Thank you for sharing!

Your article was successfully shared with the contacts you provided.
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 your own firm culture? For the last decade, law firms have been increasingly launching ancillary businesses, often referred to as multidisciplinary practices or MDPs. Reasons for developing ancillaries span the spectrum: • To create new revenue streams, • To increase client retention, • To solidify client loyalty, or • To showcase a market differentiator. Even products or services of law firm ancillaries themselves are diversified. Subsidiary companies owned by law firms, or alternative revenue streams, range from construction consulting to money management to philanthropic advice. 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 what the objectives may be for your firm. • Don’t make market assumptions. Build your company’s 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 marketplace 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 strategy, the business plan should include: — Industry professionals.It is critical to create a management that is made up of professionals from the ancillary’s industry, not partner free time. For instance, if your firm is launching a money management ancillary, then be sure to hire an investment management professional. The operation of a law firm is unique, and the ancillary will not thrive if it is run the same way. So, recruiting professionals within the industry of your ancillary is key as they will be able to lead the company in issues such as product/service integrity, among others. — Advisory board versus management team.Assemble members from the ancillary and the law firm to sit on the advisory board. As mentioned above, industry professionals are important to the company’s management team. Be sure to include partners and members of the professional team (many times the chief marketing officer or executive director) from your law firm. The advisory board’s charter will be to monitor, report, and make directional decisions of the ancillary. — Revenue forecasting.Develop a clear and defined revenue forecast, including a list of prospects. Understand upfront whether the ancillary’s purpose is to make money. Perhaps the purpose is not to create revenue but to add value clients. Either way, don’t just project the number of clients or customers, but list who those clients or customers may be. It is essential when projecting revenue to understand the “buying cycle” of the ancillary’s product or service. The buying cycle is defined as the time it takes for a prospect to become a client. Depending on the company’s product or service, the buying cycle could be as short as six months or as long as three years. — Messaging.Create a crisp message about how the company differentiates itself and competes in the marketplace. Communicate why a client or customer should buy the ancillary’s product or service. What is marketable about the idea? Is the solution a need or luxury to the market? Who is the market? — Internal referrals and lead generation.If the ancillary has synergy with the law firm’s services, then internal lead generation will be one of your most important competitive advantages: existing relationships with the target market. Internal referrals don’t come automatically. Just because some firm clients fit the target market of your ancillary business, don’t expect lawyers to introduce their clients to this service automatically. The attorneys must understand and believe how and why the ancillary business will help their clients. Also, they must be reassured that the ancillary business does not threaten their own client relationship. — Marketing versus sales.Marketing is not sales; marketing supportssales. Along with marketing materials, you must create the opportunity for relationship building. A sales or development force must be building relationships with clients and prospects. “Build it and they will come” does not apply to law firm ancillaries. • Don’t rely on traditional law firm marketing. With a new product or service, go beyond the law firm marketing comfort level. You may want to use different mediums, visuals, slogans, and messages. Your ancillary business will not have the same advertising and ethical restrictions and considerations as your law firm, but the ancillary’s industry may have its own. Be sure to understand these before launching your communications program. Also, understand where prospects may need to see or hear about their vendors, and place your marketing there. • Don’t forget to leverage success. Ask the customer or client what is working. How can you add value and continue to meet or exceed their expectations? Even though retention efforts are often overlooked, the fact is that client referrals and continued client business generally account for 80 percent of a company’s new business. • Service, service, service. If your ancillary business is a professional service, then don’t neglect the service.The substantive delivery of great advice will be easy. The hard part will be to bundle the advice with extraordinary service. Know the industry’s service standards and plan to exceed them. You may find out these standards through competitive intelligence and asking prospective clients what they expect. • Don’t measure success or failure in the first year. Just like every other startup in corporate America, a new business will take three to five years to build. If the firm isn’t willing to invest that much time, perhaps an ancillary isn’t the right fit for your firm. While the blueprint for success will vary from ancillary to ancillary, the blueprint for failure remains the same: Don’t run your ancillary business like a law firm.The decision-making process, service model, organizational structure, and business development efforts must reflect the needs of the market, not mirror the law firm. Beth Cuzzone is the director of business development at Boston-based Goulston & Storrs and a founder of Legal Sales & Services Organization ( www.legalsales.org). She may be reached at [email protected].

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.