Anita Turner

Author: Anita Turner

  • Why Do Law Firm Entity Type and Capital Buy-In Matter?

    Why Do Law Firm Entity Type and Capital Buy-In Matter?

    Does it really matter whether a law firm is set up as a PC or an LLP?

    I asked numerous lawyers this question and the usual response was “not really.”  In fact, according to this article, most firms have very little idea why they selected a particular entity type at formation.

    While it might not matter as much at the individual lawyer level, I believe it does matter at the firm level and should matter at the creditor level, i.e. to landlords signing leases with law firms.

    LLPs

    Limited liability partnerships afford more flexibility in financial management and allow for easier flow of partners into and out of the partnership.  And, as the name indicates, they also allow limited liability for partners.

    PCs

    Professional corporations allow certain tax benefits, primarily in the way of higher pension plan contributions.  Like LLPs, they also allow limited liability on the part of the shareholders. On the downside, corporate formalities associated with this entity type can be burdensome.  Further, PCs do not allow for a mandatory retirement age as they are subject to employment laws governing corporations.

    Why is mandatory retirement age relevant?

    Mandatory retirement age is a sticky issue so I am going to address it only by briefly identifying some of the benefits and liabilities.  On the benefit side, a mandatory retirement age (especially when coupled with a generous step-down program) can encourage senior partners to transition their client relationships to junior partners.  It can also ensure that a law firm does not become a country club to senior partners who are no longer billing significant hours but are still collecting partner pay and occupying partner offices.

    On the liability side, it can force productive partners with extensive experience and knowledge into a premature retirement.

    I have seen this problem best addressed by those firms that offer a generous step down and transition incentive and then allow partners beyond retirement age to continue practicing as non-equity shareholders.

    Does/Should mandatory retirement age matter to lenders and landlords?

    From a landlord or lender perspective, the existence of a mandatory retirement age is relevant if the number of partners is bloated because senior non-producing partners are not retiring and this occurrence is dragging down profitability.  In such an instance, the lack of a mandatory retirement age may affect the long-term viability of the firm and therefore the security of the loan or lease.

    Conversion from one entity to another

    Another downside of PCs: converting from one entity to another is not always simple – especially a conversion from a PC to an LLP or LLC.  “The conversion of a professional corporation to an alternative form requires liquidation, which can be a significant tax event. For many, the PC is a decision where there is no turning back. Any change that winds up the corporation, including conversion necessitated by regulatory considerations or the dissolution of the firm for other opportunities or merger, can be prohibitively expensive.”[i]

    This means that in an age of consolidation, PCs may offer merger challenges that their LLP counterparts do not. As a landlord, this challenge could prevent a failing PC from being absorbed by a larger, more viable firm, resulting in more lease risk to the landlord.

    Despite the challenges associated with PCs, they are the predominant form for law firms in the United States.

    Does the amount of equity buy-in matter?

    In addition to consideration of the entity type, a law firm and its lenders should regularly evaluate the equity buy in required for partnership in the firm.  For instance, I have spoken with lawyers at firms with no equity buy-in for partnership.  While those firms might consider themselves judgment-proof, as a landlord or lender, I would consider them high risk.  Why?  Most law firm failures result from illiquidity.   One down year can sink a firm that has no capital to weather fluctuations in revenue and collections.

    Equity as handcuffs

    Another consideration with respect to equity buy-in is the buy-out provision in the partnership agreement.  For instance, if a partner leaves a firm, how much capital do they have invested in the firm they are leaving and what is the buy-out timeline?

    One firm I spoke with determines buy-in capital based on points – a fairly common approach.  In this scenario, the more revenue a lawyer generates, the greater their equity buy-in and the greater their profit participation.  This firm’s partnership agreement provides that if a partner leaves for a competitor firm (as opposed to a judgeship, in-house position, retirement or other non-competitive endeavor), the partner’s capital buy-out will occur over a five-year period.

    I personally like this approach because it encourages loyalty to the firm and a long-term commitment to the business.  It also ensures that every partner’s interests are aligned with firm success.  Arguably, it also allows those lawyers not comfortable with this commitment to self-select from joining the firm.

    Compare this to another firm I interviewed.  Their buy-in is a flat $20,000 for every partner.  Liquidation upon departure from the firm is immediate.  In my opinion, this not only limits the capital available to this firm to invest in the business of the firm (requiring debt for any major investment), it also may leave the firm susceptible to lateral departures.  This can create a volatile environment.

    Back to my landlord or lender hat – when evaluating a long-term lease with a law firm that requires only de minimis equity buy-in and attaches few strings to departure, I will want more security for the obligation.  That may take the form of a letter of credit or personal guarantees on behalf of all of the partners.

    What do you think?

    I know that the lack of discussion around this topic is not a reflection of the lack of opinions about it.  To that end, I would love to hear yours.  I want to learn more and will update this article as I do!

    [i] “Law Firms’ Entity Choices Reflect Appeal of Newer Business Forms” by Allison Martin-Rhodes, Robert W. Hillman and Peter Tran.  Law Firm Organizations. July/August 2014

  • My Podcast Guide: High Brow to Humorous

    My Podcast Guide: High Brow to Humorous

    Want to make the most of your commute?  Or your time waiting to pick kids up from athletic practice or dance? Or your treadmill time?  I listen to podcasts at all of these opportunities and have become quite a junkie.

