FisherBroyles, a virtual law business, has become real
- (Reuters) - January may be cold and gray, but as a long-time legal business reporter/geek, I look forward to it every year. Thats because its when we begin discovering how law firms behaved financially the year before.
FisherBroyles gave me an exclusive look at its 2021 numbers, and I can see why the 283-lawyer virtual or distributed company is eager to share the news. Revenue is up 30% to $136 million, compared to $105 million in 2020.
According to Kent Zimmermann, a "surprisingly large" group of Am Law 200 law firms had revenues and profits over 20% higher than the previous year, with some up 25% or more. FisherBroyles is "in good company."
FisherBroyles isnt like other companies, however.
According to Michael Pierson, the company's managing partner, a stripped-down overhead program allows it to operate on 18% to 20% of gross revenues.
The traditional law firm model utilises the rule of thirds allocating one-third of fee revenue to overhead, one-third to salary, and one-third to profits that the firm considers appropriate.
Profits per partner are a ill-suited tool to assess FisherBroyles' performance. All the lawyers are partners, and there are no billable hour requirements. You eat what you kill, whether its a mastodon or a mouse, and no one expects you to share.
The result is a huge increase in compensation.
According to Pierson, the firm's highest-paid partner earned $6,742,540.
Which is better, but what is better? Final number-crunching in 2021 isnt complete, but for reference, in 2020 the lowest-paid partner made roughly 1,000 times less. If the ratio holds this year, that would be $6,700 (although 2020's bottom earner is no longer with the firm).
This staggering pay gap is in part what makes the firm's model so intriguing to me. Lawyers with tons of business who want to work like crazy can feast on big game.
But what about those with less appetites who are happy to work less and spend more time on their children's care and snowboarding than those who organize their stamp collection?
Kevin Broyles, the co-founder of the company, said: We arent measuring performance in the amount of hours you pay each year, but how much money you make from the hours you do pay.
FisherBroyles' business has evolved in many ways as a result of the pandemic.
As most Big Law companies switched to remote work, lawyers across the profession realized that there's nothing "scary about working from home," said James Fisher, the cofounder and managing partner.
Lisa Smith, a legal consultant at Fairfax Associates, said she thinks the pandemic will accelerate the trend of distributed firms.
The fact that the virtual model has worked well for lawyers and traditional law firms will certainly increase the interest from lawyers in joining a distributed model or beginning their own, she said. There will also be less concern about client skepticism about the viability of a virtual model since they have seen the ability of companies to adapt to the model.
A key feature at the company is that it does not redistribute profits to other partners.
Depending on the companys needs, it can cover expenses such as insurance, accounting, conflict checks, software, cybersecurity, and marketing. "The general rule is that if it profites the entire company, it's a firm expense," Pierson said.
Partnerships dont subsidize expenses of other partners, however a lawyer or a group of lawyers seeks something that will benefit them solely office space, for example, or an administrative assistant they are paying the bills.
Pierson stresses that FisherBroyles is not "social practitioners under one umbrella."
The firm provides its partners a network of friends within the firm to help them with large cases and projects. The referring lawyer receives a 32% reduction in exchange for generating the business.
Dan McGuire, who previously served as shareholder of Polsinelli, Doug Banghart, a former partner at Jones Day, and Jan Joosten from Neogene Therapeutics, where he served as general counsel.
This year, partners are able to organize regular Zoom meetings and gather each spring for a firm-wide retreat.
Lawyers are able to pay their own billing rates (though theres a minimum floor, which the firm declined to specify) and are able to take cases on contingency or alternative fee structures. Pierson claims that hourly rates are often two-thirds what a traditional law firm would charge.
In 2021, notable engagements include representing Ericsson against Samsung Electronics Co in multiple lawsuits in the International Trade Commission and PFSweb Inc., which had a $250 million carve-out sale of its LiveArea business division to Merkle Inc.
Fisher said, "As working from home continues to be accepted in the marketplace, we expect more and more growth."
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