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Law Firm Management Beware: Seven Ancillary Business Pitfalls
Some law firms create unique, successful ancillary business models that not only boost the bonus pool, but also attract related legal business. Other firms make assumptions about market need, create management teams around partner free time, and generate little or no revenue. How will your firm find a successful model that fits the your own firm culture?
For the last decade, law firms have been increasingly launching ancillary businesses, which are often referred to as MDPs (Multi-Disciplinary Practices). The key is in the objectives for launching ancillary companies. Reasons for ancillaries may span the spectrum from creating new revenue streams to increasing client retention to solidifying client loyalty or even to showcase a market differentiator. The products or services of law firm ancillaries themselves are diversified. Hundreds of law firms own subsidiary companies or have alternative revenue streams ranging from construction consulting to money management to philanthropic advisors.
Because “success” depends on so many variables including your objectives and goals for ancillaries there is no magic formula for success, but there are several pitfalls to avoid when creating, launching and operating a law firm ancillary no matter the objectives.
- Don't make market assumptions. Build your business plan around solid market research, market need, market trends and market share. Don't assume that just because you have identified a solution to a problem or need, that competition doesn't exist in the market place or that the idea is profitable.
- Don't create a business plan around internal variables. In order for a separate company to become successful, it must operate as an independent company, not just another practice area of the firm. Beyond the obvious components of a strategy, the business plan should include:
Management of the specified profession ' (not partner free time). Who will be responsible of the economics? Ethics? Internal communications? Product/service integrity?
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