    And rest assured that not everything I listen to is all high brow and educational.  Here’s a rundown of my current favorites and most recommended episodes.  Give them a try!

    For Lawyers Whose BD Game Could Use Some Attention:

     

    Left Foot: Fresh Conversations on Business Development

    The host interviews GCs from numerous large corporations.  It would be worth your while to check the list and make sure you don’t miss one that features one of your clients.  Don’t you want to know what they have to say?  My favorite episodes include:

    Legal Marketing 2.0 Podcast

    Some of the topics on this podcast get into the weeds of legal marketing, but the episode below is great for business people and lawyers alike.

    • Jeff Berardi of K&L Gates – “Thinking Like a Client.”  Berardi also recently wrote a great article about marketers taking the lead on client discussions for American Lawyer magazine.  You can find it here.

    Building New Law Podcast

    This podcast tackles many of the changes and challenges confronting the legal industry today.  It is relatively short but very valuable.  My favorite episodes are:

    • Seth Godin – How to Make Art and Start a Ruckus.  I maintain that I get a little bit smarter every time I listen to Seth Godin.  (I have not identified a KPI to confirm this assumption.)
    • Mitch Kowalski – Author of “The Great Legal Reformation: Notes from the Field.”  The book is brilliant but if you don’t have time to read it, listen to this.  Trust me, you’ll end up reading the book as well.  And if you want my Cliffs Notes on the book, send me an email.

    LMA Podcast

    While this podcast has some good content, they have some audio issues to work through.  Right now there are a lot of pops and clicks and volume changes so the sound quality is somewhat lacking.  That said, skip to 2:09 of the episode below to hear about one of the coolest law firm holiday programs.  Ever.

    For Anyone in a Business Role of Any Kind:

     

    Masters of Scale with Reid Hoffman

    Why the founder of Linked In whose net worth is estimated at $3.2B is hosting a podcast is beyond me.  Regardless, clearly budget is not an issue so this is one of the best produced podcasts you will ever listen to.  Every episode is well written.  Even the commercials are interesting.

    While I have yet to find an episode I didn’t enjoy, this one is my favorite.  And lest you think this podcast is too liberal for you because the episode I link to contains Sheryl Sandberg, rest assured Peter Thiel is a guest on another episode of Masters of Scale.

    For Anyone Who Likes to Think, Grow, or Learn:

     

    Farnam Street: The Knowledge Project

    The brainchild of Shane Parrish, this podcast series covers many disparate topics.  That said, my hands down favorite is this one.  I have listened to it several times.  And made my 15 year old son listen to it.

    • Naval Ravikant on Reading, Happiness, Systems for Decision Making, Habits, Honesty and More

    For People Who Want to Laugh Hard But Also Appreciate Intelligent Humor.  And Don’t Mind Some Profanity:

     

    ID10T Podcast (formerly The Nerdist) with Chris Hardwick

    I don’t think you can be a successful comedian unless you are fairly intelligent and Chris Hardwick clearly fits this bill.  I have listened to each of the following episodes several times, usually following long days of being “on” for clients and co-workers.  They still make me laugh out loud.

    • Dax Shepard Returns  #notmymatrix  If, like me, you become a fan of Dax Shepard after listening to this, you will be happy to know that Shepard just started his own podcast and it is just as entertaining.
    • David Spade  His Chris Farley story from the SNL days is everything.

    I know there are a ton of podcasts out there that I have yet to discover.  Please share your recommendations in the comments!

  • Three Key Questions to Ask Yourself to Improve Client Service

    Three Key Questions to Ask Yourself to Improve Client Service

    Jennifer Brooks, Brooke Haughey, and the rest of the marketing and business development team at Hogan Lovells are clearly working overtime on behalf of the firm’s lawyers.  Their goal: to help Hogan Lovells’ lawyers better serve their clients and build their practices.

    While at the Legal Marketing Association Conference in New Orleans last week, Brooks and Haughey shared invaluable insight about how they go about this task.  They offered key questions that they ask themselves and their attorneys in order to figure out how to better serve their clients.  They include:

    1. What is (or should be) keeping your clients up at night?

    2. What are the boiling frog factors (emerging changes in the external environment) which your clients may not have noticed?

    3. What are the significant issues that threaten your client’s future?

    I am sure this isn’t the first time you have heard these questions suggested, but how often do you actually go through the exercise of pondering and answering them?

    As a commercial real estate advisor, this is how I would answer these questions for my law firm clients.

    1. What is (or should be) keeping law firms up at night?

    The legal industry’s growth has been flat and industry reports indicate it is likely to remain flat — or even decline.  Notwithstanding this trend, individual lawyers still hope and expect to make more money each year.  To do this, firm revenues have to increase or expenses have to decrease.

    In the real estate industry, we help law firms decrease expenses by reducing occupancy costs.  This goal is achieved by eliminating excess space, designing more efficient space and/or moving to lower cost buildings.

