The slides from the Increase Your Law Firm Value presentation in pdf form.
A quick self-assessment to help orient you and your law firm partners on the topic of growth and long-term value.
The slides from the Increase Your Law Firm Value presentation in pdf form.
The first edition of my bi-annual sales and marketing idea booklet. Law firm partners will like the “Life is About Outcomes” piece for building value.
The second edition of my bi-annual sales and marketing idea booklet. Look for the article, “Strategy and Planning are Different.” It will help you build value in your law firm faster.
The third edition of my bi-annual sales and marketing idea booklet. Read the article, “Our People Are Our #1 Asset.” It will help make your firm the place people want to be. (without costing you a dime)
A quick self-assessment to help orient you and your law firm partners on the topic of growth and long-term value.
Hi, this is Greg Chambers. Thanks for taking the time to listen to this webinar. It’s a webinar that I produced about a week ago, got some feedback, and so I’m rerecording it so that it’s available to you. And then I’ll just leave this up as an evergreen. I’ll minimize myself here on video so you don’t have to look at me and you can just focus on the presentation.
And once we go through the presentation – The reason you’re here is because at some point, I’m sure I said, “Hey, you can double the value of your law firm using FIT. And FIT is a framework that I use for sales and marketing. And I have some law firm clients and there’s something that happened with a particular law firm that I’m going to share with you today. And that’s what this presentation’s all about. So, if that’s the case, we’re in the right place.
And get myself oriented – I’ll jump right through. It takes about 20 minutes, 25 minutes, and I’ll have you on your way. And then there’s a bunch of goodies at the bottom of the page that you can access as we go along. The first concept I need to put in your head – and really this whole presentation is built on – is this idea of perception. And I’m going to use this pack of gum, because the big question is: what is a pack of gum worth? Right?
If you don’t’ need gum, the pack of gum is worth $0.00. I could conceivably say it’s worth $0.00. But, for the most part, the market has it somewhere around $2.00. $1.57 is about what I pulled off of Amazon, if you bought a whole case of the stuff. Let’s talk about how we can double the value of that gum. You’re out to dinner with a beautiful young woman. Looks like a seaside resort right there. And I can’t exactly tell what’s on the plate, but how much is that gum still worth, right?
That gum is probably still worth the same. Maybe as a backup, you think, “Oh, maybe it would be nice to have some gum. Just in case something happens after dinner.” Maybe $2.00, maybe $3.00, but it’s still probably worth $2.00 to $0.00, I would say. Now, changing the scenario that the chef was heavy on the garlic and things are going along and this is probably what’s going to happen: you’re going to be getting very close to this young woman and you’re very self-conscious of the smell of garlic on your breath.
Now how much is that gum worth? Right? If I said that I have that pack and I was right there walking down the beach, and I had a pack for you for $5.00 or for $10.00, would you pay it at that time? My point is, is that what changed with that gum? Is there anything different about the pack of gum here and the pack of gum on this side? And I would say, “No.” Right? The reason why it’s worth double or up to five times more than it was originally is strictly because of perception.
So, using that idea that value is in the dye of the beholder – right? The person who doesn’t need gum would still pay $0.00 for it. The person who is dying for a piece of gum to get this raunchy taste out of his mouth will pay $10.00 for it. The only thing that’s changing there is perception, and value is all tied into that. We’ll do this here as we run through this big idea.
This big idea really was revealed to me – I’ve known about it, but then I guess I hadn’t really thought about it in terms of the work I was doing with this law firm, which was around lead generation. People come to me to help them with business growth, and I was helping a firm. And then this, over the years, this developed. And I’ll run you through this model.
You should be here if you have a firm. If you don’t have a firm or if you wanna buy into a firm, you’ll find it, maybe, mildly interesting. But if you have a firm and you’re looking to increase the value of that firm, this is a concept that you should put in the back of your head. And, specifically, even if you have a firm, there’s really two different types of people that firms, right?
One is a firm that is looking to maximize the cash that they take out of it. So I’m a lawyer, a law firm, and we’re just trying to maximize the amount of money that we take out. But what I’m about to describe to you is really not going to be anything more than mildly interesting, if that. So you can just jump off, take this information for another day. But if, on the other hand, you are a law firm and you’re looking at that firm as an asset that you’re trying to grow – because at some point, you’re going to either cash out of it, sell it, or bring partners in – than you will find this interesting.
And what you’re going to walk out with today is you’re – We’ll talk about how law firms are valued – what you read there on the left. Ideas on how to increase that value, and then I’m going to give you an example where we were able to increase the value. And I’m going to tell you exactly how we did it. Let’s start with how firms are valued. There’s three main components, right? Revenue, which is obvious as far as – If you were gonna go buy a law firm, the first thing you’d wanna know is, what kind of revenue does it generate?
