LPM

FEATURES
APRIL 2016
particular circumstances of the firm in
question, but focusing on the firm’s core
strengths and its key people is important.
If a firm is looking to generate cash in the
short term, they could consider
approaching firms who provide similar
services to acquire some of their work in
progress. [But] the key is probably facing
the issues, however unpleasant, rather
than burying your head in the sand.”
Richard Nelson, senior partner at that
eponymous national firm and Solicitors'
Assistance Scheme member, says it's
important to be innovative and to build on
a firm’s reputation.
“Consider developing areas of law and
focus on client feedback – request it on
each case and seek to improve quality.
You also need to have someone running
the practice who is prepared to accept a
problem has arisen and is willing to do
something about it decisively. Too many
firms fail because principals don’t face up
to problems.”
London firm ELS Legal's leader, Richard
Spector, had more than his fair share of
financial and reputational damage after it
was discovered that one of the firm’s then
partners had potentially withdrawn
millions of pounds from a client account
without consent. Spector was left with a
firm that had a £60,000 deficit in its office
account, a huge claim against it and
massive reputational damage. In March
2012, the firm was in the assigned risks
pool because no one wanted to insure it –
the firm was only saved from closure after
the SRA agreed to reduce the premium
from a £500,000 excess to £240,000, to
be paid over 12 months.
Within three years, Spector and his
team had reversed the firm’s fortunes and
in July 2015 announced an increase in
turnover of 466% over the preceding
three years from £324,000 in 2012 to just
under £2m in 2015 (before WIP
adjustments).
“We changed everything, from
accountancy systems, to staff, branding, IT
systems, culture, training and procedures.
The focus was on ensuring that every part
of the business was centred on achieving
quality and ensuring this could never
happen again.”
You have to be prepared to cautiously
fund the business, he says, and appreciate
the importance of quality staff. “When you
have people who are hungry to make the
firm and themselves better, they will
ensure that everything you put in place is
adhered to, and even improved. When
SMEs don’t invest in their staff, it can
cause problems.”
His top tips for survival when a crisis
strikes: ensure you have strong
management, let your staff know what's
happening, and work out a strategy and
implement it, ensuring everyone is
involved. Firms should also not be afraid
to take help where they can find it. “Our
accountants were a huge help. They
provided support and financial guidance,
which is so important.”
Having discovered the fraud at his firm,
says Spector, he faced two choices: start
afresh with a new untainted brand, or
commit the firm to restoring the
reputation of ELS. “We elected to follow
the second route. It was a harder route
and involved a lot of learning, but the
success in seeing it grow, and the brand
resurrected, has been all the sweeter.”
BRAND DAMAGE
Firms that have experienced difficulties
should not rush to rebrand just for the
sake of it, warns McKenna.
“Rebranding is an option, but a brand
isn’t your logo or shiny new website. Your
brand is what people say about you, so be
careful not to waste money on a new
corporate identity if your core business
hasn’t actually changed. If you have
something genuinely different to offer,
then your rebrand should focus on what
the benefits of your service are to your
client and how to communicate them
effectively. It's also critical to know who
your customers are and how to make sure
your offer is attractive to them.”
Gary Carrington, Lancashire PI firm
Fletchers’ chief operating officer, says
creating a strong brand can help to
generate more value and put the firm
directly in front of its customers.
“Following the ban on referral fees,
Fletchers made the decision to start its
own brand instead of relying on third
parties to secure new business and
promote its services to clients. This
approach has been a great success, but at
the time was quite a bold step to take
when the firm was an SME with 60 staff.”
As the sector continues to change and
move away from more traditional
practices, firms need to look at how
they’re marketing their services, he says.
“With lots of SME firms fighting it out
on the high street to attract customers,
they need to think about what their
unique selling point is, and whether they
are actually offering the services clients
want. Often, when consumers are looking
for services they will do their research
online, so SME firms need to think about
where they would be best located. Can
potential clients view a list of services
online? If so, can the firm be moved to
"The successor planning
challenge is perhaps the
most individual choice a
business owner will ever
have to make."
offices away from the high street, which
will cost considerably less?”
SUCCESSION PLANS
Something that should be a real concern
for small firms, says Peter Watson,
national firm Simpson Millar’s managing
partner, is succession planning. This is tied
closely to averting future failure; in its
autumn 2013 update, the SRA warned: “An
intervention is very likely to take place
where an effective and achievable exit
strategy is not in place and we believe
that clients are being put at risk.”
Prudent business management dictates
that business owners should begin
thinking about succession well in advance
of retirement, but the demands of the job,
family life and other pressures tend to
mean that without help, it can become an
afterthought, says Watson.
“You have a number of choices. You can
close the doors of your partnership and
pay the premium to cover the six years of
run-off you’ll require against any claims on
your previous case load and move on. This
is simple, but may not be cost-effective
given the rising cost of PI insurance.
Smaller firms are increasingly looking
towards the sale of their WIP files as a
viable option that provides them with a
mechanism for retiring and addressing
those legacy questions.
The successor planning challenge is
perhaps the most individual choice a
business owner will ever have to make.
[But] as long as you don’t leave the
hardest choices too late, the options for
closure, succession or sale remain firmly
open.” LPM
24 LEGAL PRACTICE MANAGEMENT