TRP 342: [Legal] What Would Private Equity Do? With Brad Blickstein

[00:00:10] You're listening to The Rainmaking Podcast, hosted by legal dealmaker, author and professional speaker, Scott Love.

[00:00:25] You're listening to The Rainmaking Podcast, and my name is Scott Love. Thank you for joining me again, friends. Today is part of our Sometimes Tuesdays legal specific series of shows. On Thursdays, it's general business development. Anybody in professional services can benefit from our Thursdays show, even though we might have legal experts talking on Thursday.

[00:00:44] But on today's topic, it's legal specific. If you're in the legal industry, if you're a managing partner, if you're a practice group leader, if you're a leader in a law firm, a high level executive in a law firm, this is an episode you don't want to miss. The topic title for today is What Would Private Equity Do? And our guest expert is Brad Blickstein. Now, when we talk about private equity, I'm not talking about private equity in the MSO context. I'm doing deals like that. That's not what we're talking about today.

[00:01:13] We're talking about the title of Brad Blickstein's book, What Would Private Equity Do? Unlocking Value in the Law Firm You Already Own. I've read this book. We're going to dig into it here. And we've actually put a link where you can order Brad's book as well as all of his contact information in the show notes. But this is an innovative approach to looking at how to optimize your law firm and all the different aspects of running an organization like that.

[00:01:38] Let me tell you a little bit about Brad. I've seen him speak before. He's fantastic. He is a legal industry futurist. He's developed a national reputation for his insight into the changing ways that legal services are being consumed and delivered in the modern marketplace. As a founder and principal of the Blickstein Group, Brad focuses on helping legal service providers better understand and serve their clients while providing information about law departments and legal operations.

[00:02:05] He also helps his clients see the future, educating them on the industry's evolution of legal services and their consumption and helps position them for success by developing novel products, systems, and solutions which make the delivery of legal services more modern and efficient. I know you're going to get some innovative ideas today from my conversation with Brad. Brad, thank you for being on the show. We'll get to our conversation shortly. Before we go there, I want to mention our sponsors.

[00:02:31] I'm truly grateful for my alliance with SurePoint, especially SurePoint Legal Insights since we started this show. Leopard Solutions, they sold to SurePoint. They were one of our anchor sponsors, and I appreciate that journey along with them. And here they are today, still sponsoring this podcast where they turn legal intelligence into opportunity. Also, we're almost at the one-year mark when we launched The Rainmaking Magazine. Now it's entirely complimentary.

[00:02:57] It's for the intellectually-driven and results-focused professional who wants to be the number one provider of professional services in your niche. Start your free subscription today. Visit therainmakingmagazine.com to set up your free access and chart your course to create a rainmaking success. Thanks for listening. Thanks for coming along with me on this journey, everybody. I really appreciate your support for the show. And now here's my conversation with Brad Blickstein. Thanks for listening.

[00:03:26] Hey, this is Scott Love with The Rainmaking Podcast. Our special guest today is Brad Blickstein. He's the author of the book, What Would Private Equity Do? And the topic of our title today is, What Would Private Equity Do? Brad, thank you for joining me on the show. Thanks, Scott. I'm excited to be here. Yeah, me too. I've read your book. I like it. It's innovative. It actually is helpful to those in the legal industry. So tell us, how did you get the idea for the book and what's the general thesis or premise of the book?

[00:03:52] You know, there's so much talk about private equity investment into law firms at the MSO model or the ABS model in Arizona and arguably Utah. But I don't think – and I've done some presentations on these. And a lot of times what I got back is we would never do that. And, like, we would never take outside money. It's not a good idea. All the – in some cases, really valid reasons to not take outside funding.

[00:04:15] But then it occurred to me that, you know, the thesis of the private equity firms is that they can unlock value in the law firms that they're buying. And it occurred to me that you don't need the PE fund to do that. Like, if you start to think about the things that a PE fund would encourage their firms to do once they invested, which is a pretty relatively standard list. I mean, it's not that – they've done it before in other professional services.

[00:04:41] There's really no reason that law firms couldn't do those same things or pick which ones make sense for those and scale their firms and grow their firms without the outside investment. So which really – it's – so we went out to answer the really very simple question, literally, what would private equity do? What would private equity do to unlock value in your firm if they invested in it? So if there's a law firm founder listening that says, no way, I'm never going to leave, you're going to have to pull the phone out of my cold, bony fingers when I die.