Then you’d be interested in what type of assets are there that you’re buying into? Is there a building? Is it just furniture? Is there a computer system, phone system? These are things that have value because they’ve already been purchased. And how much are they worth? And then there’s this piece called “goodwill.” And you’re all familiar with it, but, for me, it’s an important piece when we look at how we can increase the value of a firm.
The going rate these days, when I was looking up and talking to business advisors, is – what can you expect? So, if you add all this stuff up, what can you expect? Now, I know it’s a multiple. You can take it times .5 all the way to 1.5, maybe, if you’re just starting out. And if you have low revenues, it’s worth .25. But if the firm is doing $1 billion in bills and receivables, then maybe it’s worth 1.5 times what all this stuff adds up to. So, my next question is: well, then how do you determine that? What exactly is it that goes into that?”
And that’s where we end up with goodwill. So, breaking revenue into its own little piece, there’s always going to revenue and cost of sales. What does it take to generate that revenue? Because if you’re generating $1 million in revenue but it costs you $1 million to get it, you’re probably out of business, and that’s why you’re looking to sell the firm. But if you’re able to generate a healthy margin, then it makes your firm a little bit more valuable. So, on the revenue side, we’d be looking for – Well, if I wanna increase the value of my firm, the first thing I’d like to do is increase the amount of business that I do. And, ideally, I’d like to do it with as little labor as possible. Right? I don’t’ necessarily want my cost of sales to go up all that much. Or, at least, I want the increase in revenue to outpace the cost of sales.
On there, looking at assets, I’m sure there’s a way to increase the value of your assets. I’m not interested in talking about that. Unless, of course, it’s real estate, then we could get into the value of that. But I’m assuming that there’s just no change in assets. And goodwill then becomes even more interesting to me, right? So, I looked at that. What we did is we put together a lead generation process, and I wanna tell you about how that impacted goodwill.
So, inside this lead generation process – what I will describe here – you kind of already have the gist of what it is I’m going to be talking about, but I will tell you about our lead generation process and why it was that that helped increase goodwill, as well as did a number on revenue and the cost of sales. So, let’s jump into this lead generation process and talk about how it impacted goodwill.
And the first thing we start with on any lead generation process – When I talked about the original framework that I plug everyone into, the first thing we start with is the vision. Right? It’s the ability to – where we are today, we have a good idea of where we wanna be tomorrow, because then that will direct our purposes. And I bumped into this when I was reading The Talent Code – which I just happened to finish, so it’s fresh in my mind. It said that people who make a long-term commitment versus a short-term commitment meant that long-term people outperformed the short-term people by up to 400 percent.
And that’s why it’s important. That’s why it’s important when you’re starting on this process that if you are trying to increase your asset value, you do it on purpose from the beginning. Because you will spend less time doing things that don’t fit the visions. I bumped into this – here’s an example – I bumped into this with my kid. My kid goes to a little high school, and this little high school has a band program which – I know nothing about band, so this is fascinating to me. But he has been at the top of the band world.
They get rated on all the way up to “superior.” And he has produced superior teams. This is a giant – I mean this is probably 50, 60 kids in the band. He’s gotten superior ratings for, like, 27 years in a row. And so, you hear that and you think, “Oh, that’s interesting. I wonder if my kid’s going to be part of it.” He’s a pretty good musician, but I have no idea what it means inside the world of a band.
Well, the first day, the guy gives us a whole 8-page, “This is my philosophy on how to do things, and this is the way your kid is going to learn this. And this is what they’re going to do freshman year, to sophomore year, to junior year, to senior year – to the point that they can make all-state junior and senior year, if they just follow this program.” So, that’s vision, right? That’s having a purpose.
And one of the things he’s also done, is he has them listen to – he suggests all the way back and forth to school, that they listen to their pieces being performed professionally by a professional that he hires from the local college. And they come and practice it. But his point is, if they hear it every day, and if they’re focused on this, that’s how they get to the goal. So, that’s the first step: is the vision of having the lead generation process in place and why it’s important.
And then what we do is we jump into your firm, right? Generally, most firms have multiple people working there. Each of those people bring certain strengths to the table. So, if we can focus on strengths – And when I say strengths, I’m really talking about a very particular thing, which is the VIA Test of Character Strengths. And if you haven’t bumped into that, jump into it. It’s V-I-A – Gosh, I guess I don’t even know what the website is. You’re gonna have to look it up, but it’s VIA Test of Character Strengths. It’s free.
