During the 25-year seller's market that the American Lawyer called "the golden age of law firms," many lawyers had the luxury of simply filtering the steady stream of incoming business through the "who should do what" sieve to make sure the work got done properly.
Whether you're a green lawyer hanging out a shingle, or you've been practicing for 25 years, recent seismic changes in your field mean that your practice is being reinvented.
Now that we're in a buyer's market that business history tells us is permanent, many of those same lawyers must now create sustainable practices by, as one of my former clients calls it, "strategic intent." That means creating a practice-development plan with more substance than the too-common practice of listing an array of marketing tactics and calling it a plan.
For most lawyers, both the sustainable practice and the planning represent brand-new endeavors. Because of that, I encourage lawyers to view their practices as startup companies, or at least early-stage companies that already have some customers.
When it comes to startup advice, I've found none better than that offered many years ago by technology entrepreneur Mario Morino, who co-founded and helped build the Legent Corporation, a software and services firm that became a market leader and one of the industry’s 10 largest firms by the early 1990s. I find his advice both practical and credible.
In response to questions about preparing business plans for new ventures, Mario said that you don’t need a formal business plan. You need to have thought through, and come up with credible answers to, ten questions, and you’ll be investment-worthy.
I’ve shared these with many dozens of lawyers during my coaching career, encouraging them to view their practice as their venture, and their firms as their investors. Because law firms think in terms of cash flow instead of investment, they tend to commit resources to a practice only after it has more business than it can support and is in danger of defaulting without more lawyers or support. Obviously, there's a lag time to acquire talent. To have any chance to get support earlier, so the necessary assets are in place when needed, lawyers must present a rational business justification for putting assets in place ahead of the arrival of sufficient revenue.
Mario Morino’s 10 Venture-Validating Questions
1. What is the market opportunity in the market niche?
People hire lawyers for only two reasons:
- Solve a problem
- Exploit an opportunity
What is the fundamental problem that we will solve, or opportunity that we'll help exploit? In what sector does this problem occur frequently, with meaningful impact?
2. What is your solution to the market need?
Describe the solution in "how I'll do it" terms that enable a reader or listener to visualize the circumstances and recognize the legitimacy of the approach. Literally, they have to be able to see it happening in their mind.
I'm not referring to a detailed work plan, but an explanation of how you'll go about producing the change you promise. For example, if in our training business we're going to solve the problem of lawyers having apparently full, but in reality moribund, sales pipelines, we might answer the solutions question with, "We'll train lawyers to assess the cost of supporting a dead pipeline, and recognize the importance of getting people out of the pipeline by reaching a decision. We'll shift the lawyers' focus away from preference, i.e., 'pick me,' to deciding whether or not they must solve the problem at all and pick anyone."
3. How Big or Small Is The Market Opportunity? How Is It Moving?
Describe the size of the opportunity. Use comparisons. Try to find markets that are comparable or similar and make the translation. Say, "Look, we don't know if it holds exactly, but here's what happened in this other sector. We believe that it is transferable to our space."
Give people a context, a frame of reference (similarity selling). Take the model that has been used someplace else so that you can pass the "reasonableness test." Develop a list of comparable situations and use it.
4. What Is Your Economic Model? How and When Will You Make A Profit?
- How will you price the solution. Hourly? Fixed price? Risk-sharing? Reduced fee plus larger success bonus? (Increasingly, this means having a basis for establishing some type of fixed price, and a method for managing exceptions.)
- Is that consistent with market expectations, i.e., in the buyer's mind? There are always ranges for pricing in any marketplace. Be sure that your price point is within the market expectation range because, if it's not, you've got a pricing problem and therefore, an economic problem with your model.
- Does the methodology fit the marketplace?
- Is it within expected standards?
- If you'll use a new pricing mechanism, is the market ready for it?
- Over time, price erosion is a fact of life; address it now. Anticipate competition coming in. If you somehow believe that you won't have competition, you'd better build a case and explain why there will be no price erosion.
5. How Are You Going To Reach Your Market And Sell To Your Client?
- What's your marketing and sales strategy?
- How will you communicate your understanding of the fundamental problem and establish your bona fides in the market?
