reports were not reliable to pinpoint which offices, partners or clients were causing the losses. Partners were agitated with a lot of internal dissension but there was a lack of consensus on the true cause of the firm’s problems. Morale was very low and the firm’s Managing Partner worried that the firm’s best lawyers might depart causing the firm to implode.

          Bill was asked to visit the firm on an urgent basis to assess the situation. After an intensive analysis of partners, practice areas and branch offices, Bill recommended the termination of numerous unprofitable lawyers and unnecessary clerical staff positions and the elimination of two unprofitable practice areas to forestall more losses. Annual net cost savings in excess of $1,000,000 were realized. Bill then assisted the firm’s leaders restructure the partner compensation system, refinance its debt and renegotiate its credit facility under more favorable terms. A formulaic compensation system increased productivity and reduced the amount paid to unproductive partners while simultaneously eliminating the pervasive sentiment among partners about the "unfairness" of the old system. Bill’s recommendations dramatically increased the firm’s future profitability. In order to capitalize upon certain known opportunities Bill assisted the firm’s leaders develop a focused merger strategy. Bill approached prospective merger candidates on a confidential basis and successfully arranged for most of the firm's partners, associates and administrative staff to join with a larger law firm.

          Bill helped this law firm in crisis survive a very challenging period and then helped most of the firm's partners, associates and staff join a larger law firm.

Law Firm Saved by Turn-around Plan

          A medium-sized Manhattan law firm’s Executive Committee called an emergency meeting to discuss its cash flow crisis and to decide how to respond to their bank's decision to impose strict controls over the firm’s credit line due to its deteriorating financial situation. The loss of a large client combined with the withdrawal of several key rainmakers created a crisis of confidence in the firm’s ability to survive. Profitability plummeted as partners left and overhead expenses increased. Although Bill had no experience working with the firm prior to that time he was asked to participate in the emergency meeting, during which he learned of its plan to wind down operations at the end of the month and to use the firm’s remaining inventory of unbilled time and accounts receivable to pay off most of the obligations to the bank.

          Instead, Bill convinced them to forestall any action for a two-week period, during which he conducted an intensive analysis of the firm’s operations. At the end of that period he made a report to the Executive Committee proposing a series of recommendations designed to restore the firm to profitability by shrinking down to a core group that would be capable of generating a profit. Bill identified unprofitable partners and practice areas as well as unnecessary clerical staff positions to be terminated, resulting in annual net cost savings in excess of $1,600,000. The Executive Committee implemented Bill’s recommendations immediately and the firm convinced its bank to cooperate. Bill prepared pro forma financial projections reflecting the impact of the restructuring plan and the future profitability of the remaining lawyers and staff which was used to attract a large and prestigious merger candidate. Remaining partners, associates and staff joined an AmLaw 100 law firm at the end of that year.

          Bill helped the firm’s leaders avert a financial crisis and avoid having to close down its operations. The imminent cash flow crisis was resolved satisfactorily and many of the firm's partners, associates and staff joined one of the largest law firms in the country.

Financial Turnaround

          A large law firm in the Rocky Mountain area lost about 100 lawyers over a two-year period as numerous partners lost confidence in the firm’s stability and moved their practice to competitors. The firm’s profits steadily eroded as overhead expenses increased dramatically, causing profits to decline and partner compensation to be reduced, which in turn prompted more partners to leave the firm. The firm was in a “death spiral” and was about to implode. The firm’s leaders reported rosy future projections throughout the prior two-year period based on unrealistic assumptions and the hope that the situation would somehow magically turn around, rather than based on facts. They lost credibility with their partners as a result. Rather than deal with the challenging issues facing the firm, management concentrated its attention during this time on improving employee morale. Reflecting their own lack of confidence in the firm’s future viability, the executives who led the firm during this debacle bailed out to take more secure employment positions in other law firms. The firm’s new leaders found themselves overwhelmed by the magnitude of the problems and decided to seek assistance from an expert on law firm turnarounds.

