Firms lack capital ambition

Think big? I think not.

If ever there was a profession that seemed content with its lot,

it is ours.  

Looking south of the Border, several provincial firms built themselves into major, European practices, competing for almost all the most lucrative work. Leeds alone has produced numerous firms  which now compete at a level above any independent, Scottish firm.  

The Scottish profession undersells itself.  Perhaps this is a national characteristic. Talented people don’t always seem determined to take their businesses as far as they can. There are, of course, always exceptions, but generally, as businesses, Scottish legal firms have not made the impact their talent would have allowed.

Some three or four years ago I met, and subsequently acted for, a former coalminer who had spent many years in South Africa working his way up in the de Beers family business which has, generation after generation, dominated the global markets in which they operate, even when circumstances – political and economic – were heavily against them.

My client learnt much from listening to the elders of this powerful family. On returning to Scotland he set up his own successful business and would preach to all those who would listen the de Beers’ three principles of business;

n    surround yourself with the best people

n    always have enough capital

n    think big.

There is nothing particularly magical or complex about these tenets.  I suspect those solicitors involved in giving advice to business would tend to agree that these are sound principles, but I doubt if many legal firms follow all three when planning their own

firm’s activity.

Most firms do try – it must be assumed – to pull in the best people. In such a highly competitive profession all firms would agree that only by finding, training and keeping the best people – or enticing them away from other firms – can they hope to be successful in winning and satisfying the most attractive clients.  

Capital is, however, a different matter. The partners themselves and the clearing banks continue to be the source of capital.  Several years ago I met with many of Scotland’s biggest practices in a move sponsored by one of the country’s better-known finance houses to ask if they shared the view that the process should begin which would allow legal practices to take equity investment from external sources.  I have to say I was surprised at the complete lack of enthusiasm which met the proposal – eloquently and effectively put to the meeting by an experienced and highly-regarded individual.  It struck us both that it was not the complexity of allowing such a change to the rules governing our profession but a definite lack of interest in the concept. To us it seemed there was a distinct lack of ambition.  

Firms seemed to be content to go along as they were, based on the traditional equity arrangement. There is, I believe, a lack of development and diversification within the profession. Markets that could have been opened to us have been missed as we focus in and not out and without the ability for most of us to make serious investment in our businesses without reducing individual profit share. I don’t understand the reluctance to take in outside funds. Most successful, growing businesses need to raise equity from time to time and would it not also give retiring partners a better opportunity to get real value for their equity share, rather than relying on younger partners who are at the peak of their spending?

If the profession has brought in the best people, and such people are encouraged to manage practices going forward, maybe they will take a different view to my generation and engage the notion of taking in external equity which will afford them the opportunity to think bigger.  The result may not be a profession singularly as successful as the de Beers family but, surely, there would be the

odd diamond.