As a law firm owner, staying ahead of the curve is crucial to the success of your practice. In a rapidly changing legal landscape, embracing modern technology, addressing succession planning, and creating clear pathways to partnership are essential to attracting the next generation of lawyers. In this episode of The Lawyer Millionaire Podcast, join host Darren Wurz and guest Camille Stell as they dive into the importance of time and billing software, navigating partnership transitions, and creating a forward-thinking law firm. Get ready to unlock the secrets to a thriving and sustainable practice.
In this captivating episode, Darren Wurz engages Camille Stell in a thought-provoking discussion on modernizing law firms and ensuring a prosperous future. From harnessing the full potential of time and billing software to strategically planning for partnership transitions, Camille offers valuable insights and actionable strategies.
Key takeaways from this episode:
- Discover the negative impact of inefficient time and billing practices and embrace the potential of software solutions.
- Understand the vital importance of creating a clear path to partnership for your associates, attracting the next generation of lawyers to your firm.
- Navigate the complexities of succession planning, including the challenges of unexpected disruptions and the advantage of exploring multiple options.
- Learn how to elegantly approach conversations about firm ownership, nurturing an environment that aligns with the aspirations of your associates.
- Embrace the power of modernization by investing in technology, engaging your team in the decision-making process, and making your law firm more attractive to potential successors.
Are you a law firm owner seeking ways to modernize and ensure long-term success? Don’t miss out on this insightful episode of The Lawyer Millionaire Podcast. Tune in now to gain valuable knowledge and practical strategies that will help you navigate the complexities of time and billing software utilization, partnership pathways, and seamless succession planning. Your firm’s future is within reach. Listen today!
Remember, the key to a thriving law practice lies in adapting to change, embracing technology, and actively planning for the future. Don’t miss out on this opportunity to unlock the secrets to running a successful law firm. Listen to the episode now and take your firm to new heights.
Connect with Darren Wurz:
- 30 Minute Chat With Darren
- Wurz Financial Services
- The Lawyer Millionaire: The Complete Guide for Attorneys on Maximizing Wealth, Minimizing Taxes, and Retiring with Confidence by Darren Wurz
- LinkedIn: Darren P. Wurz
- LinkedIn: The Lawyer Millionaire
- Twitter: Wurz Financial Services
Connect with Camille Stell:
- Lawyers Mutual Consulting
- LinkedIn: Camille Stell
- Book: Designing a Succession Plan For Your Law Practice
About our Camille:
What does it take to create a first-of-its-kind consulting company that helps law firms evolve and thrive? For Camille Stell, it took years of helping lawyers navigate the most difficult challenges of their professional lives.
Camille is the founder, president and CEO of Lawyers Mutual Consulting & Services. She is a nationally recognized speaker, writer and thought leader on building modern law firms, succession planning, and Life After Law. She counsels law firms on next-level solutions, and she coaches individual lawyers on real-time problems.
After graduating from Meredith College and its paralegal program, Camille worked at top law firms in North Carolina and managed Client Services for the state’s largest legal malpractice insurance provider. She has chaired the Law Practice Management Section of the North Carolina Bar Association and the Legal Marketing Association Raleigh City Group. She has served on the North Carolina State Bar Committee to Study Regulatory Reform, the Duke Law Tech Lab Advisory Group, and the North Carolina Pro Bono Resource Center Advisory Board.
Camille is a Fellow in the College of Law Practice Management. She was honored by the Triangle Business Journal with its 2016 “Women in Business” award and by North Carolina Lawyers Weekly in its 2011 inaugural class of “Leaders in the Law.” In the process of winning these and many other accolades, Camille gained a unique perspective into why some lawyers thrive while others merely survive. She discovered that successful careers don’t just happen. They have to be created. A happy, fulfilling Life After Law doesn’t simply materialize from thin air. It has to be designed. Learn more at www.lawyersmutualconsulting.com
Darren Wurz [00:00:01]:
Deciding whether to pass on your law practice to an internal successor or sell to an outside firm is one thing. Pulling it off is another. I’m Darren Wurz. Thanks for joining us today, and welcome to part four of our series on succession planning for law firm owners. So how do you pull off a successful transition plan? Well, our guest today has all the answers. Today we’re excited to have on the show Camille Stell, president of Lawyers Mutual Consulting. Camille specializes in designing modern law firms and guiding lawyers through succession planning. She’s also the co author of a few books, including Designing a Succession Plan for Your Law Practice. Welcome to the show, Camille.
