David Bargman
President, Baum Stevens Bargman
As brick and mortar law firms look increasingly either to reduce headcount or have lawyers work remotely, Partners are increasingly looking to “cloud based”, “virtual”, or “distributed” law firms such as Fisher Broyles and Rimon. These firms provide an international Law Firm structure without the typical Partnership obligations, e.g. leases, staff, and associate salaries.
Partners can make more money and bill their clients at lower rates because of the lack of overhead. For example, at Fisher Broyles, 20% of collections go to the firm. A Partner who originates a $10,000 matter the (“finder”) and does the work herself keeps 80% ($8,000) of collections. If a finder originates a $10,000 matter and refers it to a colleague, (the “grinder), the finder gets 28% ($2800) while the grinder receives 48% ($4800) (assuming, of course, that the clients follow you into new venture). Thus, if your practice is self-sufficient, and you do the work yourself, your share of collections exceed typical compensation on the same originations at most firms.
Fisher Broyles requires an annual minimum practice of $600,000 over the past three years, experience with an AmLaw 200 firm, and at least a $300/hour billing rate in order to join the Partnership. Fisher Broyles Joel Ferdinand sums up the value of virtual laws firms: “Our model allows lower billing rates by drastically reducing overhead and passing on cost savings directly to our clients. This all results in a better work product, at a better rate for our clients, with Partners that are actually happy.”
Another virtual firm, Rimon is also growing rapidly, with 23 Partners joining in 2020, 32 locations in nine countries on four continents,45 areas of expertise, and dozens of clients. One Partner “…was drawn to Rimon’s unique model, in which clients receive excellent services with flexible, creative fee structures, and attorneys are incentivized to work efficiently and collaboratively, using cutting-edge technology. “ There is no question that cloud-based law firms are well suited to some practices and are experiencing rapid growth. According to Julie Inman, Recruiting Partner at Fisher Broyles, the firm is opening offices in Europe and expects to be in the AmLaw 200 next year.
The underlying theory of virtual law firms is that, Covid or not, and with the exception of gym memberships, Partners generally do not like to pay for things they do not use. For example, why should a Partner foot the bill for office space when she can work anywhere? And why pay for part of an associate’s or paralegal’s compensation in a different practice group?
Covid19 is clearly a major reason why Partners who have been downsized staff or face excessive overhead are looking for an alternate solution. Since July 1, Fisher Broyles counts 35 new names since the start of 2020, including seven Partners since July 1, and. Rimon Law has announced five new Partners since the beginning of May.
Still, these firms preceded the Covid scourge and plan to grow after it. Fisher Broyles co-founder James Fisher says, “When all traditional firms went remote, a funny thing happened. They figured out working remotely isn’t as difficult as they though it was.”
Working remotely may attract many partners (especially who do not rely too much on employees). However, virtual firms have no permanent law associates, who are trained and integrated create an ongoing firm culture. As the pandemic wears on, firms are increasingly wrestling with how to train, coach and develop their talent in an effective and equitable manner. This is will be especially complicated as segments of their workforce return to the office, integrate them into firm culture. while others practice remotely for a variety of reasons. How do firms avoid falling into the trap of giving more work to the people who are physically present simply because it's more convenient?
After Covid is a bad memory, law firms and Partners will be faced with the options of either keeping the brick and mortar tradition, creating a collegial atmosphere remotely, or finding a hybrid solution. Stay tuned.