And what it does is it rates you, or you rate yourself, on these 25 strengths. And, basically, it gives you a report that says, “These are the things I am best at. My particular character strengths.” It’s very close to Gallup in Omaha, Nebraska here. We’ve got a lot of Gallup people around. So, this is very close to that, but they’re character strengths, so they’re just a little bit different. Like, humor is one of mine. That ties into humor and strength of ideas. So, whether or not I’m funny, objectively, doesn’t matter. This is just my perception, right? So, if I think I’m funny, that’s what the strength is.
And the way we use that inside of – the reason why you would find this important is because, as you’re building your lead generation process, one of the things that you need to do is you need to make sure that it’s taking advantage of the strengths of everybody in your firm. So, even the people that are like, “I’m not gonna help with lead generation at all,” if you can get them to help you just a little bit – And they will help you if they’re able to use their strengths to get that done.
We’ve got a lot of examples of that. But with the US Open – Serena’s up, right? Serena’s on and she’s gonna dominate and make it really far in the tournament again. There’s a little commercial with Watson – where she’s talking to that IBM computer – and he says, “Oh, I’ve noticed that when you fall behind, you serve aces, like, 60 percent of the time more than your competitors.” Her strength is she can always go to it, and she’s comfortable with it, but it’s her serve – her tennis serve. So, if you’re not a tennis fan, maybe that didn’t make any sense.
But think of it in those terms: you’re trying to get your people to use their strengths. But then you use it toward lead generation. That’s what we do there. And from the VIA Institute – actually, I think it’s www.viainstitute.org – but if you use – people who use their character strengths at work, it’s directly connected to productivity. This goes well beyond lead generation, but I think if you apply it to this lead generation process, what you’re going to find is your people are plugged in, and they will help you find more leads.
And when you find more leads, you generate more revenue, your cost of sales goes down, and it all works in your favor. And then the last thing we do is we use technology to lock everything in place. And what I mean by that is instead of looking to technology to fix things for us today, what we do is we start with the vision, we work on our strengths, we develop our process internally. And then we go to technology and start asking it to help us improve on the process that we’ve developed with our vision and strengths.
We don’t do this backwards. We don’t start with technology and run up the line. Instead, we develop what it is we’re trying to develop, and then we apply technology. And an example there would be – Think of Amazon. So, I just ordered something from Amazon the other day. And, like clockwork, about two days after my package comes, I get a note that asks for feedback: “Please leave feedback on the packaging.” And then that leads to, “Please leave feedback on the item and the seller.”
So, Amazon knows that the more reviews there are on a product, the more likely you are to buy it. And if you have to go to Amazon to see 2,500 reviews on a product, you’re right there. The first time they get you to buy something now, it’s even easier because now I’ve got one-click buying, and Amazon Prime, all that other stuff that goes along with it. That’s an example of you using technology. They didn’t start by thinking about the review process and, “How do we generate more reviews automatically?”
They figured out, “Oh, we can get reviews if we catch these people right after. What’s the way that we build the technology? And then, instead of just asking for a review, let’s ask for feedback on the packaging and then move from there.” So, that would be an example of using vision, and strengths, and technology. And let me tell you what happens once we apply these things to a – This gets applied to the lead generation process, right? Which ties back into goodwill.
So, the future firm that you have – when you think of it in these terms – it’s split into three pieces, right? We’ve got revenue, which we will take at – you know, it’s always going to be worth what it’s worth: .5, to 1.0, to 1.5. I’m not sure that that changes just because – other than if you have more of it. A $10 million firm is worth more than – the multiple is going to be higher than $1 million and it’s going to be less than one that’s at $100 million. Assets are going to stay the same, and goodwill is actually going to become a player in this.
And what we’re going to do, is we’re going to end up driving the total value of what the firm is worth. We’re going to bump that up, right? So, instead of 1.5 or .5 being the lowest, 1.5 then becomes the lowest in this example. And not only do we do that, but we also get this increased cash from generating more revenue, and the goodwill, right? Which is why they would buy. “Why am I buying into this and why should I trust that it’s there?”
A lead generation process helps with – What I’m finding is, one of the things that lawyers, in general – so, if you happen to be great at this, I applaud you. But I talk to a lot of lawyers who struggle with finding new business. And that’s what a lead generation process does. And let’s jump into where we’ve actually seen this happen. In this example, the names have been protected or changed to protect the innocent, and the numbers are very round, based on these conversations.
But this was the trend that we were at with this firm: the three-year average revenue was going to be around $380,000.00. Not bad. A two-person firm. Assets on hand. There’s a few things that go into this number, but, for the most part, they’re not interested in selling the building going on. And let’s just say that goodwill, the fact that they’ve been around for a while – a long time. The name’s been around, it’s got a little bit of traction in the marketplace. That goes into goodwill. So, what is the multiplier on those things?