Camille Stell [00:00:56]:
Thank you so much. I’m excited to be here today.
Darren Wurz [00:00:59]:
Yes, and we’re excited to hear all of your wisdom on succession planning and selling and buying law firms and making that a success. And over the past few episodes, we’ve been talking a lot about the different pathways for law firm succession, whether that’s an internal transition or an external sale. From your perch and your experience, your viewpoint, what are some of the different options you see commonly used for law firm owners? And maybe what have you found to be the most successful or popular among those options?
Camille Stell [00:01:33]:
Sure. I do want to say I’ve enjoyed the series so far, so great job on picking out your guest and your topics.
Darren Wurz [00:01:42]:
Camille Stell [00:01:43]:
So what I typically see is a couple of options. So one would be looking for an external buyer. Perhaps the owner has been approached by someone they know. Perhaps they’ve been approached by an outside firm that is interested in their geographic footprint or their practice area. So an outside purchaser. Another option is to look for a merger opportunity. Maybe it would be nice to sort of slide what you’re doing into another entity that’s going to be around for a while. Maybe they have more young lawyers there. And you can sort of wind down your career knowing that it’s in good hands with a merged firm. And I also really like the option of either hiring your successor or doing an internal transition of ownership. And when I say hire your successor, I’m really talking about that five to seven year plan where you can bring someone in and spend a lot of time with them, or the associates who have already been in the firm for several years and already know your culture and buy into it.
Darren Wurz [00:03:12]:
Okay. Yeah, great. So you lined up a couple of different pathways for us there. And it’s interesting because everybody has their own take on what they like to do, what they find to be successful for them and their clients. For you, it seems like the internal transition is a great way to go. You’ve helped people do that. When you’re counseling with law firm owners, how do you help them determine what’s going to be that best pathway and how do you help them make that decision?
Camille Stell [00:03:39]:
Absolutely. So I really like to start by just talking to the lawyer, the senior lawyers, and finding out what about practice they like, what about running a firm they like, and what they’re really interested in stepping away from during a transition. And it’s interesting because I see both sides. I see the lawyers who say, I cannot do one more divorce. Done. Through. But I love to market the firm and that’s really what I’m looking for in my transition period. I’d love to slow down my legal practice, but continue to promote the lawyers here and the good work that they do. And then there are other lawyers who say, oh my gosh, I love my clients and my client work, but if I never have to arbitrate another partner dispute over who gets to use the conference room today, then my retirement will be well worth it. So I try to find out what they want and present them with options about what their best path may be.
Darren Wurz [00:05:04]:
I love that and you’re so right. It really comes down to what you want your life to look like, what exactly are the things you enjoy. And it’s different for everybody. As you said, it might be stepping more into a managerial role or conversely, it might be stepping out of the managerial role, really depending on the kind of life you want to lead. And I talk about that with clients who are doing retirement planning. Whether they want to bow out completely or they want to still be involved in some capacity. It really just is what your personal preference is. So that’s great. So let’s go back to the internal transition. If that’s going to be the pathway that someone is going to potentially use, how would they know that that is the way to go for them, that that’s going to be the right option for them to pick?
Camille Stell [00:05:56]:
Well, what you definitely don’t want to do is walk into the break room and say, hey, associate, do you want to buy my law firm? That is a sure path to frightening them into perhaps not even showing up for work after lunch today. And the reason I say that is because oftentimes firms have sort of expressed the way they are moving forward, right? No one’s making partner. This is a solo owners entity. Maybe it’s owned by the two lawyers who formed it 30 years ago. And along the way they just said to themselves, we’ve done law firm life and we’re never going to work for someone again. And then they reach a magic age, right? They hit age 60 or 65 and they go, oh my gosh, I’ve built this fantastic thing, but what am I going to do with it? And they suddenly realize that having a successor is really important to them. So I think if you have found yourself in that situation, I really think the best thing to do is not an immediate conversation about ownership, but it’s to begin to show by your actions that you are seriously thinking about what the future looks like. And you can do that through open conversations with your associates, starting to create path to partnership options and ownership opportunities. And you let them begin to absorb your conversation, take it all in. And then, based on their personality, they may pretty immediately say, oh yes, this is for me. I’ve been longing for the day that you would ask. But a risk in that situation is that the reason these associates have stuck around for 20 years is because they themselves are not interested in ownership. They like being employed. They like the way that suits their lifestyle or their entrepreneurial disinterest.
