How to Build a Large, Influential Law Firm (Part #2)

Positioning a Startup to Win in a Crowded Market

This series lifts the kimono and exposes the unvarnished details on how we built Sterling Law from scratch to be the largest, most influential family law firm in Wisconsin in less than 3 years.

I hope our story and the lessons help you build your practice or business.

Batting 10% in Businesses

Tony and I felt that a law firm had strong potential. Much of the market’s vulnerabilities lined up with our strengths.

Candidly, I had thought this before–and failed nine times.

By 2013, I had one business win, nine business failures, and one TBD (RocketClicks.com).

True story. I was batting 10%.

My dismal “winning” percentage raised a fair question that rattled around in my head.

“Was I a terrible business man who got spectacularly lucky once?”

I needed to answer that question. It haunted me.

Answering “Why Would We Win?”

One of my most epic fails came in 2008. We started a company that connected homeowners to roofing, siding and windows contractors. The business launched as “Nationwide Home Improvement.”

We grew the company to about 20 teammates operating in a half dozen states.

Then came the financial crisis of 2008. That crushed our business.

After Nationwide collapsed, I sat down with my mentor, Bobby Martin, to do a post-mortem on another failure.

Bobby possesses extraordinary wisdom. He is also one of the most generous people on the planet. He joined Walmart when it was a regional company and was a key leader during its major growth years.

Before retiring, Bobby led Walmart’s international expansion from $0 to $30+ Billion. He is the real deal. World class.  Ask Google, and you will see what I mean.

As we relaxed around a campfire at his Arkansas duck club, Bobby asked me penetrating questions about our Nationwide failure.

I groped for answers and didn’t find any. I had theories.

I captured pages of notes by that flickering fire. There was much to ponder on my flight back to Wisconsin the next day.

My big takeaway was the realization we didn’t have enough reasons why we would win. We had one strategy, and when that failed, we failed.

Bobby taught me that new businesses need at least two reasons why it will win – preferably three or four.

For the law firm to win, we must have at least two winning strategies that we could execute.

We needed to clarify our “why we would win” before we launched.

Must Understand a Market Before Attacking

I had last practiced law on a day-to-day basis in 2006. I was rusty and out of touch.

For us to win, I had to intuitively understanding the pulse of a community law practice.

I needed to think like a client. I had to be able to feel what they felt and understand what they wanted.

We craved to build the law firm from the ground up bullseye centered on the client. I had to get in clients’ head and hear the conversation.

So, I immersed myself into reading everything I could find. Everything.

I bought every book on Amazon about trends in the law, especially on the individual client side.

I read every law blog and subscribed to every RSS feed. I searched out to every law journal article about the state of the practice of law. I followed every Twitter “user” that had anything to do with the business of law firms.

I obsessed on understanding the subtle trends and how law practices grew or didn’t grow.

I talked to every lawyer I could to discover how their practice was going.

My favorite resources were Lee Rosen’s Blog found here and Richard Susskind’s books. These were the most insightful.

Determine Value Creation in the Market

There is another critical component to understand before starting a new business.

Figure out how the participants create value in that market.

If a “typical” law firm has gross revenue of $1,000,000, how is that profit shared? How much goes to the landlord, the support staff, the lawyer doing the work, or the originating lawyer? How much value goes to a marketing expense?

For example, in the iOS app market, Apple captures 30% of the value. The developer keeps 70% of the value and has to pay expenses from that. Consequently, Apple captures a disproportionate amount of the value.

In the restaurant world, most often the landlord is the only one who makes money. Thus, the building owner captures a disproportionate amount of value.

In many consumer-manufacturing markets, the distributor or retailer captures disproportionate value. This is especially true where there is no strong brand value associated with the product.

In the law business, the “originating” lawyer captures disproportionate value. They make the most money. This is strikingly true in firms that cater to businesses.

Often called “rainmakers,” they have the most influence in the law firm. They are usually the lawyers who started the firm or made partner the quickest.

In the case of online legal lead generators, they charge attorneys to bring them business. Their marketing fees to publish lawyer websites and allegedly attract clients are almost criminal. In most cases, they make way more profit than the lawyers.

Tony and I felt we would excel at getting the attention of prospective clients. We were strong in the “value” areas of the law practice.

There is a great book on this topic titled “Value Migration” by Adrian Slywotzky.

Find Your White Space Among Competitors

We knew we could get the prospective clients’ attention. But, to stand out, we had to tell a compelling story.

As we looked across the law firm landscape and examined competitor websites, this became easy.

Most law firms looked the same to us.

People hire people, not businesses. This is especially true with law firms. Clients hire individual lawyers. Businesses sometimes hire law firms. But mostly a person in the business hires another person, who is a lawyer they trust.

To tell our story and get client’s attention, we tried to focus on what they cared about. We did not emphasize our law schools, what we had written, or where we had given a speech.

Clients couldn’t care less about those things. They want to know if you are trustworthy and if they like you. They want to know if you can solve their problem and get them out of pain.

We found our “white space” in authenticity and speaking to client concerns.

Armed with this information, Tony started building our website. I started the process of getting my license active.

 

Key Takeaways to Position a Startup to Win:

 

1) As you start up, find at least two key strategic advantages that you can execute to win. If you hinge your success on one thing falling your way to win, you are vulnerable. In our case, we felt we could win with online marketing and fundamental business execution. We had two main strategies. Within online marketing, we had several strategies. There was not a single point of vulnerability.

2) Before launching, obsessively immerse yourself in that market. Read. Read. Read. Watch every relevant Vlog. Talk to everyone that has experience in the market. Question everything you assume you know.

3) Don’t be romantic about value creation in a market. Lawyers struggle here. They often believe that their wonderful reputation and legal acumen will attract clients. They tend to see advertising and sales as crass and below their dignity. It’s fine to daydream about this and wish this were true. It’s not fine to build a business on this romanticism. You must be cold hearted about value creation in the market.

4) Be clear how you will be different from the competitive noise. Find your “white space” among the competition. This is the time for contrarian thinking. If you look and act like all your competitors, your customer has no compelling reason to chose you. Your success as a storyteller will depend on your own clarity.

Dear Reader, I plan to post an update each week until I catch up to current times.  You can subscribe below to receive updates.

See “How to Build a Large, Influential Law Firm (Part #1)” here.