[00:05:10] And I don't want to have a succession plan or an exit strategy, but I want to grow and get better. I want to help my firm. Your book is for that person too, right? That's actually mostly who it's for. Got it. Good. Thank you. Well, let me do this. I want to read through the chapter titles just so people understand what's in this book. You have chapter one, the introduction, what would private equity do? Subsequent chapters. Running the firm like a business. Operating efficiency and process discipline. The value behind the billings. Pricing as a strategic weapon.

[00:05:39] Beyond artisan lawyering, choosing what scales. Technology as an operating lever. Business development as a system. Talent and incentives. Overcoming portable talent. Culture, the firm's operating system. Accountability, turning strategy into execution. M&A and inorganic growth. And then finally, exit readiness without exiting. That's innovative. I don't think anybody's ever read or written a book like this. You've definitely cornered the market on that. Where do you think we should dig in and talking about your book, Brad?

[00:06:09] Well, you know, there's a couple of really important concepts that I think I want to mention right off the bat. One is, I think for most firms, actually, the lowest hanging fruit is in pricing. Too often pricing decisions. And I'm not really talking about alternative fee arrangements or how things may have to change in the world of AI. I'm really just talking about even in the typical hourly model. Too many decisions are made by instinct.

[00:06:34] Too many decisions are made by, like, I'm the partner and I really don't feel comfortable asking for a rate increase right now. Or the client asked for a discount and I feel like we should do it because they're a good client without really doing the work to figure out if there's room to move there, right? So it's easy to imagine a good – and by the way, and if you can retain higher prices or raise prices, that money goes straight to your bottom line. So I think that professionalizing pricing is low-hanging fruit for a lot of folks.

[00:07:03] But since we're on the Rainmaking podcast, I think we should probably focus our time on business development, which is Chapter 8 of the book and another place where some professionalization would be helpful. And a place where if a private equity firm with their playbooks got in there, they would say, wait a minute. There's all kinds of things that professional services that we invest in can do that you're not doing that would help. Yeah, that's good concepts there, Brad. So let's dig into business development then.

[00:07:30] One of the things you mentioned, a couple of things I want to dig into, you talk about from rainmaking to repeatability. What does that mean exactly? At most firms, even at big law firms, business development is largely the domain of the partners that do business development, which means that it ends up being episodic and it ends up being in the hands of a few – it's weird to use the term entrepreneurs around lawyers because they seem non-entrepreneurial, but it's an entrepreneurial business, right?

[00:07:59] Like they build their own practice areas the way that they build their own practice areas. Marketing folks tend to be more about the brand and some eminence rather than actually feeding a pipeline. Anything you might call a sales function at law firms largely really doesn't exist. I mean, it doesn't exist in a way that other businesses would do. Again, I'm overgeneralizing a bit, but for the most part.

[00:08:23] So, you know, if you're trying to grow or scale your business, there are tried and true business development techniques to do that, most of which are ignored by law firm partners who largely do business development when the next event they want to go to comes around, or when they feel like they don't have enough hours to fill for their team coming up in the near future and they better do something and get some business in here.

[00:08:50] And that's not systemic. And while I wouldn't say it's not sustainable because law firms are doing fine, they can do a whole lot better if they built the right process. So do you think business development is actually a system in the firm, Brad? Again, I'm going to overgeneralize because I'm going to say the answer is no. But someone's going to say, no, no, it totally is at our firm. We do this, this, and this. And it may very well be at your firm. But speaking across the board, I wouldn't say so. I mean, it's not.

[00:09:18] How do you think law firms can change that? How would they look at private equity examples in changing their business development as building it into a more of a systematic process? Well, for one thing, just think about the funnel or the continuum, right? Like what's, you know, what are the prospects that we have that are, and well, they're law firms. Who are the prospective clients that we have that are at the top of our funnel that we should be talking to occasionally? How should we be nurturing them to move through the funnel?

[00:09:48] What materials should we send them? What do we need to show them to get them to become more interested in doing business with us? How can we identify what their problems are that can move them along? Who should be in charge of that and making those calls? How can we, calls and other efforts, how can we make sure that it happens on a regular basis, or a regular basis if you're going to do proper research and find out who to talk to when, as opposed to, I know I needed to make those calls sometime this week, and now it's noon on a Friday and I better get on it.