    Law firms (and the lawyers who own and work for them) are also very careful about capital expenditures.  Law firm moves and new office construction are paid for in one of two ways: capital contributions from the firm (i.e. its partnership) or loans.  Right now, many firms are focused on investing capital in technology and business staff – areas where the perceived return on investment is high.  This focus leaves firms reluctant to re-allocate that capital to new construction.  Similarly, debt service can be costly.

    My job as a broker is to help law firms understand the different pathways to achieving lower occupancy costs.  They can restack their existing space to make their existing footprint more efficient and conducive to collaboration.  This can be less capital intensive than a relocation.  In the alternative, they can relocate and commit to a long-term lease that allows a landlord more time over which to amortize a higher tenant improvement allowance.  Or, they can move to space already built out for a similar use and make limited modifications to the space to adapt it to the firm’s occupancy needs while limiting capital costs.

    That said, expenses cannot be endlessly cut.  Eventually, focus must move to the revenue side of the equation.

    2. What are the boiling frog factors (the water temp rises so slowly the frogs don’t know they are boiling) which law firms may not have noticed?

    If you pay attention to the legal industry, you hear about firms hiring laterals from other firms in an attempt to grow revenue through accretion.  Granted, much of this lateral hiring is strategic in that the lateral brings an expertise or geographic coverage to the firm that the firm’s clients are requesting.  However, hiring laterals just to tack on revenue can be short-sighted.

    Per Bruce MacEwen and Thomson Reuters, if the revenue growth of 4.3% in AmLaw100 firms last year “had been reported in constant dollars and had taken account of the head-count growth in the firms, the impressive average gain in gross revenue would have been reduced … to a negative .5 percent.”[i]  (This could be – and probably already is — a book.  Because there are many people more knowledgeable than I opining on this topic, I am going to end my discussion of lateral hiring here and shift to organic revenue generation.)

    Per Peer Monitor, hours worked per lawyer have decreased significantly from an average of 140 hours per month pre-Recession to 120 hours per month presently.  This is a boiling frog topic and I applaud the firms that quickly realized it and began to focus on generating more work for the attorneys they already employ from the clients they already have so that hours worked per attorney increase across their firms.

    This increase in utilization results in revenues increases without attorney headcount increases.  To achieve this result, compensation systems can be devised to incentivize the attorneys who control an abundance of work to share the wealth; however, as a real estate advisor, I focus on potential solutions offered through real estate.

    To that end, open and fluid working environments encourage greater interaction as well as random collisions between attorneys and staff.  This often results in more conversations about specific client issues which in turn can prompt attorneys to offer assistance to their colleagues on accounts with which they were not previously involved.

    Open and fluid environments also encourage interaction between associates and partners which can increase awareness of other attorneys’ capabilities (and availability), thereby encouraging future working relationships.

    How are open and fluid environments built?  Glass walls, attractive common areas, vibrant informal meeting areas.  The options are abundant and existing space can sometimes be modified to foster these environments.  Hogan Lovells built an exceptionally open and collaborative environment in their Denver office and you can see more pictures of it here.

    Hogan Lovells Denver3. What are the significant issues that threaten a law firm’s future?

    Right now, the biggest threat to law firm revenue is the client itself.  In a recent survey by HBR Consulting, participants indicated that essentially all of the increase in legal spend in their organizations over the previous year occurred within their law departments.  Outside legal spending remained unchanged.[ii]

    Many clients are taking more work in-house because outside counsel does not provide what general counsel at these companies perceive to be sufficient value for the cost.  One of the most-cited issues by general counsel is that outside counsel does not understand their clients’ business issues and instead focuses only on the associated legal issues.

    How can real estate play a role in improving this perception?  Build space that invites clients in.  If your firm has locations across the country and those locations contain vacant private offices, let your clients know that they are welcome to use those offices when they are traveling to other cities.

    Build inviting event space and then invite your clients to it to meet each other.  One thing in-house counsel can’t get in-house is an introduction to someone outside of the house.  Think about how you can connect your clients to each other in ways that are mutually beneficial to their businesses and then orchestrate those connections in your office.

    Build training rooms into your space and use them to educate your firm’s lawyers on business.  Chicago-based Levenfeld Pearlstein educated its own people on lean practices for law and then offered a one-day White Belt workshop for its clients (taught by Legal Lean Sigma) in LP’s offices.

    You might also consider creating space that can adapt to your firm’s changing business structure.  For example, build space for summer associates that can also serve as hoteling space for retired partners or incubator space where the firm can partner with clients and legal tech companies to innovate.

    Finally, ask whether your office is in a location that is conducive to your attorneys running out to visit clients and your clients stopping in to visit their attorneys.  It should be both.

    Answer these three questions and your clients will love you.  No question.

     

    [i] 2018 Report on the State of the Legal Market, Thomson Reuters and Bruce MacEwen, “But What Do the Am Law Numbers Really Show?” Thomson Reuters Forum, vol. 3, ed. 2 (2017), at 36, 37.

    [ii] HBR Consulting, 2017 HBR Law Department Survey, Nov. 14, 2017, at 49.