Darren Wurz [00:08:28]:
Yeah, that makes sense. Not everybody wants to be an owner.
Camille Stell [00:08:30]:
Darren Wurz [00:08:31]:
And there’s nothing wrong with that. Some people just want to come to work and they want to go home at the end of the day. Others want to build and grow a business. And I love what you said. Partners get to a point where they’re like, okay, now what? I’ve built this great thing. And sometimes the question is, what is all this really for? You have a great successful business, but then you get to a certain point where you want to maybe enjoy life a little bit more. Absolutely. So then if you’re going to do an internal transition, you say you want to not just come up to people and say, hey, do you want to buy my practice? But maybe make that part of the culture. You mentioned path to partnership. Could you talk a little bit more about that and how that goes?
Camille Stell [00:09:24]:
So I think that if you have been in that firm where a partnership track was really never discussed in the firm, then creating a path forward is going to be helpful. And I think the best way to do that is to, actually I help firms prepare a document about that. And we look at subjective criteria we want the associate to be able to do. We look at objective and subjective criteria. We want to start talking about what their financials look like, have a much better understanding of what the law firm financials look like, which most of the time are in a black box just for the owners and with good reason. But if you want others to begin to have any level of comfort with buying the business, they need to understand what the business is. So I would say the path to partnership would cover your basic qualifications, such as expertise in certain practice areas and good communication skills and those kinds of things, as well as billable requirements, rainmaking requirements, fulfilling more of that ownership responsibilities.
Darren Wurz [00:10:59]:
Yeah. And so when you design a pathway to partnership, does that include a capital contribution? And how do you arrive at that price? Or what that capital contribution is going to be. How do you design that?
Camille Stell [00:11:15]:
So one of the first things I ask the lawyers for is for their partnership agreement. And they kind of scratch their heads for a minute and say, gosh, where did I put that? And that’s always a bad sign, right. Because then they find it and they dust it off. And the capital contribution is what the three partners started the firm with in 1977, a grand total of $2,000 each. And that probably is not the path that you’re going to want folks to take today. So just one takeaway for today is look at your partnership agreement and see if it addresses buy in, if it addresses buy out, transition time, retirement information at all. Because it’s not likely that at 25 years old when you started this firm, that you were thinking about what the end of the firm would look like. So I think starting with your partnership agreement, updating your partnership agreement, if necessary. And for kind of the small to mid size firms, I typically see a capital contribution and in the amount of, say, $20 to $30,000. Another option for that is to get a law firm valuation and then base a buy in on that valuation.
Darren Wurz [00:12:49]:
And does that give them like a certain percentage ownership or a certain number of shares? How is that typically designed?
Camille Stell [00:12:57]:
I like the idea, particularly in a firm that doesn’t have a culture of creating additional partners, I really like the idea of a non equity path for a year or maybe two, and then I think a defined period of time within which they would start moving into partnership.
Darren Wurz [00:13:24]:
Okay, that’s a great idea to kind of introduce them to that role and that position. Okay, that’s a great concept. And then did they increase their equity over time or how does that plan unfold?
Camille Stell [00:13:44]:
Many attorneys think, oh, I’m going to bring in a partner. Well, there goes half of my owners, because that’s just sort of the natural or default. I would say that’s sort of the default thinking. But that’s not true at all. You can start by giving them a 1% interest, but often what I’ll see is a five year buy in, so a 20% ownership year over year and a buy in proportionate to that, and the partner is then working their way out during that same period of time.
Camille Stell [00:14:28]:
So 20%, and they still own 80. And most of the decision making is theirs. And then five years later, it’s been a really smooth transition, slow ownership, slow exit, which is often good for lawyers.