[00:10:16] You know, what are, how can you build a process that is going to, and I'm not, I'm really talking about what the dirty word of sales in law firms right now. I'm not even getting into really marketing yet, but you know what, you know, if you were a private equity firm, if you're a private equity owner, every quarter, every month, you talk to the VP of sales at your portfolio companies. You say, what does the pipeline look like? And if you said that to a, if you found a head of biz dev at a law firm,

[00:10:44] first of all, you're probably not going to find a head of biz dev really at a law firm. And if you say, what does the pipeline look like for all your rainmaking partners at the firm, you're going to, you're, you're going to get either a blank stare or a business development guy who's going to quit. But there's a reason that private equity firms hold their portfolio companies accountable on that issue. And it's because it drives revenue. Yeah, that's right. And now you mentioned in your book that eminence marketing is not the same as pipeline management. There's that word pipeline management again. What does that mean exactly?

[00:11:12] So at most firms, most firms market with their marketing strategy is, is what I would call eminence marketing. On a firm wide level, they want the brand to be strong. They want to promote trust. They want people to understand how big their firm is, how great their firm is. They spend a lot of time on chambers. They spend a lot of time on making sure that they're in the right spot. They want to be in the AMLA 100 and the AMLA 200 at bigger firms. And on more of a partner level, they support the partners and the other lawyers by,

[00:11:42] hey, you know, our guy finished sixth at Harvard Law School, or our guy used to work in the, at the FDIC. Our guy used to work in the government. So he's the person you need for this type of regulatory issue. Or look at all the great work that she has done. So she's the, here's the articles that she's written. She's the right person, which is great. Like that, and that's necessary. But a private equity fund would not really consider that full blown marketing. Right. I mean, that's, that's, that's one thing.

[00:12:10] But when we're talking about identifying prospects, when we're figuring out, when we're talking about figuring out who to call, when we're figuring out who works with our competitors that might benefit from working from us, when it comes to, hey, we've developed this new line of business at our firm, or this new, now that we're sort of in this AI world, this new subscription model, or this new offering, you know, how do we, how do we get that in front of prospects? How do we move those folks through the pipeline from, you know,

[00:12:38] what I would call a suspect, you know, someone we suspect maybe could do business with us through becoming a prospect and through finding an opportunity to work with them and eventually getting them to, to do business with you. And it's a whole lot more than just eminence marketing, a whole lot more than just showing that your firm is good. It's really, there's a real process there towards moving prospects along. And I can see that in the private equity world. That's absolutely what they do. Everything's systematic. They've got a process, they've got accountability. And you're bringing things in here that I think are going to,

[00:13:08] I don't want to say ruffle feathers, but let's just say it will spark innovation in organizations that definitely need to innovate in this area. One other wee bit of heresy I'm going to introduce is a quote that you mentioned. Clients are firm assets, not partner owned. Oh boy, I think we just lost half of our listeners. Maybe hang on everybody. Let's hear and see what Brad says about that. What do you mean by that exactly? That's something that is truly different than what you see in most law firms.

[00:13:36] It's, this is really tough. And for those partners that maybe have their fingers hovering near the end button right now, your concern is valid, right? Like that's, that's not how things in a functional way. That's not necessarily how things are right. Um, but if you want to be able to grow effectively, if you want to be able to cross sell effectively, if you ever want to retire, um, really you have to find ways to, to break that bond to some extent, or to really a better way to put it is probably to, um,

[00:14:06] is probably to expand that bond and give folks in your firm more visibility and more access to the, to your clients. It's hard. And, you know, not only is, geez, origination credit and compensation wrapped up in who brings that deal in, but there's, there's ego, there's friendship. There's the sort of a Superman complex. Like, you know, I can always jump in and save this deal if I ever need to. I mean, those are, and I don't really mean to make fun of that at all. Like those are valid things, right?

[00:14:33] But firms grow in different ways and there's all kinds of other opportunities with your clients, with those companies. And, and you can do more when your time is spent only on the business development opportunities where you, the rainmaking partner need to be involved, but other people manage the rest of the process to the, to the extent possible, because it frees you up to do more. It's sort of the same thing as, you know, why do you have associates doing associate level work for the clients?