  • Placemaking: Minneapolis Edition

    Placemaking: Minneapolis Edition

    While visiting downtown Minneapolis recently, I literally stumbled upon the atrium inside the 130,000 square foot 801 Marquette office building.  801 Marquette is adjacent to the 17 story TCF Tower and the atrium is an amenity to tenants of both buildings.  It is also open to the public.

     

    This multi-story community space features a fireplace, abundant living room and dining table seating, and a stunning stairway that doubles as amphitheater seating.  One four-story interior brick wall in the atrium has been painted white so that it can function as a projection screen.

    All of the tables in the atrium are stacked with assorted games like cribbage, backgammon, jenga, etc. so tenants can stop and enjoy a respite from their workdays.

    The space is staffed by a community manager who is responsible for planning and hosting community events including movie screenings as well as regular screenings of TED talks on the aforementioned white wall.  There are also weekly Wednesday morning cereal bars and happy hours for the tenants.

    Musicant, the company that is responsible for operating the 801 Marquette lobby, also manages an outdoor lawn space at 333 South 7th Street in Minneapolis.  In this space (“The Turf Club”), Musicant offers weekly concerts, outdoor fitness activities, monthly happy hours and tenant events.

    The outdoor fitness activities hosted by Musicant have included everything from a large yoga class to a massive spinning class with numerous spinning bikes brought in for the event.

    What a fantastic example of Place-Making: none of these amenities are expensive to offer.! What does this inspire you to do with your space?

  • Five Key Questions to Ask When Hiring Outside Counsel

    Five Key Questions to Ask When Hiring Outside Counsel

    “I saw the skyline/smiling lawyers/column on their website and thought ‘that is the firm for me’.”           – No client ever

    I am sure the same could be said of building photos on real estate company websites.  Pure hokey-ness.

    A website photo obviously cannot tell you whether to hire a particular law firm.  But if you ask the right questions, you can determine whether a law firm can provide value to you.  Start with these:

    What are your clients saying about you?

    If you ask a firm this question and the respondent cannot immediately provide you with an answer, it may be an indication that the firm doesn’t know and/or care what its clients are saying about it.  In fact, many firms don’t ask their clients how they are doing.

    If a firm represents that they do ask for client feedback, it is helpful to understand what questions they ask to obtain that feedback.  For example, if the question is “did we do a good job on that matter?”, the firm is trying to make sure its clients are satisfied.  If they ask questions like “did we provide value beyond your expectations and if so, how?”, it indicates that the firm cares about exceeding client expectations.

    As a general counsel, I would rather have a firm that is trying to exceed my expectations than one that is trying to make sure I am satisfied.

    If a firm asks, “how could we do better next time?”, it is probably both willing to hear constructive criticism and interested in service improvement.

    Gold star to law firm Levenfeld Pearlstein which has a feedback box on its website that asks “If you were in charge of LP, what improvements, if any, would you make?”

    Not only does Levenfeld Pearlstein ask this and other tough questions of its clients, it publishes their responses in the form of a report card on its website.  Check it out.  The firm also posts spontaneous client feedback as Letters to LP.

    What do you know about my industry?

    As a buyer of legal services, you want to know that the law firm has an in-depth understanding of the challenges and opportunities in front of your industry as well as who your competitors are.

    What do you know about my company?

    This answer should include a knowledge of how your company is structured (because it matters and because this information can be found); its history, size, strategy and market position; and a preliminary knowledge of the decision makers in the company.  Most general counsel are looking for legal solutions to their business problems. If a firm doesn’t understand your business, you aren’t going to believe they can solve your problems.

    Further, if a firm has not done any of this research before pitching to you, it sends the message that your business is not of sufficient value to them to do their homework.

    Who’s going to work on my initial matter?

    Most general counsel don’t want to pay to train a first-year lawyer, nor do they want to pay a senior partner’s hourly rate to look up a statute.  Rather, they want a diverse team, both in terms of experience and gender/ethnicity. This ensures diverse perspectives when solving the client’s legal and business issues.  To that end, ask whether the composition of the firm’s leadership and overall employee base reflects an emphasis on promoting diversity.

    Also worth noting, a lot of general counsel look like me, i.e. a woman in her forties with a family.  If I were hiring a law firm, I would not want to hear lip service about diversity that is not genuinely reflected in either the composition of the firm or the specific team actually working on my account.

    Can you give me some concrete examples of how you add value to your clients beyond legal work on a specific matter?

    The answer to this question can be very informative.  For instance, if a firm says it regularly sends out client alerts about recent rulings, as a general counsel, I would be unimpressed.  This is equivalent to “here’s what I am selling; do you want to buy it?”

    Compare this to the firm that says it is watching relevant issues for each client and alerting specific clients about those issues that might affect them.  This firm has promise.

    If a firm says (and shows) that it is actively looking for opportunities to identify and solve problems for its clients in order to build and reinforce each client relationship, I am really impressed.  And if a firm’s lawyers spend time at their clients’ locations understanding their clients’ operations without billing by the hour for that time — even better.

    [Author note: I acknowledge that this blog is my self-indulgent sharing of information I find interesting — the equivalent of a client alert against which I am preaching in this bullet.  Noted.  However, when coupled with my daily and concerted effort to send information and knowledge pieces to specific clients to whom I believe that information may be relevant, I am going to let it slide.  Also, you can unsubscribe.]