Darren Wurz [00:14:47]:
Yeah, that makes a lot of sense. And then, so the other part, if you have multiple partners, their ownership would stay the same, but the partner who is retiring their ownership percentage would decrease over time. Right?
Camille Stell [00:15:00]:
Darren Wurz [00:15:01]:
Okay, and how does that tie in with the compensation plan? Or what advice would you have as far as the compensation plan and succession planning goes together, you know, how do those coordinate?
Camille Stell [00:15:16]:
Darren, I could talk the rest of the day with you about compensation, and I bet you don’t want to do that. What I’ll say about compensation is that first, there’s some generational issues to address with compensation. Senior lawyers particularly are very accustomed to compensation also being inside that black box of firm financials. And us baby boomers grew up with folks telling us what to do and telling us what the rules were, and we followed them. And so when the partner in 1977 said to the associate, you can’t ask any questions about compensation, you’re just lucky to get it, the associates didn’t blink an eye.
Camille Stell [00:16:12]:
Because they knew in five years, partnership was going to be waiting for them. And it would be wonderful and fabulous if it wasn’t, the firm wouldn’t offer it.
Camille Stell [00:16:24]:
So changing that mindset is tough. But this generation of lawyers working today, they believe in pay transparency, they believe in equity amongst employees. They value things beyond just the salary. But they’ve been through some hard economic experiences or they’ve witnessed their parents going through the Great Recession, or they came out of law school during that period of time. And so they’re very sensitive to pay and it has many more emotional aspects than I think we give credit to. So I would say that a compensation plan, along with your path to partnership that really makes pay more transparent and provides a path forward, is an excellent tool to get buy in from your associates. That partnership is going to be a great option for them. And then you can with your buy in period, whether it’s a year or 18 months or whether it’s five years, their pay will adjust. They’ll move from that regular paycheck to getting a draw and either a split of profits at the end of the year or quarterly profit or dividend payments throughout the course of the year. They’ll have a different bonus structure. So it’s a lot to get used to and it impacts their lifestyle a lot.
Camille Stell [00:18:14]:
Employees are very used to a certain amount of money being deposited into the paycheck every month, and that takes care of our bills. And all of a sudden, this idea of a quarterly draw, even if it’s a monthly draw, it can still be nerve wracking.
Darren Wurz [00:18:32]:
Yeah, absolutely. Especially like if you’re at a small firm, a big firm might have more consistent revenues, consistent profit that you can kind of anticipate on. But if you’re part of a small practice, there can be some pretty wild swings that you have to kind of plan for and get used to. And I’m curious, how does that ramp look as you’re transitioning from salary to draw? Is there kind of a slow fade between the two as you’re gaining ownership? What does that look like?
Camille Stell [00:19:06]:
There can be a slow fade or it can be abrupt. I’ve definitely worked with firms who’ve spent nine months or so preparing that comp plan. They roll it out in the fall of the year and say, this is what it’s going to look like and it’ll go into effect in January. And they also have probably given their associates a heads up in January of that year that, look, this is something we’re looking at and studying and expect to see some changes in the new year. And so make your adjustments as necessary. Maybe you’ll want to instead of taking a fabulous trip with your mid year bonus, maybe that would be a nice cushion to get you through changing your salary in such a dramatic way. So I’ve definitely seen the this is it and it’s going to have a start date, but I’ve also seen other firms who have worked a little bit more of a fade, as you called it.
Darren Wurz [00:20:16]:
I guess the key there is transparency, really making it clear and easy to understand. I think in law firm culture, ownership has been murky historically and so if we can clarify that and make that really understandable and easy for people I like this because it feels very non stressful of a succession plan. It’s very orderly. It feels good to me as I’m listening to it and hearing you describe it. And I want to get into some of the mechanics because you help people design these plans and execute them. What kind of advice do you have for preparing for that succession? What are some steps that owners can take to kind of get their firms ready for that transition to take place?
Camille Stell [00:21:17]:
Exactly. It’s not terribly different from if you were looking for an external buyer. I always like to talk about kind of that buying and selling process, like buying and selling a home, because most of us have done that. And so we understand the concept of curb appeal. We understand the concept of foundational repairs versus cosmetic repairs. We understand comps in pricing in a neighborhood or those kinds of things. So if you were looking for an outside buyer, you would want to make sure that your firm was operating at a high level. You don’t want to be the firm that still has sticky notes all over your desk with passwords and bank codes and your calendar is in paper and your reminder notes to show up in court tomorrow. Again, a sticky note.
