Legal Futures reports…
The traditional law firm model does not support entrepreneurs who want to build and sell a business, according to the solicitor who last week sold his company for £61m.
Mark Ellis said the key to building value in a service business was to create a recurring revenue stream not dependent on any individual.
He founded Chester-based Ellis Whittam (EW) – an employment law, HR and health & safety business built on fixed fees – in 2004 and sold it last week to Marlowe plc. His minority private equity investor also exited.
Mr Ellis is retiring from the business and in an interview with Legal Futures said that one of the reasons he left his equity partnership at Cheshire law firm Aaron & Partners was that he wanted to build something to sell.
“If your main career motivation is to be a great lawyer and to make a good living, private practice is a good option. However, that wasn’t me… I hadn’t seen many – or any – traditional firms scale up quickly and exit successfully.”
Decisions ended up being made by committee and slowly – amid the well-worn conflict between maximising annual earnings and investing for the longer term – and Mr Ellis said he felt the pressure to maximise billing contradicted the notions of fair fee and value.
“I wanted to provide great service but for a fixed fee, regardless of usage. I wanted clients to have absolute certainty of cost and peace of mind. I wanted to grow a business quickly, to disrupt the market and to become a market leader.
“Importantly, I was really clear from the outset that I wanted to build something to sell.”
This meant creating a “fast-growth” service business rather than a “slow growth” traditional law firm – and outside of a regulatory environment. EW did not need to be regulated and he saw no reason to take on the burden, although since last year changes in the rules mean that the solicitors the company employs no longer have to describe themselves as non-practising.
The key to success, he advised, was identifying recurring services that could be sold on long-term contracts – a model employment law suited perfectly. “The quid pro quo for the client committing to the contract is the certainty of a fixed fee.”
Mr Ellis acknowledged that this was harder with occasional services like litigation, property and commercial.
“However, doing so in some areas will help to retain clients in others. Think outside the box, be creative and be brave.
Full article https://www.legalfutures.co.uk/latest-news/solicitor-who-sold-business-for-61m-i-couldnt-do-it-in-a-law-firm
