Big Law Archives - The BTI Consulting Group

How 25 Client Industries are Impacted & 5 Things You Can Do About It Right Now

Michael Rynowecer — Wed, 15 Apr 2020 13:38:31 +0000

Only 15 to 20 industries account for 85% of US legal spending. Of the more than 1500 industries identified by the US Government, a small number will have an enormous impact on law firms. The same proportionality is true for law firm revenue.

The typical law firm with more than 200 attorneys derives about 44% of their revenue from its largest 25 to 30 clients – meaning managing risk, revenue, and keeping clients is downright crucial.

We found 3 major client categories: Beneficiaries, The Squeezed, and The Super Challenged. We realize there may be more, but these 3 constitute the bulk of the potential client base. We discuss each below along with 5 recommendations for immediate action.

Some clients will benefit and end up thriving even though growth will be dulled during the pandemic. Most have cash flow and are essential businesses – some of which are part of the fight against the pandemic. These industries include:

Beneficiaries

Digital Health – will go along for the ride with Home Diagnostics and Telemedicine
E-commerce – even the technology resistors are buying online
Health Care – a new focus on health and disease will turbo charge growth
Home Diagnostics –bursting onto the scene like never before
Life Sciences – the world wants the ability to move at near real-time speed
Logistics – the epicenter of developing new supply chains
SaaS – easier access for remote workers
Streaming – quickly developing into a mainstream service
Technology – the cornerstone of many changes taking place
Technology Enablement – bringing technology to more places and processes
Telecom – the backbone of streaming and remote work
Telemedicine – the CARES Act passed last week by Congress; the FCC plans to spend $200 million to support telehealth programs
Trucking – an often-unsung cog in the supply chain
Work Platforms – more ways to collaborate and share work

The Squeezed

A large number in the middle are being squeezed but will turn out OK. These companies have strong cash flow and are being slowed. They are stretching out payments and pushing off non-essential legal needs. The squeezed industries include:

Banking – burdened with getting money where it needs to be in the crisis and hurting from lower interest rates
Big Pharma – unless pursuing coronavirus projects, supply is squeezed and R&D is slowing
Financial Services – asset managers are dealing with changing asset values and risk averse markets
Food and Agriculture – challenged to produce fast enough for customers who may be slower to pay than usual
Mega Cap Manufacturers – these core brands (Caterpillar, Boeing, Ford, etc.) are experiencing demand dry up but have the resources to get through it

This group includes 5 of the largest legal spending industries in the US. Law firms servicing these clients will need to keep a keen eye on cash flow and focus their efforts on essential needs.

The Super Challenged

These clients are experiencing abrupt supply and demand imbalances and dramatic revenue shortfalls and/or asset devaluation – especially in energy. The larger energy companies will likely be able to refinance or restructure their way out of the problem. The smaller organizations, which are still quite large, are looking at court-supervised reorganizations and a ton of litigation around supply contracts.

Energy including Infrastructure and Services
Oil & Gas

The super challenged also include the following industries where demand has all but disappeared.

Airlines
Hospitality
Restaurants
Retail

Look for these industries to restructure, use government programs, and bankruptcies to find their way out. We expect mergers and business combinations to change these companies’ economics.

BTI research reveals only 48% of law firms really sit down and analyze their client base. These firms know with certainty and precision their year-over-year retention rate, revenue concentration, and risk inherent in those 2 numbers. Another 37% of law firms go-to-market by industry. Both are smart moves and drive business.

Now, What to Do

Assess your client base. Look carefully at your exposure by client and by industry – in this order. The difference between the assessment process now vs. a “standard” ranking process; past financial performance and lifetime value are no longer reliable indicators. Client feedback is more reliable than ever – and clients are still making the time to talk to BTI in the middle of all this.

There Are Still Opportunities – Find Them. Nurture Them. Build Them. Hold Them.

Most opportunities will reside in the beneficiary industries. You will also find opportunity in the squeezed industries if you can manage to their cash flow and find ways to help them navigate their way through the pandemic. Most of these are large-spending, marquee clients but are currently struggling managing for the conservative outcomes. We have reports of law firms jumping into these squeezed clients deeper than ever – while others are pulling back. Now is the time to jump in if you can manage a slower cash flow.

The super challenged clients present the biggest cause for concern for law firms lacking a robust bankruptcy practice. These clients have some serious and acute needs outside of bankruptcy – taking this work on poses credit risk but you will likely forge some strong client relationships.