          Retained on an emergency basis to assess the situation and propose a solution, Bill learned that many of the remaining partners planned to leave the firm within a two-week period. They had been given attractive offers from several competitors and planned to announce their withdrawal from the firm within days if a practical and realistic restructuring plan based upon a sound strategy was not proposed and approved by the partners. Partners lost confidence the firm’s new leaders could turn the situation around and were ready to “jump ship”. The financial crisis developed over a period of two years caused the firm to be in a desperate situation.

          Bill was immediately appointed as Interim Chief Operating Officer (COO) of the firm and authorized to create a Restructuring Plan as rapidly as possible. He began to identify the firm's core strengths as well as areas that were relatively unprofitable and assessed all aspects of the firm's operations in detail. Bill gathered information from partners, administrative managers, supervisors and selected secretaries and staff. Everyone had an opinion as to the cause of the problems and what needed to be done but there was little consensus. Bill created a comprehensive Restructuring Plan that would overhaul the firm and make it profitable. He presented it to the Executive Committee for their review and approval, which was then presented with the Executive Committee’s slight modifications to all partners for their approval. The plan was approved and implemented immediately.

          Results: Partners approved a change in leadership and the newly elected leaders led the implementation of the Restructuring Plan. Two unprofitable offices were closed, vendor contracts were re-negotiated, unnecessary staff members were laid off and business processes were re-engineered to be more efficient. The firm stopped losing partners and the firm’s net income increased beyond historic levels, allowing key partners to be fairly compensated for their contributions to the firm’s success. According to the firm's managing partner: "We could not have done it without Bill’s help. This is a success story he should tell to all prospective new clients.”

Financial Crisis Hits Medium Sized Law Firm

          The global recession of 2008-2009 caused distress in many law firms throughout the country, but one law firm that was heavily concentrated in a particular industry that was decimated by the recession found itself bordering on collapse. Clients delayed work on all new matters and halted work temporarily on matters that were in progress. Revenues plummeted. Unfortunately, the firm’s timing was very bad because in 2007 it had embarked on an ambitious and expensive geographic expansion that required a substantial investment of capital. A new office was opened that year in a major metropolitan city that was hit extremely hard by the recession. Losses mounted with no end in sight. Unfortunately, the firm had invested millions of dollars in a contingent fee matter that would not be resolved for several more years, causing more of a cash flow crisis. Finally, the firm’s pension plan changed from being over-funded to being under-funded as a result of the stock market decline, requiring several million dollars more funding per year.

          Numerous partners withdrew from the firm because of its dismal prospects for future profitability, which caused overhead expenses to increase dramatically on the remaining partners. Other partners threatened to leave the firm. To stop more lawyers from leaving the firm its leaders increased partner distributions by “borrowing” from future profits. To make matters even worse, the firm was significantly under-capitalized even before these new problems developed. The financial crisis was extremely serious with many partners doubting if the firm could survive.

          Recognizing the dire situation they were in, the firm’s leaders sought assistance from an experienced law firm consultant. Bill began to craft a plan to address all of these perplexing problems simultaneously and help save the firm from bankruptcy. Bill created a customized planning model addressing every one of the problems and projecting realistically what the firm’s future profits would be under various assumptions. The firm’s Executive Committee revised the proposed plan to reflect the political reality of the situation and then began to implement the various recommendations. The changes included a streamlined organizational structure, a new partner compensation system, raising of additional capital, a comprehensive expense reduction program, revisions to the criteria for equity partner and counsel on how to implement the program successfully.

          Results: After presenting the Restructuring Plan to partners the firm’s leaders regained their confidence. The firm stopped losing more lawyers and began to recruit lateral partners to fill in “gaps” in coverage it wanted to address. It survived this difficult challenge and restored its profitability to a level that substantially exceeded its prior level. The firm’s prestige in its local market was enhanced and it remains a profitable and stable law firm today.

