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Partner Capital: Why Firms Need More in 2003

By Howard L. Mudrick
September 25, 2003

Most law firm partners react skeptically to the suggestion that their capital contributions should go up in 2003. After all, with the cost of borrowing at its lowest level in over 40 years, why should partners invest more capital in the firm, thereby delaying or reducing personal cash flow?

Nevertheless, even well managed firms are now likely to need more partner-contributed capital than they did just a few years ago. Reasons firms currently need more capital relate to changes in the costs of firm growth, to technology requirements, and to additional cash flow stresses. Let's examine those changes, and then look at some capitalization challenges that are also new.

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