    There are some truly amazing firms out there with great, considered answers to all of these questions.  The value they provide you will likely be worth every dime you spend on them.  Please use this information to help you find those firms or, if you are at a law firm, to ensure that your firm is one such firm.

  • What You Can Learn About Video Content From the AmLaw Big Dogs

    What You Can Learn About Video Content From the AmLaw Big Dogs

    Law firm marketers are rapidly embracing video as an efficient medium for sharing legal knowledge with clients and prospects.  They also recognize video to be an effective tool for creating market visibility for their firms.  This was the clear message from a NYC Legal Week panel I attended entitled “Creating Competitive Differentiation: Where to Invest Content Marketing Time and Money.”

    Since I am obviously a believer in the written word, I assumed this panel was going to discuss how law firms invest in blogs, email blasts and newsletters.  I was dead wrong; still, I am so glad I attended because my eyes have been opened.

    The panel, loaded with communications professionals from AmLaw200 big dogs, had a common message: while it is important to create content that is valuable to clients, it is also important to make that content accessible.  Apparently, many people would prefer watching a three-minute video to reading through more text – especially if they are accessing the content after business hours from a mobile device.

    What Do We Put In a Video?

    At each of the panelists’ firms, the majority of the videos published contain quick examinations of hot legal topics by the firms’ attorneys.  Other videos contain previously published white paper content that has been condensed and translated to video to enable easy sharing and digesting.

    Arielle Lapiano, Director of Communications and PR for Paul Hastings, said that her firm frequently uses videos for client alerts.  In these videos, the firm focuses on answering just ONE question in order to keep the alerts short (less than three minutes) but valuable.

    Lapiano said that the firm has found this especially effective for ensuring immediacy of response to current news.  Per Lapiano, it can sometimes take weeks for a lawyer to draft a written work addressing some current happening, but that same lawyer can quickly assemble three minutes’ worth of relevant thoughts on the same subject.  Often this is just enough information for a client.  And, if the client needs further information relative to the alert, they can reach out directly to the lawyer from the video.

    Paul Hastings also gets more innovative with video content.  For example, this year, Paul Hastings is going to produce a video in lieu of an annual report.

    Shearman & Sterling’s use of video is extensive and extremely creative (for a law firm – this isn’t Pixar).  Like its peers, Shearman produces the standard client alerts; however, it has also launched some eclectic series.  One of these series, “Reflections,” features retired partners telling stories from their careers.  The videos are fascinating, short, and highlight the firm’s work in a way that doesn’t feel like marketing.

    Shearman has also created videos to highlight such things as LGBT inclusion and the 10th anniversary of the firm’s Women’s Initiative.

    True to its overall marketplace reputation, Seyfarth is a video innovator.  For a recent conference of in-house counsel, Seyfarth created this Level Up video and a corresponding video game for its information booth.  GCs were invited to come play the video game during breaks in the conference, and while the game communicated the desired marketing message, it also created a fun diversion.

    Brian Kiefer, Director of PR for Seyfarth, said they work hard to keep videos from being too lawyer-centric and dry.  To that end, they sometimes film outside of the office or do voice-over on animated client alert videos which illustrate the concepts being discussed by the narrators.  Shearman does a great job of illustrating this approach here.

    Weil uses videos extensively as well, including a recent series on Weil alum.  This video series does a great job of highlighting the quality of the people that have worked at Weil while perpetuating the firm’s relationships with those alumni. This is brilliant, because law firms like to refer to alumni that end up as in-house counsel as “clients.”

    Similarly, Paul Hastings uses video collaborations with clients to deepen and strengthen their client relationships.  The firm has also found this to be a great way to capitalize on the value of the combined knowledge of the client and the firm to the benefit of each party’s reputation.

    I have interviewed several other law firm CMOs subsequent to Legal Week and they are all in some stage of experimenting with video.  For example, Levenfeld Pearlstein has engaging videos incorporated in each of the attorney bios on its website.

    https://youtu.be/fdAzXE0p0uQ

    HOW DO WE DO IT?

    OK, “I’m sold,” you say.  “How do I do it?”

    It’s easy to start, even on a limited budget.  (The panelists agreed that video production does not have to be expensive.)

    Shearman’s Marketing Technology Manager, Harry Marks, described the evolution of his firm’s video capabilities as a journey during which he initially taught himself video editing and eventually lobbied the firm to build a small studio and invest in some reasonably priced but quality equipment.

    While Marks now enjoys the benefits of his firm’s investment, he maintains that you can take quality video with a smart phone.  He emphasizes, however, that purchasing inexpensive portable lighting will improve video quality and a lavalier will ensure good sound.  Per Marks, lighting and sound quality should be non-negotiable.

    Like Shearman, Paul Hastings has invested in video and lighting equipment but no studio has been built.  The firm’s editing is outsourced to freelancers – a great idea if (like me) you can’t fathom the idea of learning another software platform.

    Last question…

    HOW DO YOU MEASURE THE ROI OF VIDEO?