Camille Stell [00:22:36]:
That’s not attractive to an external buyer, but it’s also not attractive to an internal buyer.
Camille Stell [00:22:44]:
They likely put up with it because they’re not the owner. They don’t really have an option in that. Maybe they’ve had some conversations with you. Maybe those conversations have fallen on deaf ears. No one really likes change, and technology can certainly be challenging and so it’s often just easier to go with flow. But to make your practice more attractive, I think it’s important to make it look and feel modern. And I think it really sets a tone if you walk into your associate’s office and say, I know we need to do more, but what would you be interested in? I have many fewer years ahead of me than you do. You’ve got many more years to practice. I have fewer years to practice. So what would you like to see around here? And that’s before you even have the ownership conversation. Can you imagine the level of trust that would give them if they give you advice and counsel and you actually take them up on it? Even if you don’t go out and spend a million dollars tomorrow. Investing in your law firm is important, and I think that helps attract that next generation owner, even if he or she is sitting inside your office.
Darren Wurz [00:24:22]:
Yeah, that makes sense. So probably a lot of investing in technology, improving processes and procedures. Could you give us some examples of some of those foundational issues versus cosmetic issues? You mentioned that. I like that analogy. That’s really good.
Camille Stell [00:24:40]:
Yes. So time and billing is a great example. Plenty of firms say, oh yeah, we have time and billing software. Yes, absolutely we do. What’s the name of it? I have to ask the firm administrator. If you don’t know the software program that you’re logging into every day to enter your time and run your bills, it is likely that you’re not utilizing that software to the fullest. So you may have it and it may be running in the background, but you fill out a paper Timesheet and you ask your assistant to enter your time for you. That’s the kind of foundational issue that is a drain on productivity. It is resulting in less true hours collected and billed, and it is probably resulting in the firm being underpaid and certainly paid a lot slower. Law firms are resistant to credit cards. They’re resistant to online payments. They don’t want anything to do with something like stripe or a program like that. And I think that’s a foundational issue that is one of the first ones that really needs to change. So getting your financial house in order is important because they’re going to need to see and understand what the finances look like. And often I see firms who have a really hard time pulling meaningful reports because, well, John doesn’t actually enter time just at the end of the month. He kind of guesstimates. And guesstimating really never works for anybody.
Darren Wurz [00:26:40]:
No. Yeah. As I’m listening to this, I’m thinking, if you don’t have a bookkeeper, get one. You need to have those reports ready to go. You shouldn’t be what is it, July now? You shouldn’t be in July finally putting together your profit and loss for 2022.
Camille Stell [00:27:02]:
And can I add, you should be preparing a profit and loss. A surprising number of attorneys, they just don’t function like that.
Darren Wurz [00:27:13]:
Camille Stell [00:27:13]:
Is there enough money in the bank pay the bills, cut paychecks, but they don’t have a true sense of what financial bookkeeping, how it can benefit them, and a profit and loss is just that should be a regular feature.
Darren Wurz [00:27:31]:
Absolutely. I applaud that 100%. So as you’ve been doing this with clients, what are some of the challenges you’ve seen? Or what are some of the big challenges that could arise during the transition process and how do you prepare for those?
Camille Stell [00:27:47]:
Yeah, I think one of the most disappointing challenges is when from the start, they let you know that they’re not interested. Your longtime trusted associate that you assumed would be delighted to take over the practice. They just don’t have any interest and that doesn’t mean they have to be gone. I mean, you can find someone else to come in and run and manage the firm and this associate would then be a fantastic asset to the firm and the new firm owner.
