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FEATURES FIRM PROFILE APRIL 2016 Counterculture 20 fee earners, 21 total staff <strong>LPM</strong> FACT FILE Offices: Two, London and Manchester Specialisms (law): Charity law and governance, entertainment and media law, IT/IP clear to our clients.” Given the arts sector is used to managing diverse projects, sometimes with unusual governance models, it seemed natural for Counterculture to practice what it preached and to champion a structure that was best for its clients. It was therefore decided that the two senior partners, Tom Wilcox and Stephen Escritt, would continue to manage the firm. “Tom is a trained accountant and he has years of experience working as a chief operating officer in various large organisations," explains Arrowsmith. "Stephen’s work with clients managing large-scale public projects is second to none. The fact that neither qualified as a solicitor is not relevant." Having other professions working together with legal brings different skills and experiences to the partnership, the Counterculture people say, and when they talk about managing a partnership they challenge any other similar-sized partnership to build such a robust team. “We know we need to make sure that the SRA’s requirements are fully met, but we work together to ensure that takes place” says Arrowsmith. Another 'new law' aspect to Counterculture is the ratio of solicitor partners to ‘non-lawyer’ leaders. The firm is able to provide a quality service by focusing on the types of legal advice that sit alongside its other non-legal services. By concentrating on legal services most often requested by those in the arts and entertainment and third sectors, the firm only works on projects that are central to its more general consultancy services. Anything legal that doesn't fit the firm’s remit is referred to other law firms – that way, the partnership can be assured that there is quality control over all the work and therefore that the kind of risk profile that they handle is very low. This approach delivers a one-stop outcome for many clients. For example, a client could approach Counterculture to provide business planning and fundraising advice for a large-scale project. Once the funding application has been successful, the client may need complementary legal services such as setting up a new corporate vehicle, or a charity application. The client may need contracts preparing or reviewing, and their brand protecting. The firm makes it clear whether it is offering legal or non-legal services, so clients are in no doubt what they're By concentrating on legal services most often requested by those in the arts and entertainment and third sectors, the firm only works on projects that are central to its more general consultancy services getting. Clients say they value that the legal team is already up to speed with projects being carried out by the overall business (which would happen less with a referral), and that the legal advice complements the accounting, tax and other specialisms offered. Within 18 months of bringing Arrowsmith in, the firm’s legal revenue has grown to 10-15% of its total income. Counterculture has recruited more legal staff and opened up a new office in Manchester. It has invested in a cutting edge cloud-based platform for its work, which is easily scalable. Given that the level of referrals within the firm continues to increase, and that more new clients are instructing Counterculture, the ABS model has proved to be a success for the business. Future plans are to offer similar services to artists and other creative people who often struggle to find professionals who are familiar with their work and what they want to achieve. Counterculture is recommended by some of the key arts funders in the country. Those funders know that, as a law firm, Counterculture is obliged to go that extra step to provide a quality legal service that is always in the best interests of the client, with confidentiality at its core. Arrowsmith says that other businesses can benefit by embracing a work ethic that encourages a multidisciplinary partnership. Law firms typically grow their business by merging with other law firms, but that route risks losing their core mission and values. What excites the people at Counterculture is finding a way of using the ABS structure to enable the firm to do what it truly wants to do – providing help to those passionate about their art. <strong>LPM</strong> 20 LEGAL PRACTICE MANAGEMENT
FEATURES APRIL 2016 Turnaround and recovery UPS AND DOWNS What happens when things go wrong with a legal business, and how can they get out of the mess? Lucy Trevelyan digs into the tricky subject of turnaround and disaster, and discovers some answers as well as salutary lessons It’s been a rough ride for the legal services sector since the recession. Those that managed to emerge intact from the credit crisis have been assailed by a plethora of threats, including a heavier regulation compliance burden, increased competition, changing client behaviours, the plug virtually being pulled on legal aid, and other changes – such as the ban on referral fees – which have reduced fees and threatened future income streams. Although these unprecedented challenges hit firms of all sizes, as Sally Azarmi, chair of the Law Society’s small firms committee points out, smaller firms had to face them with fewer partners, resources and support. “Smaller firms face particular challenges that put greater pressure on their financial stability and competitive position. These include legal aid reform, a disproportionate regulation compliance burden and weaker technology capabilities. Some difficulties also stem from smaller firms being more prominent in the business to consumer market, carrying out retail, social welfare and legal aid work.” Many firms that failed to adapt to the shifting landscape quickly started feeling financial pain. According to Barry Wilkinson, a member of the Institute for Turnaround's legal services panel, a primary problem – the lack of cash – has significant effects on the greatest challenges SME law firms face at present: succession, strategic direction and short- to medium-term financial viability. Principle 8 of the Solicitors Regulation Authority’s handbook (dust off your copy) requires law firms to run their business or carry out their role in the business effectively and in accordance with proper governance and sound financial and risk management principles. But the frequency of misuse of client money or assets – whether caused by poor systems and controls, financial difficulties or unethical behaviour – has remained stubbornly high on the list of key risks to the SRA regulatory objectives in the SRA’s last three Risk Outlook reports. Wilkinson says: “Good lawyers are not necessarily commercially aware and may not understand the difference between profit and cash flow. Where WIP is concerned, lockup levels can be extreme. When lawyers do not understand the need to fund a business, they tend to extract all their profit. The Law Society's Law Management Section benchmarking survey showed 40% of firms overdraw their profits each year, and are still doing so.” STARK CHOICES In 2008, Sharon Beck, managing partner of north-east firm Taylor Bracewell, was on the sharp end of this kind of financial mismanagement. “As the head of the business department, I came to realise in the months preceding the partnership crisis that the then managing partner was leading the firm into financial ruin. He was creating a barrier between the existing equity partners and obtaining "The reality of the situation was that Mark and I were left owning a legal practice which was £500,000 in debt and employed 23 people at the time of the most severe recession law practices have ever seen." 21 LEGAL PRACTICE MANAGEMENT
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