    How do these firms know their investments are paying off?  According to the panel, they start by tracking video engagement.  Youtube makes this easy as it tallies views for each video.  Also, to the extent your firm distributes the videos via email blast, most email distribution platforms allow you to track opens and link clicks.  Video is easy to share and track on social media platforms as well.  These metrics will give you a good idea of how well video is performing, especially as compared to legacy platforms like blogs and white papers.

    Things like client goodwill are harder to gauge but one very simple way of assessing value is by asking your clients if they find these videos helpful.  (More on that here.)

    And yes, I think video is in AnitaInsights’ future.  Stay tuned.

  • Pick Up the Dang Phone: The Sequel

    Pick Up the Dang Phone: The Sequel

    Answer the Dang Phone

    To be licensed to practice law in the United States, an attorney must pass two exams: the Bar and the Multistate Professional Responsibility Exam, i.e. the Ethics Bar.  Compared to the actual Bar exam, the Ethics Bar is a walk in the park.  As my Ethics professor said “you only have to remember two things: (1) don’t commingle funds and (2) call your clients back.”  Why?  Because almost every legal malpractice case (and probably most client defections) stems from misappropriation of funds or failure to communicate.

    As a result of this early brainwashing, to this day, I am what some might consider neurotic about answering the phone and/or returning voicemails.  Please understand that because my job necessitates a ton of phone conversations, I rarely get excited when my phone rings.  My kids and hubs know this and therefore communicate by text only during the work day.  However, unless I am in the middle of a meeting or a focused project, when my phone rings, I answer it.  If I can’t answer the phone, I check my voicemail at my first opportunity and return all calls at that time.

    It’s important.  It means something.  Here’s how I know that to be true.

    JC Blakely

    When I call my client, JC Blakely, he either answers right away or calls me back within a few hours.  Blakely knows I am usually calling because I need information or direction from him which in turn means answering is going to require work on his part.  However, he values my time and efforts and wants to help me do a good job for him.  When someone’s actions clearly reflect that they value your time, you will knock yourself out to ensure that their efforts are rewarded.  And you better believe I answer Blakely’s calls to me as quickly as I can.

    My work also requires that I do a lot of research and interviews, often reaching out to experts who have no idea who I am.  Last year, I was looking for a legal C Suite recruiter to obtain an expert opinion about the growth of C suite positions in law firms.  I called a recruiter I had met at the Law Firm COO/CFO Forum to seek her input.  She never returned my voicemail.

    Amanda K. Brady

    On a lark, I reached out to The Expert — Amanda K. Brady, Global Practice Leader of Major Lindsey & Africa’s Law Firm Management recruiting practice.  Not only did Brady answer her phone when I called, she graciously scheduled a time to speak with me extensively.  Fast forward a few months and she agreed to write the foreword for my C Suite report and share it with her network.  I am now a raving fan and will recommend Brady and her firm to anyone looking for recruiting services because I know how responsive and knowledgeable she is.

    Mark Hanson

    For that same C Suite report, I polled every AmLaw200 firm about the constitution of its C Suite.  This was exhausting work and my calls were often left unreturned.  That said, Mark Hanson, Executive Director of Irell & Manella, answered both my voicemail and my questions.  Hanson has since become a dear friend who humors my frequent calls to bounce legal industry questions and ideas off of him.  (Maybe he regrets initially taking my call but that ship has sailed, Mark.)

    The Lesson

    Here’s the moral of my story: if Hanson (and Brady and Blakely) respond to their voicemails and treat me well when I call knowing that I may be able to offer them nothing of immediate value, I can only imagine how responsive they are to their internal and external clients.

    Clients know that we pay attention to the things that are priorities to us.  How you respond (or don’t) to a phone call sends a message.

    Is It Really That Hard?

    If your client leaves you a voicemail requesting an update on a matter and you don’t have one, call them back quickly and tell them exactly that.  I promise you they would rather know that you have no update than wonder if you even remember who they are.  I can also promise you that they will find another attorney for their next matter who will return their call.

    If you can’t return a call right away, write it down so you do not forget.  Then schedule a time every damn day to return phone calls.  Maybe even take a chance returning a phone call from a person you don’t know.  Chalk it up to your daily random act of kindness.  You may reap unanticipated benefits.  Regardless, you will establish a reputation as a responsive and considerate professional.

  • How to Review a Lease

    How to Review a Lease

    In 21 years of tenant rep brokerage, I have had the privilege of working with some exceedingly smart real estate lawyers reviewing leases.  [Tom Aggen, Linda Warren, Vytas Petrulis, to name a few.]  I have learned so much from them and think it only fair that I in turn share that knowledge with you.  So, bookmark this page and pull it up next time you need to review and redline an office lease.  Hopefully, it will save you some time.

    Entities and Definitions

    When I receive a draft lease from a landlord, I start at the beginning, checking to ensure that the entity names are correct.  This blog post goes into depth about why it’s important that the landlord entity matches the tax records for the building and how to make sure that is the case.

    Next, in leases, the drafters will frequently define terms that will be used repeatedly within the document. Those terms will be capitalized.  Make sure that there are no “defined terms” that are left undefined.  You can do this quickly by comparing to a “definitions” page in the document or by searching the defined terms to find the corresponding definitions.  If one does not appear, note it in your comments so that the drafting attorney can address.

