Keeping a firm on track during a difficult economy requires flexibility, which Germer Gertz, a 58-lawyer firm based in Beaumont, demonstrated this year, as clients requested changes to their payment plans.
“Some still are monthly, which is great, and some are quarterly,” says managing partner Karen Bennett of clients’ payment plans. “Some changed to billing every six months; that hurts.”
But the firm has adapted to the changing payment schedule, she says.
“If certain clients bill every six months, but we continually have cases coming in, it [cash flow] balances out over time,” Bennett says.
Although clients did not request that the firm reduce its billing rates, some did offer to pay their bills within a certain number of days in exchange for discounts on those bills, she says. The firm accepts the discounts and receives quicker payments.
“Both sides come out better,” she says.
Bennett predicts the firm will end 2010 with increases in both revenues and profits when compared with 2009.
“It’s too early to estimate percent growth . . . many clients try to close out their files and invoices at year end,” she says.
Bennett says business in the energy sector is one of the main drivers behind the firm’s increased revenue.
“This year is better than last year,” she says.
|See results of the Managing Partner Survey in charts.|
2010 has been a better year than 2009 for many Texas firms, as firm leaders across the state predict year-to-year growth in revenues and profits. An overwhelming majority of firm leaders — 80 percent — expects increased profits for fiscal year 2010, according to Texas Lawyer’s annual Managing Partners Survey.
That’s a dramatic change from last year, when less than half — only 44 percent — of firm leaders were anticipating a good year for profits for fiscal year 2009.
The 2010 survey, conducted during September and October, is a barometer of how firm leaders perceive 2010 has progressed and their expectations for 2011.
A combination of cost cutting and a slight uptick in business may be a reason firms are anticipating improved 2010 financial results, says firm management consultant William C. Cobb of Houston. Cost-cutting during the past two years, such as layoffs and bonus and salary reductions, has helped firms’ profits per partner, he says. He notes that energy litigation and transactions picked up during the year.
“There are some energy deals out there, where one energy company is buying another, or one drilling company is buying another,” as companies face cash flow problems and decide to sell assets, he says.
Almost three-fourths, or 74 percent, of the 67 firm leaders participating in the survey say that revenue for fiscal year 2010 is up when compared to fiscal year 2009. Eighteen percent of firm leaders expect a revenue decrease when compared to 2009, and eight percent expect revenue to be flat.
That’s noteworthy when compared with last year’s survey results, when less than half, 47 percent, of firm leaders expected revenue increases for fiscal year 2009, 35 percent expected a decrease and 18 percent reported that revenue would be flat with the previous year. [See "View From the Top," Texas Lawyer , Dec. 14, 2009, page 1.]
While most of the 2010 survey respondents are predicting an improvement in profits when compared with 2009, nine percent are expecting a decrease, and 11 percent expect profits to be the same as the previous year.
In 2009, only 44 percent of the participating firm leaders expected increased profits for 2009, and 35 percent said profits would decrease, while 21 percent of the firm leaders expected profits to be flat with the previous year.
Dallas-based Munsch Hardt Kopf & Harr expects improved performances in both revenue and profit when comparing 2010 with 2009, says Glenn Callison, chairman and chief executive officer of the 110-attorney firm. At the beginning of the year, the firm set its 2010 revenue goals flat with 2009, he says.
But the firm is about 10 percent ahead of its goal and added 10 attorneys to its staff during the year, he says.
“We’re starting to see some upticks in the transactions area and will continue to see opportunities in litigation,” he says.
Gary Gurwitz, managing partner of 35-attorney Atlas & Hall in McAllen, is another firm leader predicting positive financial results for 2010. Four first-year associates started with the firm in September, he says.
“It seems to us that bank loans may be picking up a little bit, construction may be picking up a little bit,” Gurwitz says. “We’re anticipating a good 2010; business has been okay.”
Gurwitz says he expects to see continued improvement in the banking and credit markets during 2011, which will translate to increased business for the firm.
“We represent a lot of developers and contractors,” he says.
Firm leaders participating in the 2010 survey are bullish about expanding their attorney rosters in the coming year. Seventy-seven percent of firm leaders plan to increase attorney counts between September 2010 and September 2011, compared with 59 percent of firm leaders in 2009 who forecast growth between September 2010 and September 2011.
In 2009, nine percent of firm leaders expected to decrease their attorney ranks between September 2009 and September 2010. By contrast, none of the firm leaders participating in the 2010 survey are predicting a decline in attorney count between September 2010 and September 2011.
Houston-based Vinson & Elkins will have “a significant number of new hires” from its summer associate class of 2010, says managing partner Joe Dilg. The 779-attorney firm made permanent job offers for 2011 to 55 of the 60 second-year students who were summer associates during 2010.
During the first three quarters of 2010, the firm has seen increased activity in transactions, such as equity offerings and bank financings, primarily due to activity in the energy sector, he says. Dilg says he expects to see the mergers and acquisitions practice continue to strengthen as credit becomes more available. He also expects an increase in the firm’s energy projects practice area as “people start building structures that should have been done a year ago but were deferred.”
Survey participants are managing partners/shareholders/directors, presidents, chairpersons; and chief executive officers of Texas-based firms and partners/shareholders-in-charge of the Texas offices of out-of-state firms. Sixty-seven firm leaders from firms ranging in size from fewer than 25 to more than 125 attorneys participated in the survey conducted during September and October. Most of the firm leaders, 65 percent, have been in their leadership positions for more than five years. Most of them, 53 percent, spend 10 to 25 percent of their time in their role as managing partner. Fifteen percent of the 67 survey respondents are from firms with more than 125 attorneys, 50 percent are from firms with 26 to 125 attorneys, and 35 percent are from firms with 25 or fewer attorneys.
The largest percentage of 2010 survey participants’ firms are headquartered in Houston (42 percent) or Dallas (27 percent), with eight percent in San Antonio, six percent in Austin, five percent in Fort Worth and 12 percent in other cities. Fifty-six percent of the firm leaders work at full service firms, 24 percent at boutiques and 20 percent at firms with limited practice areas. In the charts, the percentages are the percentage of respondents.