Revenue, we say, “Oh, they’re little – they’re not tiny and it’s a very lucrative $380,000.00, so we’ll take that. We’re not going to take 100 percent of that as a value, but we’ll take that at .75. Assets, whatever. We agree on that – 65. “But goodwill, the revenue’s up and down, why are we doing this?” And then the future partner takes it to the banks and financial advisors, right? And their first question is, “Why wouldn’t you just do this yourself? What prevents you from just hanging this out? If we’re just being devil’s advocate.”
The same thing that any advisor would do: “Prove to me that this is worth what we say it’s worth.” But let’s say that’s $400,000.00 and that’s what they were at. This is a reasonable buy-in number that the future partner would be expected to buy-in on. This is what actually happened. We were able to increase revenue over that three year period to where it’s an average of $480,000.00. Now, in there is a couple big years, but we had actually loaded the works in progress into the – There are cases coming down the road that are going to be great.
Let’s say, gosh, that’s actually worth – We totally trust in it. And the reason we trust in it is not because the assets have changed, but it’s because this goodwill piece. We know exactly where that revenue is coming from. And when somebody says, “Well, if one partner leaves and I step in, how do I know that things are going to continue?” Because it’s not dependent on that partner, right? The lead generation process is actually what’s driving the revenue into the business.
The new partner was more comfortable, the bankers were more comfortable – right? And they’ve got to finance the thing. And then the financial advisors, all the advisors, were more comfortable with the whole thing. So, what we end up with is $300,000.00 in new revenue. An asset that’s worth another, say, $100,000.000 – close to. And all it was was a regular investment. I mean, it’s a lot of money – $60,000.00 a year that went into that – but that was paying for $300,000.00 in revenue. So, it’s always been providing a positing ROI for us, but it was an investment.
And here’s the thing – and this is why I think that what I said at the beginning – that you can double your firm’s value with this information, is because this is a process that’s completely replicable. You can do this because we weren’t looking to do this when we started. This was not the vision. The vision was drive revenue in a cost-effective way and get better at it as we go along. And we are much better at it today than we were year one. Those principles of lead generation, they followed best practices from other industries, so it wasn’t like it was a very lawyer-specific thing. It was simply using the tools that were available to us across all marketing.
We looked at e-commerce, we looked at business-to-business revenue, we looked at anything. And that gives me hope that no matter what it is, no matter who it is that you’re targeting, if people need to find you, there is a way to build a lead generation process that will help them find you faster and do it in a cost-effective way. And, again, knowing that, the 400 percent increase, I think if we would’ve started this out three years ago and knew what we knew today – which of course we didn’t. But if we did, we would’ve done an even better job at building that story and building that value.
So, that’s the concept, and hopefully it makes sense to you. If it doesn’t, I’ve got resources that should help you with that. So, my Right FIT newsletter gives weekly ideas on sales and marketing topics – on the general topic of sales and marketing. And these guys were instrumental in helping me get this put together, because they loved the little tidbits of information that come through that help them – remind them as to how to generate revenue in a cost-effective way.
My book is a bigger version of – I do this little booklet and it’s about 30-some pages, but it has new ideas on business development. And inside there, will be some ideas that you can take and apply them again. They’re generic enough that you can apply them to your firm and make it happen. I put together a quick firm value assessment. So, this is a self-assessment. You don’t need to share it with me, and don’t share it with anybody else, but you can go through it and answer the questions. It’s one of the “strongly agree/strongly disagree” assessments.
And by adding up your score, it will kind of tell you, are you ready for this concept? How much of this stuff do you need to familiarize yourself with before you jump into it? And I’ve also got an article that I wrote from a past business that I did. And this became mighty clear to me, because I was working at a very particular good. I was selling tropical shirts and I saw – as it was thrust right in my face – exactly where perception meets value.
And if that’s not enough and you wanna go deeper into this – Of course, the reason I put this out there is because you can get results faster with my help. Guaranteed. Some people actually won’t ever get results without my help, but others of you, even if you could figure this out yourself, it’s not the best use of your time, so schedule a call. And we can do 30 minutes – it’s probably more than enough time – Skype or on the phone.
And I will send you a different assessment. It’s not exactly that assessment, even though that one would help. Just so we can be on the same page. And then I will give you specific steps, about your firm, at no charge. And it will just be 100 percent focused on answering questions about applying these ideas to your firm and your market. And so, I hope that that’s been valuable to you. Download the slides, they should be at the bottom of the page, and then pull down all the PDFs, and read.
Most of the attorneys I know, they love to read. [Laughs] Look through everything and see if that concept applies to you. And if you’d love to talk about it, or if you’d be interested in talking about it, by all means, get in touch with me. Thank you for your time. And if you bump into people who would be interested in this concept, by all means, refer them to this presentation. Thank you.
A short note every Friday afternoon with tips on getting more done in less time. . .next week.