    Business Terms

    Have the letter of intent or most recent proposal reflecting the terms to which the parties agreed handy while reviewing the lease.  Check that each of the business terms, i.e. term length, rental rate (including any monthly or annual rent payment calculations), space size and location, rent escalations and operating expense base year, is thoroughly addressed and comports with the negotiated agreement.

    Commencement Date

    This subject is a whole blog post unto itself and, unfortunately, not one that I have yet written.  Suffice it to say that you must verify that the commencement date occurs when you bargained for it, whether that be a date certain or upon completion of improvements.  Also ascertain who bears the risk for failure to deliver by the commencement date.  You do not want your company or your client paying rent for space they are not using.  Now is the time to make certain that does not happen.

    Operating Expenses

    In initial lease drafts, some landlords try to include every possible expense in the definition of Operating Expenses that may be passed through to tenants.  Click here to download my “go to” list of operating expense exclusions that I add to every landlord-generated lease I review.

    Insurance Language

    Insurance lease language can be full of landmines.  This will help you avoid them.

    Assignment and Sublease

    All leases address the rights (or absence thereof) of the tenant to assign or sublease the leased space.  This post details the five must-have lease terms relative to assignment and sublease.

    Build Out

    If your lease anticipates any kind of construction in the premises prior to occupancy, it will include, at a minimum, a workletter detailing the parties’ respective obligations for construction of the space.  Start by asking the person who will be responsible for overseeing the buildout on the tenant’s behalf to review it.

    This blog post discusses all of the lease exhibits that should be included along with the workletter to ensure a smooth build out process.   Also, make sure these five interior finishes are addressed to guarantee a Class A appearance.  If you happen to be moving into a newly constructed building, this is a must read.

    Expansion Rights and Rights of First Refusal

    Always secure renewal rights and document them in the lease.  This post explains why.  In light of the new FASB regulations, read this to understand whether you want those renewal options to be at below-market rental rates.  Also, if your renewal term creates a total lease term in excess of 20 years and your lease is in Alabama, you must read this.

    If your new lease includes a right of first refusal, make sure your lease addresses these 5 things.

    Signage

    If you negotiated signage, make sure the lease addresses these issues.

    Almost Done

    When you finish the steps above and a thorough read-through of the lease, make sure that these No Go Lease Terms are not included in the draft lease.  If they are, delete them.  Read the blog post so that you understand why you need to do so and can convey that position to the landlord’s attorney.

    Lastly, while I am an attorney, I am licensed under the California Bar and currently inactive and therefore cannot give legal advice and do not have malpractice insurance.  Consequently, in a perfect world, you will go through the process I detail above and then send your redline to your actual lawyer who will then love you forever and sing your praises because you have saved him/her so much time.

  • How to Avoid the Nightmare of a Missed Notice Date

    How to Avoid the Nightmare of a Missed Notice Date

    When I was in college and grad school, I waited tables to pay my tuition bills.  At that time, my nightmares were either about tests for which I was not prepared or endless tables of customers waiting inordinately long for their food.

    Fast forward to the present.  As a tenant broker, my work-related nightmares are about missing my clients’ lease renewal or termination notice dates.  It can be truly catastrophic for a tenant to miss a notice date and risk forgoing an option to renew or terminate a lease. And, landlords are not likely to let the lapse slide and honor the late notice — especially where tenant-favorable option language is concerned.

    An example

    You lease 10,000 square feet in an office building in Austin, Texas.  You have the right to renew for five years at a 3% increase over your then-current rental rate.  Because you originally leased your space before the market skyrocketed, your rental rate is currently $10 per square foot below market and this option will enable you to enjoy that below market rate for five more years.  If your lease says that you must give landlord 270 days prior notice to exercise this option and you don’t realize until too late that 270 days does not equal nine months, you just missed the notice deadline.  If you then end up with a market renewal rate, you just cost your company $500,000.  Ouch.

    How do you ensure you never miss a date, whether you are the tenant or the broker representing the tenant?

    My solution has been to abstract every lease into a lease administration database licensed by my company.   I then set ticklers to alert me in advance of approaching notice dates.

    Some larger companies already have their leases in lease admin systems, however, I find this is the exception rather than the rule.  Further, often the broker does not have access to the system.  I will happily duplicate the client’s system in order to sleep well at night knowing that I am not going to miss a date.

    How does this work?

    After a lease is fully executed, I make sure it is abstracted into our database.  As part of that process, I set reminder ticklers to give me sufficient advance notice so that I have can notify my client of the approaching deadline and help them figure out how they wish to address it.

    If my client leases 100,000 square feet and they have a right to renew for five years with twelve months’ notice, I am going to set my tickler for at least 18 months prior to the notice date to ensure the client has time to evaluate renewal versus relocation scenarios prior to giving notice.  For smaller spaces and/or shorter terms, ticklers are set closer to the notice dates.

    What do I do when I receive a tickler notice?

    On a renewal, I will look at:

    • My client’s density in the location: Do they have enough space? Too much?
    • My client’s rental rate vis a vis market
    • The availability of relocation options in the market

    I will synthesize the information above into a memo to my client so that they can evaluate their current situation and begin to formulate a strategy with regard to the renewal.  If my client is not yet ready to make a decision, I will reset the tickler for a month or two later so that I am not in danger of forgetting the notice date.  I keep resetting the tickler until my client has exercised or waived whatever right is concerned.