The 2 Most Important Steps

Asses your top clients. Then actively decide exactly how to allocate your resources. A pandemic demands more strategy than ever. A diffuse approach reduces your chances of keeping clients – never mind building them. The best strategies will play to the firms’ strengths and focus heavily on the beneficiaries and the squeezed. You will find opportunity in the super challenged industries, but the risk reward is different and demands objective criteria to evaluate.

Perform This Analysis At the Practice Level and Firmwide

Act quickly with strategic focus and intent. Smart strategy, client selection, and management is more crucial now than ever.

Thank you to my friend and internationally recognized consultant, Patrick J. McKenna, for help, insight, and collaboration on this.

Be safe and be well.

MBR

Forwarded to you?
Get your own copy every week!

Fill out my Wufoo form!

The post How 25 Client Industries are Impacted & 5 Things You Can Do About It Right Now appeared first on The BTI Consulting Group.

Kirkland Crushes $4 billion, What They Do and How They Do It

Michael Rynowecer — Wed, 08 Apr 2020 15:04:58 +0000

“I don’t know what their (Kirkland & Ellis) system is, but every partner I meet falls all over themselves to outdo the other in client service and make things happen for us. It’s kind of amazing. I love it.”

Managing Director, Large Private Equity Fund

Think of the implications, a demanding client who believes partners from their outside counsel compete to over deliver. Even as COVID-19 is making law firms take pause, Kirkland is out there bringing in laterals and going after the restructuring business. These are 2 small reasons Kirkland smashed through $4 billion in revenue. We see only a small part of the Kirkland & Ellis strategy – so much of it is behind the curtain. Here are 11 key aspects of their approach driving success:

Outdo Each Other In Client Service, But Still Deliver as a Team

Think of it as competing for client attention, while adding to the client experience. Clients see a team and firm all working in one direction. Partners are always looking for ways to add to and improve the client experience where it counts – client interaction. And, clients say it’s a continuing process – this is their modus operandi.

Embrace Aggressive Business Development

Kirkland is one of the few firms truly embracing the ideas of rainmakers. They want, support, and reward big books of business. Kirkland has mastered the art of creating a rainmaker system built around serving clients.

All-in on Clients and Growth

“We will tolerate a lot of things – but don’t ever piss off a client we think is important or want to keep” says an influential Kirkland partner. This partner’s goal is to hyper-focus on understanding and meeting client objectives – and exceed them. The firm expects attorneys to be all-in on every matter and everything associated with their clients. There are no minor clients or matters – it’s all or nothing.

Watches After Clients Even When They Can’t Work On the Matter

Kirkland routinely refers matters to other firms due to conflicts and matters being too small for the firm’s economics. But the firm still seriously cares. Kirkland takes active steps to ensure the law firms receiving the referrals deliver excellent client service. “They are all over us to take care of their client” says the practice leader of a midsize firm enjoying Kirkland referrals.

Take No Prisoners Approach

Kirkland plays to win. The culture is more like a high-tech company than a law firm with their sense of market domination. The firm sees no boundaries in clients, matters, laterals, associates, or tradition in staking their claim. They do what they need to win.

Focus On the Client Personalities Where They Can Be Most Successful

Clients have distinct personalities. Kirkland is skilled and well-positioned to attract the 2 types of clients who pay the highest premiums in return for the ultimate in client commitment and certainty. These clients are the hardest to find and issue fewer RFPs than all other clients. They are considered the most demanding but are most likely to stick with their law firms for the long term – if they keep performing.

Create Robust, Inbound Lead Flow

The clients where Kirkland & Ellis performs well – they perform exceptionally well. They earn high praise and the honor of being one of the most recommended law firms despite focusing on a much narrower client base than most firms. Clients’ peer-to-peer recommendations are the single largest driver of inbound leads. This is especially powerful. Combine this inbound lead flow with their aggressive business development and winner takes all approach – and you have serious growth.

Find Great Landing Spots for People Who Leave the Firm

The associates and selected partners who leave the firm get help. The firm wants future alumni to land good jobs where the firm will have a friend. This under-utilized approach is a long-used tool for the Big 4, major strategy consultancies, and investment banks. There is a lesson for all law firms here.

Lateral Strength and Savvy

Kirkland knows how to recruit, integrate, and otherwise leverage laterals. They have no qualms about convincing some of the best rainmakers in the business to join their ship. Once they are on board – the firm is skilled at making use of their contacts, skills, and ability to make things happen.

Creating Future Brand – Highly Recommended by Associates – Even Those Who Don’t Work There

Associates have a high opinion of Kirkland – even when they don’t work there. Soon to be published BTI research shows Kirkland is one of the top law firms associates recommend to other associates. This gives Kirkland a chance to start branding with future clients well ahead of many other firms. This makes it easier to create the valued inbound if, and when, these associates become decision makers.

