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42 Legal Industry Update National Focus NATIONAL FINDING SYNERGY: STRATEGIZING FOR A BETTER LEGAL PRACTICE By Michelle Gilbert, Gilbert Garcia Group, P.A. Diversify or die. is is the choice for default servicing firms that face challenging economic times, an increasing regulatory environment, and evolving technologies. But this should not be seen as a threat. Firms that embrace this challenge as an opportunity for growth will lay a foundation for success that far exceeds today's demands. DON'T MISS THE SIGNS Why diversify? First, consider the unfortunate facts: Altman Weil's 2016 Law Firms in Transition report paints a bleak picture: market demand for legal services has not returned to pre-recession levels and overcapacity and underutilization continues to drag down law firm profits. In the meantime, clients continue to request efficient, cost-effective legal services. Doing more of the same is simply not a solution, so law firms across a variety of practices are turning to innovative ways to stay competitive. Default servicing firms in particular face a crossroads. Such firms practice in a niche area of law that is subject to unique regulatory burdens and expenses. To encourage long-term stability and growth, these firms should diversify legal practices as a core part of their business models. What kind of firms are succeeding in this new environment? Altman Weil reports that it is proactive firms that embrace alternative fee arrangements, use legal project management or reengineer work processes, and are responsive to clients' changing value demands. Default servicing firms therefore have a unique market opportunity. As subject matter experts on "alternative fee arrangements" and engineering of work processes, these firms can leverage this skill set and their talent to expand into new, synergistic areas of law and into other complementary businesses. TO THINE OWN FIRM BE TRUE e first step for a firm in transition is to evaluate how best to expand or diversify. is process should take some time. Firms have untapped resources in the form of skilled lawyers and inquisitive staff who have the incentive to learn and expand into other, related practice areas or into new venues. ere are many ways to diversify. It can be expanding into new practice areas, moving into new geographic markets, acquiring other firms, and starting or acquiring ancillary businesses. e best form of diversification will depend on the unique strengths and contexts of a given firm. Continual introspection about what the firm's core competencies are and how they can be exploited leads to the low hanging fruit: handling related real estate work, like retail and commercial closings; non-foreclosure litigation; commercial and residential leasing; construction law; and land use and zoning law. Try to avoid work that does not naturally fit with the firm's focus, unless a new attorney is brought onboard who is a culture fit and who can drive that business to the firm. Big firm attorneys and partners may be attracted to default servicing firms in order to escape the demands of billable hours, the overhead expense of downtown office space, the lack of value billing, and more entrepreneurial opportunities. Network with other firms not only for referrals but for recruitment of like- minded attorneys. Also, look for practice areas that naturally fit with your clients' businesses, like employment and business law, an opportunity to provide one stop shopping to your clients. Better yet, ask your clients how you can help them better handle all of their legal needs, and build your firm out based upon requests voiced by your clients. THINK OUTSIDE THE BOX Expansion can come by acquiring or starting a new business, which can provide cross-referral business for the law firm. Another service business, like an accounting firm or insurance agency, leverages existing clients for both businesses and offers that one-stop shopping convenience. Again, culture fit, economies of scale, buy-in of firm principals, and training and education of the entire team can make or break the success of adding on an ancillary business. A word of caution: Attorneys can be disciplined for actions taken as business people, and ancillary business clients should be told that attorney-client privilege and confidentiality rules do not apply to ancillary business matters. Be sure to check your state bar rules for further clarification. For more on the evolving relationship between legal practice and business practice, see Dana A. Remus's 2014 article on the subject in the Duke Law Journal. NOW COMES THE WORK After brainstorming comes a due diligence review with the financial and logistical teams to evaluate implementation costs and project revenue streams. As with construction costs, law firms in transition should always estimate higher costs and lower revenue. Once a firm determines which way to go, implementing a plan involves buy-in by everyone: Use cross-selling strategies, including meetings among key players to implement training, policies and procedures; networking activities; and educating the entire firm about business opportunities. Make sure the right people are in the right seats on the bus, too. Make leaders of those attorneys and staff who understand market forces and who are willing to implement market- friendly solutions for pricing, staffing, efficiency, technology and so on. Chronic underperformers need not remain, and managing attorneys should be required to manage their practice areas for profitability or make room for someone who will. Communication with existing clients about your diversification will assure them that they continue to be valued and that they too are partners in your growth—which is also their opportunity to work with a full-service firm. Communicate with them about their objectives and the advantages they have with your firm, such as alternative fee arrangements that can provide them with more certainty about their legal costs. And it bears repeating: Your team makes diversification possible. Not only must they be invested, they must understand the critical need for default servicing firms to diversify in order to survive and provide them with further opportunities in their careers. WHAT ARE YOU WAITING FOR? ink about how to get your firm to buy into the need to change now. Small group meetings, retreats, and market awareness are your tools to bring your team onboard with the evolution of your firm. Smart thinking and reorganization today can pay dividends in the future. Firms that don't change may find themselves left behind. Don't wait until it's too late to catch up. Be proactive, know your firm, and play to your strengths. Your future firm will thank you.

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