- Will you generate revenue by direct sales? If so, by whom? What percentage of your time will you devote to reaching the revenue goals? What if you fall behind projections? Do you have people who can help sell, or who can take over some of your other duties so you have more time to sell?
- Will you partner with other organizations who already sell into that market, and whose offerings make sense in relation to yours?
The game today is not about the attractiveness of your solution. It's about distribution, without which nobody will ever know about your wonderful solution, and your practice is dead.
6. What's The Competition? How Will It Change Over Time? How Are You Better?
Don't ever get caught where an investor informs you about a competitor. (I remember working with a client team for a firm's big food-service client. During our analysis of potential opportunity, the senior partner assured us that they already "get all of BigCo's M&A business." While he was speaking, my partner visited the company's website, where at the bottom he saw a crawl announcing the company's first acquisition in Europe.)
Don’t have a myopic view of competition, e.g., "I'm competing against law firms A, B and C." These days, lawyers have much more non-lawyer competition, e.g., in-house law departments, LPOs and other forms of offshoring, and technology solutions. Make a guess about who you'll have to compete against, because the more correct you are about the size of the market opportunity, the more other lawyers and providers will come into that market.
- Who are the logical players that will step in once the market starts growing noticeably?
- What happens if the little firm you're competing against is acquired by a much larger firm?
Understand your competition: be absolutely precise, absolutely detailed and absolutely objective. "Now, how good are they really? What are my clients saying? What's the market saying about them?" Know what they're doing. Know their plans. Know where they're going.
7. What's Your Differentiation And How Will You Maintain It?
Know what makes me different?
- Proprietary technology?
- Industry knowledge?
Don't have 12 points of differentiation. Two or three very good ones will do.
Don't make outlandish claims about staff. Just substantiate the skills and qualities of your people so the investor or buyer understands your true strengths.
8. How Will You Execute? How will You Grow and Manage Your Business?
Yes, this is a business.You're asking your firm or partners to invest money in your plan, which means risk. Commercial investors die for 50% compounded growth. They love 35% with good, conservative, substantial numbers. What are your investors' expectations? You have to know.
Be realistic about what you can execute and think it through. What you say should pass the reasonableness test.
Are you coachable? If advisors say something, are you listening? (You do have advisors, right?)
You have three options:
- show that you personally have the wherewithal to execute on your business;
- show that you have the disposition to bring somebody in to help execute your plan with you;
- show the willingness to grow, that you're coachable, that you can learn and adjust.
9. What Are The Risks? What Might Stop You?
Be open about the risks, but with a positive sense of arrogance here.
What are you most afraid of? Are you afraid of your own inability to execute?
Most time, we're properly afraid of what we don't know. That means you need to speak with more people in the opportunity sector to get more reliable answers. I don't mean "analysis paralysis" of perpetually "getting ready to get ready," but filling in holes in your understanding that represent potential danger.
10. Why Are You Going To Succeed?
Why you? Why now?
- What is it about your plan, about you, that's going to make this successful? How well do you know the sector?
- Know why you're doing this for yourself, and what you expect out of your business. Imagine it's 20 years from now. What do you visualize about your life? What will the line on you say?
- Find an alter ego, a mentor, an advisor, somebody who will help you think through these questions; somebody who can play devil's advocate. Somebody who will help you to answer these ten questions objectively.
- Secure an initial client at all costs. Get somebody early in the game to work with you.
- Find a trusted emissary, an ambassador who can introduce you and broker you into places. Somebody who knows a lot about your business, who can open up doors and get you in for that introduction, or who can get you to somebody who can get you the introduction.
- Create the sense that you're going to accomplish this, and that, if they're not there with you, it's going to be in someone else's bag. Sooner or later, someone's going to do this, so why not you?
Remember that Mario's remarks were directed at founders of Internet startups. I've adjusted some of the language for you, but they may not all be literally applicable. However, if you think through them you'll be able to interpret them for a law practice.
RainmakerVT just-in-time business development courses will help you apply sound business principles to developing the practice that you want, by teaching you the rainmaking skills you need to succeed amid real competition.
This is not your grandfather's training. There's no program to follow, no big commitments, no nagging. This is just-in-time training. That means you buy only the course you need right now to prepare for what you'll face in the next week or so.