They Know They Are Not For Everyone, and It’s the Plan

Kirkland & Ellis is confident in knowing exactly who they are and where they perform best. They are client savvy and use their intuitive sense of investing in the clients where they can be highly successful. This sixth sense makes it easier to understand a client’s culture. The ability to attract, pick, and pursue the right types of clients for Kirkland is a marquee strength.

On top of the firm’s strategy and skill, so much of Kirkland’s success is based on cultural factors. They drive behaviors, communication, client management style, and approach. And this may just be the key point – everyone at Kirkland understands how they are expected to interact with clients and within the firm. This understanding focuses all their energy on clients and success.

Kirkland shows few signs of abatement as the pandemic hits. Business may slow as the economy is on lockdown – but Kirkland invests on. They are going after restructuring business while saving the deals their private equity clients want to save. And they are advising clients on what this all means, before clients ask.

Any and every law firm can start working on setting uniform expectations for client interactions and business development today. Your firm will see results much faster than you can imagine. You are closer reaching this goal than you think. Call or email to talk about how.

Be well. Be safe.

MBR

Forwarded to you? Get your own copy every week!

Fill out my Wufoo form!

The post Kirkland Crushes $4 billion, What They Do and How They Do It appeared first on The BTI Consulting Group.

Who’ll Collect the Win? 9 Firms Intent on Edging Out Kirkland and Latham

Michael Rynowecer — Wed, 20 Mar 2019 20:23:41 +0000

Who’s next? Kirkland and Latham are in a class by themselves. So, which firms can get even bigger and create a new class? We asked more than 160 law firm marketing leaders and here’s who they think are the next firms to deliver blow-out growth:

DLA Piper and Dentons

These 2 merger-hungry firms lead the list of firms most likely to pass Kirkland and Latham in growth. Law firm leaders expect DLA Piper and Dentons to find new merger partners—and create 2 new, even larger firms to drive unmatched growth. Whether the mergers occur inside or outside the US remains to be seen—but—the competition expects each firm’s next moves to be big and impactful.

Baker McKenzie

The firm is undergoing major changes to bring together its many pieces into a unified growth machine. The firm closed comp, brought in a strong leader to drive client development, and is becoming much more aggressive in its innovation and thought leadership. This is the strongest effort yet to create the uniformity successful law firms need to scale past the current market leaders.

Hogan Lovells

With a collection of global clients which would make any law firm salivate, Hogan Lovells has the existing base to kick off blazing global growth. The firm’s proven experience in serving and managing global clients paired with its superior client service prowess has law firm leaders watching Hogan Lovell’s next steps—very carefully.

Jones Day

Boasting one of the best brands and the highest levels of client service, Jones Day is positioned to leapfrog the market leaders. The firm brings one of the strongest cultures of strategic discipline and uniformity across the globe. The partners understand and believe in the firm’s strategy—and the changes in strategy as market demands change. Jones Day understands the legal world is all about its clients—and knows their clients better than most others. All this adds up to outsized growth waiting to happen.

Morgan Lewis

Morgan Lewis is one of the rare firms able to integrate its sizable lateral pool, deliver superior client service, change its approach to the market as needs develop, and is deeply committed to client-facing innovation (dating back over 20 years when Cisco used Morgan Lewis as the poster child for how to use AFAs). Look for the firm to take on more lateral groups and improve its already high-performing global client teams to drive leadership growth levels.

Paul, Weiss

Paul, Weis announced its new growth strategy by picking up Scott Barshay out of Cravath. Not only did it announce the death knell for lock step, it announced the firm was going big. The firm is one of the few with successful lateral integration. The firm’s lateral rainmakers are supported while growing the existing client base firmwide. A longtime client feedback advocate, Paul, Weiss is adding business (and profits) by leaps and bounds.

Quinn Emanuel

Quinn is nothing if not aggressive. Having passed $1 billion last year, you have to believe $3 or $5 billion in revenue is the next goal. The firm takes marketing and business development more seriously than most give it credit for. Quinn targets prime clients and goes after them with a vengeance. It understands how to win work without RFPs. The firm brings in rainmakers able to keep their existing clients while also finding new ones. Quinn is enjoying brand growth—driving more inbound leads. A growing group of clients is coming to terms with Quinn’s representing plaintiffs and defendants—and a few clients see it is a plus.

