Stevens & Lee was able to increase its gross revenue by 5 percent in 2010 despite seeing a 2 percent drop in headcount and a 7 percent drop in billable hours. The firm was also able to increase profits per equity partner (PPP) 10.5 percent, pushing it to the $1 million mark for the first time.
The firm’s revenue rose from $108.6 million in 2009 to $114 million in 2010, thanks to what firm President Ernie Choquette said was a validation of its business model.
He said the firm spends a significant amount of time researching the economic climate in its local regions and nationally as well as the economic situations of its clients and their industries to determine what services it could best provide. That value-add, along with a lot of time spent cross-selling, resulted in client loyalty during the recession, Choquette said.
He said Stevens & Lee was able to increase revenue even though billable hours went down from more than 312,000 in 2009 to more than 290,000 in 2010 because of about a 3 percent rate increase and the firm’s commitment to alternative fee arrangements.
Choquette said the firm has been implementing more and more fixed fee and other AFAs and has employed an internal tracking system to monitor their success. He said the arrangements have worked out well for both the firm and its clients and now contribute between 20 to 25 percent of the firm’s revenue.
Choquette said there were also a few contingency fees paid in 2010 that were “marginally material” to the top line with the bulk of the hours worked on those cases done in 2009.
In terms of other areas that contributed to the top line, Choquette said the economy improved a bit, laterals that were brought on in 2009 started to produce more and practices that were flat the year before were up in 2010. He said the health care litigation, general litigation, bankruptcy and private equity work were up last year. The labor and employment practice started off slow but picked up in the third and fourth quarters. Employee benefits was also a strong practice, he said.
Health care has historically been a big practice for Stevens & Lee and that is paying off in this regulatory climate. The practice makes up 18 percent of the firm’s revenues and isn’t limited to representing only hospital systems, but also acute care facilities, rehabilitation centers and physician practices, the firm said. The lawyers in that practice focus exclusively on health law, Choquette said.
Stevens & Lee made a move in the insurance arena in 2010. The firm and its financial advisory subsidiary, Griffin Financial Group, created a joint venture with insurance consulting firm Risk Capital Partners to form Griffin Risk Capital Partners.
After the law firm saw its profit margin fall from 57.2 percent in 2008 to 51.7 percent in 2009, the firm boosted that back up to 54.4 percent in 2010. Revenue per lawyer (RPL) moved up nearly 8 percent from $635,000 to $685,000. Profits per equity partner reached a milestone, reaching for the first time $1 million. That was a 10.5 percent jump from 2009 when Stevens & Lee’s PPP was $905,000. The firm’s average compensation for all lawyers was up 5.5 percent to $695,000 in 2010.
The firm’s headcount dropped 2.3 percent from 171 lawyers in 2009 to 167 in 2010. After two years of shrinking, the firm’s equity tier remained flat at 62 equity partners. The non-equity tier grew nearly 6 percent from 51 to 54 last year.
Stevens & Lee has said that it has not conducted any mass layoffs during the recession nor has it cut salaries or undertaken other cost cutting measures used by many firms in the last two years. When asked how the firm grew profits at such a rate without changing its makeup, Choquette pointed to a familiar line for the firm — expense management.
He said the firm was able to reduce the average cost per attorney by $5,000 in 2010. That was due in part to fully enjoying the lease reductions the firm negotiated in 2009 as well as renegotiating the firm’s disability and life insurance plans.
Those types of cost savings will be undertaken in 2011 as well. Stevens & Lee offers pretty extensive health benefits along with profit sharing plans and retirement benefits for its employees. Choquette said the firm was intent on maintaining the same level of coverage and decided the only way it could do that was to move to a self-insured system for medical benefits in 2011. He couldn’t put a dollar figure on what that would save the firm, but said it would be no less than $500,000 while maintaining the same benefits.
Choquette said the reduction in headcount in 2010 was just normal attrition. He said the firm didn’t do much in the way of lateral hiring last year, but intends to get back into that in 2011.
Not conducting layoffs during the recession put the firm in a good position last year, Choquette said, because while hours were down in the first half of the year, the lawyers got busy in the second half and the firm didn’t have to scramble to hire people to do the work. He said the strategy allows the firm to grow in its own time and on a “rational” basis.
This year, Stevens & Lee will be focused on hiring younger attorneys with two-to-eight years’ experience in the corporate, health care and litigation practices as well as bringing on laterals with substantial portable books of business that are complementary to what the firm is already doing.
Choquette said cross-selling has been and will continue to be a major part of the firm’s marketing effort. He estimated about 30 percent of 2010 revenue was derived from cross-selling initiatives.
The uptick in work in the second half of 2010 continues into 2011, Choquette said. He said 2011 will be a “good year with potential to be a very a good year.” He said that while he was pleased to see PPP reach $1 million, he would be disappointed if it wasn’t higher at the end of this year. •