Camille Stell [00:28:28]:
They know the process, the procedure, the clients. They’re going to have that institutional knowledge. So a big hurdle is when you thought you had a plan and it changes, that associate could have been on board and there’s an unexpected life circumstance that happens or they get some job offer that they can’t possibly turn down. Another disappointment is if you put all your eggs in one basket, there is a risk that the path for succession that you have chosen is going to unravel. But not until a year later and then you’re at the place of starting all over again. So imagine that you’ve done all the things, you created a compensation plan, you created a path of partnership. People were genuinely interested and things went well and they are beginning to have an idea of what the financials look like and they know they’ve got to save for their capital contribution. And again, life happens. It just happened twelve months later and they come to you and say, I know this is going to be hard to hear, but I can’t do it. And that’s tough because they were your only option and you were hoping that you were two years away from retirement and now you’ve lost a year of that and it’ll take probably perhaps more than a year to get a new plan in place. So I advise people on the front end to potentially explore more than one option. And if you have multiple associates, then I think that’s great because then that gives you the opportunity. If the path changes for someone, it’s likely not going to change for everybody at the exact same time. So I would say that is both a huge disappointment and a challenge to overcome.
Darren Wurz [00:30:40]:
Yeah, well, that makes a lot of sense and that is great advice to have multiple options that you can… contingencies as different life circumstances unfold. It’s true, things happen and we’re talking about pretty long time frames here. Five to ten years. A lot of things of course can change. Well, Camille, we’ve been talking about retirement and succession planning for law firm owners and you’re in Raleigh, North Carolina. I am curious what your future dreams are. Do you have a future dream retirement plan yourself?
Camille Stell [00:31:18]:
One of the things that I’ve learned doing this work is that so many professionals have built their identity around: They are what they do. And if you have something to look forward to and to move towards instead of just framing it as what I’m leaving behind, I believe it makes the transition so much more exciting, and it gives you a journey to look forward to. So I always thought I’d work as long as I could and just see what happens then. And with COVID I had the opportunity to work from home and to see what my husband was doing in his retirement. And I have to tell you, Darren, it looked pretty darn fun. So I have a lovely niece who created an extensive hobby list for me, so she has me looking at things like cooking classes and golf lessons and I already love travel and so I definitely hope to do more of that. I also think I will do a wind down myself where I’ll probably retire from full time employment when I reach about 65. That’s a magic number for a lot of reasons that I’m sure all your listeners understand and then do some part time work. And I actually have already been to–because I love to read and write so much–I’ve already been to the library and looked at part time opportunities there because I can’t think of anything more rewarding than being able to share a love of books with others. I’ve taught paralegal classes in the past and I adore teaching, and so maybe there’s opportunities to do that. And here’s the most fun thing I’ve thought of so far. I just cannot get my whole family interested in doing this. I want to start a read and travel group and my cousin, I want her to do all the food for us as we travel around the south in our lovely van and food truck and we’re going to read on the way. And my husband and my cousin’s husband are going to drive the van for us and unload the bags and baggage. And I’m going to direct the tours and the book readings. But shockingly, I’m not there yet on convincing them to cook, manage the finances and do the heavy lifting. Can you imagine?
Darren Wurz [00:34:25]:
Right. Well, that’s wonderful. I love all your plans. You’re so right. You’ve got to have some exciting stuff that you’re looking forward to that’s really important. So congrats on that. Now we’re at the end of our time, Camille, I want you to let our listeners know how they can reach you if they have questions or they want to learn more about you. How can people get in touch with you?
Camille Stell [00:34:48]:
Sure, I work for Lawyers Mutual Consulting. So Lawyersmutualconsulting.com takes you to my website. You can schedule online appointments there, free consults, as well as much longer paid consults. My phone number and email address are easily accessible there. And I’d welcome to have a conversation with you about what you think succession planning, compensation planning, and path to partnership look like. I’ll also be willing to share my business ideas about all the fun things I’m going to do in retirement in this business I’m going to start definitely.
Darren Wurz [00:35:33]:
Well, thank you so much for being on the show, Camille. And thank you, the listener, for joining us for this episode of The Lawyer Millionaire. Don’t miss our next episode, part five in our continuing series on succession planning. If you enjoyed today’s episode, please like, share, subscribe and give us a five star review on Apple or Spotify. Also, check out The Lawyermillionaire.com, where you can access free resources and webinars for law firm owners. Schedule a consultation with me and get your own copy of the book The Lawyer Millionaire. Now take what you learned today and go make your dreams a reality. Also, I’m your host, Darren Wurz, and I’ll see you next time.