    There are other benefits to having access to my own lease admin files.  I can answer any client questions regarding previously negotiated leases very quickly and accurately.  I can facilitate speedy review of any estoppel forms received by my clients and also monitor their leases for renegotiation opportunities.  For these reasons, my clients readily agree to let me abstract their leases.  And, because this is an application to which only the broker working on the deal has access, there are no privacy concerns as to other brokers or clients.

    If my approach has piqued your interest, I am happy to recommend lease admin programs or discuss my process.  You can contact me here.

  • The Best Lease Rights of First Refusal Address These 5 Things

    The Best Lease Rights of First Refusal Address These 5 Things

    In leasing, when a landlord agrees to give a tenant a right of first refusal (“ROFR”), the landlord is committing that when the landlord receives a proposal from a third party for available space that is subject to the ROFR, the landlord will offer that space to the tenant at the terms offered to third party.  The tenant has the right to accept the offer and lease the space or refuse the offer, at which time the landlord may proceed to lease the space to the third party.

    This sounds simple but in application, it is anything but.  To ensure that there is no confusion after the landlord gives the tenant the right of first refusal option, the following five things should be considered and documented in the lease.

    #1 Term Length

    Landlord and tenant must determine whether tenant may exercise the ROFR at the terms offered by the third party but for a term that is co-terminus with the tenant’s current lease, or whether the ROFR must be exercised for the term length agreed to by the third party.  This can be critical to both parties.  For instance, if the tenant has only two years left on its lease but needs additional space, may the tenant exercise its right on the space for only a two-year term when the third party was prepared to commit to a longer term?

    Or, if the landlord requires that the tenant exercise the right for the same length of term agreed to by the third party, is there a mechanism in the ROFR by which the tenant can extend its existing lease term to be co-terminus with the ROFR space?

    When I represent the tenant, my approach depends on the length and size of the tenant’s initial commitment.  If my tenant is leasing 100,000 square feet of space for a ten-year term and has a ROFR on the balance of a partial floor it occupies, I will push hard to ensure that the tenant has ROFR rights reflective of its importance to the landlord, i.e. extremely favorable.  If my tenant leases 5,000 square feet on a five-year term, I will push to ensure that the tenant has the right to extend its lease to be co-terminus with any expansion space it leases by virtue of a ROFR.

    #2 Applicable Space

    The parties must determine and document which space is subject to the ROFR.  For instance, if tenant has the ROFR on contiguous space and there are 10,000 square feet of vacant space adjacent to tenant, does the tenant have to exercise the ROFR as to the entirety of the space the third party desires to lease?  Or may the tenant exercise the ROFR as to a portion of the space in the third party offer?  Again, this negotiation is influenced heavily the tenant’s relative size and term commitment to the building.

    #3 Continuing or One Time Right

    Is the ROFR ongoing for the entire term of the tenant’s lease, or is it a one-time right?  Consider the situation where the tenant commits to a ten-year term and has a ROFR on contiguous space that happens to be vacant at the time the tenant signs its lease.  If the landlord receives a third party offer one year into the tenant’s term and the tenant does not yet need the space, will tenant’s ROFR endure through the third party’s five-year term such that should the same space become available in five years, the ROFR will reattach?

    Similarly, if the tenant has the ROFR to all space on the same floor as tenant’s premises, if tenant turns down one space, that space is leased to a third party, and another space on the floor becomes available, does the tenant have the ROFR on the second space to become available?

    Another thing to consider in this area is whether the landlord must present the ROFR to tenant again if the terms of the third party offer improve in the tenant’s favor after the tenant turns down the ROFR.  I like to negotiate language stating that if the third party negotiates a deal which is “materially better” than that presented to my tenant originally, the improved deal must then be presented to my tenant.  I will then negotiate the definition of “materially better” but usually I am content with “the effective net rent is >5% lower than the offer initially presented to tenant.”

    #4 ROFR Notice Response Time

    This is key to both the tenant and the landlord.  From the landlord’s perspective, time kills all deals.  If the landlord has to wait fifteen business days after offering the space to tenant on the third party’s terms, there is a very high risk that the third party will get spooked and look elsewhere.  On the other hand, if a tenant is getting close to needing expansion space but is not aware that some may be coming available, the tenant may need some time to evaluate the offer and secure internal approvals to move forward.  The tenant is going to want as much time as possible to evaluate and respond to the ROFR.

    #5 ROFR Space Start Date and Condition

    The landlord and tenant should agree as to whether the third party’s offer terms will govern the commencement date for the ROFR space and the allowance offered by the landlord to build it out, or whether the ROFR language in the lease between landlord and tenant will define these terms.  Allowance needs to be similarly considered as it is largely dependent on the term question addressed in paragraph one above.

    Addressing these five points takes time and effort, however, your client – landlord or tenant – will be immensely grateful to you later when the ROFR process is efficient and conflict-free.  At the end of the day, the negotiated language has to work for both parties based on the needs/leverage each has at the time the right is negotiated.