Prestigious IP Firm Saved from Bankruptcy

          An intellectual property boutique firm that had a proud history suffered from the defection a large number of partners, including the firm’s own managing partner, who took their practice to a competitor. The newly appointed managing partner was in an extremely difficult position trying to keep more partners from leaving the firm but with excessive overhead and dim prospects for future profitability. Overhead per lawyer doubled to over $450,000. Partners decided they would have to wind down the firm in 30 days unless an acquisition could be arranged prior to that time. If the firm had to dissolve it would entail losing over ten million dollars of inventory to the landlord plus another six million of capital. The firm’s financial reports were unreliable for a variety of reasons. Partners were being called by headhunters on a daily basis to switch law firms, and some were even given “offers” without even having an interview. A few partners had ten such “offers” to join competitors. The new managing partner realized he needed assistance from an experienced law firm consultant and Bill was retained.

          Initially Bill developed a restructuring plan that involved a Reduction in Force, the renegotiation of the office lease and other large vendor contracts. Over 20 support staff positions and managers were eliminated, many expenses were cut substantially, and administrative operations were streamlined. These operating changes were used to prepare a pro forma financial projection of the impact of the restructuring plan on future profits. Then Bill developed a merger strategy for the firm and proceeded to contact numerous prospective merger candidates. Intensive negotiations were held simultaneously with various suitors. Within thirty days of being retained the firm was acquired by an AmLaw 200 law firm which resulted in the partner’s capital being preserved and the partners being compensated substantially above the level they were paid as partners of the IP boutique. A resounding success for all involved – accomplished within 30 days.

Exit Strategy: Restructure and then Merge

          An intellectual property boutique in a major metropolitan area grew rapidly for several years, but profits languished; in fact, the firm’s uncontrolled growth caused a dire financial crisis threatening the firm’s very existence. Escalating overhead expenses and an unsteady cash flow caused steadily declining profits, delinquent payments to unhappy vendors and frequent difficulties meeting payroll. Lawyers in the firm expressed concern about the firm’s viability and began to search for other career opportunities. The firm was on the verge of imploding. Spending on technology was extremely high even though the network was old and outdated and desktop computers frequently crashed causing disruptions to operations. Additional problems included long delays in collecting receivables from “foreign associates”; redundant business processes requiring identical client information to be re-entered multiple times; and an inability to confirm from available management reports the suspicion that certain clients and associates were unprofitable. Faced with these problems the sole owner of an intellectual property firm contacted Bill and requested assistance. The sole shareholder did not have an exit strategy. The firm's lease agreement was almost up and the shareholder was reluctant to commit to another 10 year lease term, which the landlord was pressuring him to sign.

          Bill responded by visiting the firm onsite within 24 hours. He analyzed the firm’s operations in detail and within a week identified several unprofitable lawyers and paralegals, as well as unnecessary clerical staff positions, and one client that cost the firm substantially more than the fees it generated. The firm’s owner implemented Bill’s recommendations cutting unproductive lawyers and staff, severing the relationship with the troublesome client and cutting overhead expenses while simultaneously upgrading all technology. Redundant business processes were eliminated; work flow was re-engineered to facilitate more efficient production of legal documents via automated processes. Annual expense reductions of several hundred thousand dollars were achieved and client work was turned around faster at lower cost, resulting in greatly enhanced profitability.

          The next step was to determine the firm’s optimum strategic direction. Bill prepared pro forma financial projections reflecting the impact of the restructuring plan and the future profitability of the remaining lawyers and staff, which allowed prospective acquirers see how the firm's future profits would contrast with its recent losses. On behalf of the firm’s owner, Bill brokered an agreement with an AmLaw 100 law firm to hire the partners, associates and staff several months later.

          Bill helped this troubled IP boutique chart a successful course of action through a cash flow crisis, resolve problems with creditors and then merge into one of the largest law firms in the nation, resulting in the firm’s owner being paid three times the amount of compensation he had been earning from his own firm. He used the additional compensation to purchase a vacation home on the shore that he and his wife always wanted.