[00:15:01] It's because it doesn't make sense for you to do associate level work. It's the same thing from a business development standpoint. I know it's heresy. I know it's hard. I know it's dangerous because if you want to, and Scott, you're in this, right? Like if you want to move from your firm to a different firm and you don't have your fist around the clients that are going to come with you, it makes it harder to do that. So I know what I'm saying. I know, I know what I'm saying is difficult. But if you, if you want the firm to grow to a place where it's not all reliant on just a couple of people, you have to, you have to let go and you have to submit

[00:15:31] to some level of process. And I've seen firms that have gotten in trouble because they just didn't have that sort of model. And then you have partners about ready to retire and there's no succession planning. They've never developed the relationship. They've never incentivized people to share it. And they're approaching the realm of it's just too late. So that's, that's too bad. And this is something that firms, oh, go ahead, go ahead, Brad. And I'll add, and you said the word incentivize. That's really a big part of the problem, right? A big part of the issue.

[00:15:58] If I'm compensated largely on origination credit, and if I cross sell to use the term that firms like to use, if I invite another partner from another group into sell to my client and they get that origination credit, or if I bring a senior associate in and I, and I put my credit at risk and there's nothing in it for me to do this, then why would I do this? And you see it a lot on the firms that have things like captive ALSPs or e-discovery functions or other functions within the firm that sort of sell differently.

[00:16:28] And, you know, I've talked to litigators and they're like, why would I suggest our own e-discovery operation for this work? I don't get any money for doing that. May at bonus, like bonus time, I get nothing. The managing partner maybe gives me an attaboy. And, and frankly, if the project goes sideways, I look like a fool. So the risk reward is out of whack. So it's not really unilateral, really, I'm not really suggesting that partners out of the goodness of their heart decide to change the way they do business for the benefit of the firm.

[00:16:58] Really what I'm suggesting is that the firm makes it worth their while for partners to think more systemically. That's a very good point. And it's a useful perspective also, Brad. This will be my last question related to business development that I wanted to kind of take it into more, a more larger overview of your perspective. But let's talk about the word sales. It's a word that's hypercharged in any industry. Nobody wants to be seen as a salesperson. I didn't go to law school to become a salesperson. And they tell me I had to get work. In fact, it used to be illegal.

[00:17:25] But I remember reading, doing some research back, I think it was in 1998. And the American Lawyer, there was one of the main publications did a survey. And the majority of the partners at that time said the profession of law is going down because people think it has to be more business development. I think that's changed. I think there are firms that have gotten on board with this. Now you start to see not just chief marketing officers, but chief business development officers.

[00:17:51] You have trade associations such as the Legal Sales and Service Organization, which is the group for business development professionals and legal. So you say that sales is a capability, not a dirty word. How would you advise a firm to change the way they think about that, Brad? Yeah, that's a great question. And it's hard. All of this is hard, right? I would say that in a lot of ways, that ship has sailed.

[00:18:19] And I don't really want to lay blame on anybody. But when firms decided, 20 years ago, 30 years ago, when the firms decided that they were going to extract as much revenue as they could from their clients, and I'm talking about everything from, I hate to use the word padding hours, but making decisions that they knew would increase the amount of hours, maybe. Even if they're maybe starting to uncover, look for some risks that they didn't really believe were there because they wanted to overpaper a deal, partially because they knew

[00:18:49] that there was money in it for them to do it, all the way down to billing for photocopies and things like that. Really, the barn door was opened on legal becoming a business. And the clients reacted, by the way. The clients started to push back on that. And they absolutely view it as a business. They're buying legal services. That's what they're doing. So I think you got to lean into that a little bit.

[00:19:15] And I think just years and years ago when I had a sales job, I got some advice. And I think it's a valuable little north star here, which is this. Do you believe in our product? And I said, yes, I do believe in our product. And then my boss said, when you're trying to sell our product to somebody, do you truly believe that would help that person if they bought our product? And I said, well, most of the time. And he said, well, the rest of the time, don't do it. Like, don't say don't do it if you don't believe that.

[00:19:41] But all the times when you see that they're going to benefit by using our product, you're not selling to them. You're doing them a favor. You know, they will benefit by doing business with you. And if you don't believe that, you should probably find another firm or another line of work. But if you do believe that, then don't be so afraid of trying to, I'm going to say convince people, but I don't even mean convince people. It's really don't be so afraid of finding the people who would benefit from working. You're helping out. That's great. I think that's the perspective that people need to have.

[00:20:10] They're serving their clients by obtaining business from them. So let me ask you this then, Brad, kind of a more general perspective. You are a futurist in the legal industry. Do you think that it is likely then that law firms will actually make changes, even if they don't have a goal to sell or have an exit or an equity event or anything like that? Do you think it's likely that firms can actually make these changes that you're talking about? I think, first of all, I think some firms will make some of these changes. We're already seeing some trends in this direction.