Skadden

Boasting one of the strongest brands, competitors expect the firm to gain the momentum to go right past Kirkland and Latham. The firm enjoys an institutional client base with large budgets and recurring needs. The brand generates significant inbound referrals. Skadden sits in the heart of the markets showing the most growth—providing a strong tailwind.

Skadden assigns a group of partners to look at business development and client related issues at regular intervals. These groups may not have long lives but a short life span can bring a more thoughtful approach. Our research detected 2 changes to it’s business development and client development tactics—both relying on educating clients on leading-edge trends in transactions and litigation. While Skadden has a history of using their knowledge to keep clients current—the tactic is becoming more widespread – developing brand and new business across a wide swath of top legal decision makers.

The Big 4

A smaller number of law firm marketing leaders expect the Big 4 to eclipse law firms in size and growth. The Big 4 can only achieve this by acquisition; this would clearly redefine the business of law as we know it and require some regulatory wrangling.

Nobody No How

11% of law firm marketing leaders believe Kirkland and Latham have a lock on being the fastest to grow. They see these 2 firms as having the strategies to continue being unmatched market leaders.

We eagerly watch the competing landscape unfold. Paul, Weiss and Kirkland will not be the only firms to pluck the best laterals. Other law firms are making large investments in their growth which they believe in their heart of hearts will drive market-setting growth. These firms rarely get noticed during early implementation and “pop up out of nowhere” when they start to grow.

We wish all these firms luck as we track their growth and watch how they navigate one of the most attractive legal markets to appear in almost 20 years.

MBR

The post Who’ll Collect the Win? 9 Firms Intent on Edging Out Kirkland and Latham appeared first on The BTI Consulting Group.

Clients Shatter 2 Records Helping Latham Shatter $3 Billion in Revenue

Michael Rynowecer — Wed, 28 Feb 2018 20:06:58 +0000

Clients are on pace in 2018 to record levels for spending the largest amount ever on outside counsel. At the same time, they rely on fewer law firms than ever.

Latham, which has just posted the highest revenue of any law firm, has been following and using these shifting client and market trends to its advantage for more than 10 years—it’s one reason Latham’s growth is in overdrive.

Latham’s unprecedented growth is turbocharged by the firm understanding why clients are consolidating their work and then positioning the firm to pick up major chunks of new business with existing clients by delivering what clients are seeking.

Latham’s winning approach? Adopt the ‘provide-the-best-value’ approach, not the low-cost provider approach—and clearly this tactic is working.

This strategy becomes clear once you understand why clients are consolidating work.

Improving Risk Management

The current round of consolidation is all about risk management and adding value. Clients have been cutting their law firms in an especially aggressive manner—dropping more than 19% of their firms over the last 3 years. On average, clients now have a record low 34 law firms on their panel, down from 42 firms in 2015. Clients’ goals with consolidation are to:

Streamline outside counsel management
Stop working with firms not adding measurable value
Have law firms build institutional knowledge about the company
Develop uniform understanding of their preferences among their law firms
Create uniform understanding around the risks they face

It’s Not About the Fees

Cutting your fees won’t keep you on the roster anymore. What clients are looking for most in their panel firms is:

Knowledge about their specific risks and exposures
Vehicles to share and discuss this knowledge
Candor—how can they do things better and smarter
Tools—budget/progress dashboards and other tools where key information is now on-demand
Education on issues they need to know—going well beyond e-alerts

These criteria have big implications for how to develop big client relationships:

Clients teams who don’t offer client-specific education programs will miss a major opportunity to upgrade the relationship.
Play an active role in helping clients streamline their legal operations.
Use client feedback to learn what tools clients have, what they want, and then give them more.
Always be in an informal discussion with your client. Informal discussion provides the context for the formal requests— giving you knowledge no one else has, and you will learn about new needs before anyone else, too.
Offer to perform the work you know is coming down the pike—don’t wait for it.
Stick it out. Client growth is anything but linear. It will take more time to develop than you expect—and will then grow faster than you expect.

Clients have never been more serious about using their law firms in a more clever way. The market is still ripe for firms to execute this low-risk/high-return strategy, but success demands commitment, training, tools, and embracing the art and science of pulling all the pieces together to make it sing. Latham serves as highly visible proof of this concept. What more evidence do you need?

BTI has helped some of the most successful firms in the world develop client growth plans. We would be happy to answer questions or discuss your approach.

MBR/JPD

(Based on BTI research conducted on a rolling basis between February 2017 and December 2017. BTI conducted more than 350 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations)

The post Clients Shatter 2 Records Helping Latham Shatter $3 Billion in Revenue appeared first on The BTI Consulting Group.