How to Build a Large, Influential Professional Practice, Part #1
Diversification, Vetting Ideas, and Market Research
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.
Roundhouse to My Face Got My Attention
On January 1, 2013, I woke up emotionally battered. Physically, I was exhausted. Mentally, I was processing the anguish that nine years of work was teetering over the abyss.
I invested 2012 into selling our Dish Network retail ecommerce business and digital agency, RocketClicks.com. The new tax laws in 2013 prevented further effort toward a sale.
My team and I went “all in” on the sale that I was “definitely certain” would close. How could the deal not happen? All the interested parties professed commitment to the deal. The offer price was way above my bottom line.
This deal was definitely going to close.
Except, it definitely didn’t.
The scuttled sales process blasted a gaping hole in our business. It nearly depleted our financial resources. I was angry and confused – and extremely motivated.
On that cold Wisconsin New Year’s day, I rededicated myself to zealous diversification.
Approximately 95% of the combined revenues from both businesses flowed from one client, Dish Network. Even though Dish had been a perfect partner for almost a decade, we were too reliant on one relationship.
The situation was not healthy for me, or for our partnership.
Up to that New Year’s Day, I had the desire and even the “will power” to diversify my business. But, I candidly didn’t have enough “want power.” I had been gorging myself at the table of my one great, profitable client.
I had a glimpse into a world without that client. The failure to sell felt like a roundhouse kick in the teeth.
I was now alert to our vulnerability.
Triage Before Progress
First, we had to stabilize our sick business before it redlined.
We did a massive layoff – the kind that is so terrible that you have to notify the State. I recall that we laid off around 75 teammates on that second week of January. Apparently, when you lay off a lot of people the State needs to prepare, and they want the public to know.
The business press broadcasted our vulnerability. Quite a few friends read the news and conveyed their concerns.
The whole experience was even more gut wrenching than necessary. We had to wait until the week after our yearly celebration to make the announcement. Tuxes and dresses were already acquired in anticipation of the event.
After the layoff we restructured the leadership and streamlined the reporting structure. Some key teammates quit because they lost faith in my leadership.
We cut programs and terminated projects. We attacked every expense in the business to free up as much cash as possible.
By May 2013, we were on stable footing. Most of the severance packages had expired, and the new leaders had settled into their role.
Now, we turned our focus to diversification.
Small Businesses Can Have a Skunkworks
Someone smart told me about a massive conglomerate that needed to innovate. The company started a “Skunkworks.” I didn’t know what that meant, but I was pretty sure it wasn’t a business selling noxious rodents.
So, I looked it up. Wikipedia defined it as a “team devoted to innovation.” That sounded great to me. We needed innovation.
We repurposed four of our most productive teammates. I asked them to form a Skunkworks. Their job was to generate ideas and research markets.
Market Filter to Test New Business Concepts
Next, the team built a filter to vet ideas. At our DNA level, we were a digital marketing and phone sales team. We excelled at marrying these two skills to sell Dish Network and other home services.
So, we knew that the new idea needed to center around our strengths.
We began looking for businesses that satisfied this 4-point filter:
1. Growing at least 10% per year
2. Traffic online in that market
3. A human required to help the transaction
4. We have or could have a passion for that market
We wanted to be in a market that was growing. Even then, we could see slowing growth in the subscriber television market.
Filters #2 and #3 fulfilled our core competencies of digital marketing and a sales call center.
Finally, we felt a passion for the new business would sustain us through the volatile emotions of a start up.
Skunkworks Team Isolated Itself from Distractions
The Skunkworks team moved to a quiet corner in the building away from other teammates. The separation created a barrier to “drive by” teammates. It also gave the team a sharper psychological focus on its mission.
Over a six week period they looked at 100s of ideas in dozens of markets. The team did not seek to create a “new” business model. It focused on the fundamentals of the filter that centered on our core abilities.
In the end, the concepts that made the most sense to me were (1) online education, (2) recruiting service for coders, and (3) something in the trades, like residential roofing.
But, there was still one more idea to consider.
Fantasies of How a Law Practice “Should Be”
Since I left my law practice in November 2005, I often daydreamed of how I would operate a law firm. I imagined all the ways the practice of law “should be” better.
I felt that community law firms were ripe for disruption and needed to modernize. Most firms that served individual clients (as opposed to businesses) were poorly managed. Few firms seemed to even have a plan. And, from what I could tell, they all looked the same and did not tell a story as to why they were different.
My moment of truth had arrived. It was time to quit whining in my head and do something about my law practice improvement dreams.
I needed to find the right time to pitch these law firm ideas to my team. I knew they would work, but I needed buy-in from key teammates.
Coffee Shop Pitch that Launched Sterling Law
On June 24, 2013 we attended a meeting in Denver with Dish Network. We were there to save 70% of our business.
We lost.
After our butt kicking, we brooded in a coffee shop in Greenwood Village, Colorado. As we sat licking our wounds and contemplating another massive lay off, I pitched my law firm idea.
Tony and me at the coffee shop four years later. (That’s my son, Jack, photo bombing us with the cheezy grin.)
I explained how B-to-C law firms were fundamentally broken. Law firms seemed to exist to benefit the lawyers who owned them. Their billing practices and office cultures reflected this attitude.
Attorneys too often cared more about what their colleagues thought of them, rather than what clients thought.
These law firms generally had great lawyers, but inept business leaders running them. Few knew their numbers. Most firms rarely got billing out on time.
I argued that most firms were a collection of bad business practices. Terrible firms continued to exist because there was weak competition in a regulated market. The market is inefficient.
Progress Causes Friction and Breaks Things
By the end of that java-fueled encounter, I felt I had persuaded Tony Karls, who later became my partner.
There was another teammate at the table. He quit the next morning at the airport before our flight back to Milwaukee.
Within a few weeks, the other Skunkworks team members quit or moved to another part of the business.
It was now Tony and me to give birth to our law firm ideas.
Key Takeaways from the Ideation and Research Process:
1.) When going through a business sales process, assume the deal will not close. I wrongly assumed the deal would happen. This assumption led to a painful cascading pattern of behaviors and decisions.
2.) If your business falters or fails, you as the leader must loudly own it. We had lost, and many on my team lost confidence in my leadership. I made up some of the lost ground when I publicly made sure they knew that I knew that I had failed them. I acknowledged my failures and committed to correcting them.
3.) When a business needs to diversify, the initiative needs an “owner” and dedicated resources. We had attempted to diversify several times prior to 2013. But the tyranny of the urgent always snuffed out the enthusiasm. By creating a Skunkworks team, with resources and space, we had an environment for innovation.
4.) Getting buy-in from key people is essential. You may need to wait for the right time. Maybe this is a business partner? Maybe it’s a spouse? As it happened, I pitched the law firm idea to Tony after he had performed weeks of research in other markets. His mind was open and focused on new opportunities.