[00:20:39] You mentioned that there's, you know, chief business development officers that there weren't a few years ago. I still think they're largely under-empowered, but it's maybe not as big a step to empower them as it was to hire them in the first place. Or maybe it is. I don't know, but at least you took one step. So I think some of these changes can be made. I don't think you have to do all of these things. But I also start, I've also been thinking a lot about other types of firms that are, you know, spinoffs.

[00:21:07] You know, we hear the term AI native law firms a lot. I don't know if I buy into that so much. But, you know, there are firms that can do a level of work that bigger firms used to be requiring. You need a bigger firm in order to do that. I mean, you know, we're seeing, you know, 10 good lawyers spin off from a big deal firm and form their own firm with no, or in some cases, Pearson Ferdinand, for example, hundreds and no associates necessarily, or a few associates. They're using tools.

[00:21:35] They're, you know, using new business development models. Maybe they're taking outside funds from a private equity fund. Maybe they're not. As those firms become more competitive, I think we're going to start seeing some traditional firms have to make some changes in response. And by the way, I think that they're going to start to understand that there's so much opportunity in doing some, you know, they're doing so. I mean, they're making the, under traditional model, they're making X and getting home at 10 o'clock every night.

[00:22:02] Maybe with some of this thinking, they could be making 1.5 X and getting home at six. Those are aspirational goals. Absolutely. And Brad, tell us this then, if you were going to advise someone, here's three steps you can take to get started implementing those ideas. What would be those three steps, Brad? What would you suggest? The first one, the self-serving one is buy the book. Buy the book. You can grab it on Amazon or on my website. It's 2795. Read the book.

[00:22:31] Two, you know, there's a lot of ideas in here. You don't have to do them all. I mean, if we talked today a lot about business development, but if professionalizing business development doesn't seem like the right thing for your firm or doesn't seem like the right priority for your firm, start thinking about how to improve your tech stack or fix pricing or empower your associates to work better or to think a little less artisanally and more, you know, build new processes around getting the work done.

[00:22:59] Like there's all kinds of ways to scale here and no one could do them all at once anyway. So pick your spots. And the third one is once you pick something, work hard to build not only the process and then the strategy. You know, I'm a big fan of the old objectives, strategies, tactics, planning method, right? So just start with your objectives. Just think about what you're trying to do and go from there and communicate well with your folks about what you're trying to do.

[00:23:29] And, you know, have the fortitude to stick it out a little bit if you can, despite, you know, the slings and arrows that might be coming your way from your partners and associates. Well, thank you all for all that, Brad. We're going to put all of your information, including the link to order your book in the show notes. Everybody listening, you can just go there and be able to get Brad's book today. And tell us about your offerings, your services. What would you like our listeners to know about what you do, Brad, and how you can help them? Yeah. So we are a, we are a, Blickstein Group is a research and advisory firm.

[00:24:00] We have a few different lines of business. One is the research line, which is, we have a number of flagship surveys that we do each year. We have one for law department operations professionals that we're working on our 19th annual survey. That's why when someone wrote a bio for me and it said futurist in it, I was, I didn't cross it out because it was like, all right, I guess I got legal ops right. 19 years ago. So I, you know, we won't talk about the ones I got wrong. And one that's really for a law firm, chief operating officers as well, which all of those

[00:24:29] could be downloaded from our website. So feel free to pop over there. Those are all, the book costs $27.95, but the reports from the surveys are free. We do go to market, we've got go to marketing services, go to market services, I should say for legal techs and ALSPs and innovative law firms or innovative groups within law firms. So if you're looking to implement some of these ideas, especially on marketing or business development or strategy, we can maybe help you there.

[00:24:56] And, you know, we, we do some, you know, speechifying, you know, we were, you know, we run the occasional law firm retreat or do the occasional keynote speech. And, and, you know, I know we're coming up on retreat planning season. So anyone out there that thinks we might be a good fit or I might be a good fit for their retreat to talk about some of these concepts, reach out. That's great, Brad. We're going to put all of your info in the show notes. Thank you so much for being on the show. And I look forward to having you back on the future as a guest. Can't wait.

[00:25:26] Really looking forward to that. Thanks for your time today. This was so fun. Thank you, Brad. Thanks, Scott. Thank you for listening to the Rainmaking Podcast. For more information about our recruiting services for international law firms, visit our website at attorneysearchgroup.com. To inquire about having Scott speak at your next convention, conference, sales meeting, or executive retreat, visit therainmakingpodcast.com.