Law firms would do well to look at how businesses operate, says Chrissie Lightfoot, author of Tomorrow's Naked Lawyer.
The UK media is presently buzzing about the general election with one of the hottest topics on social media the impact on the property market post 7th May. Listening and engaging in some of these conversations really got me thinking about what the ‘house of law’, aka the legal world and businesses of law, could learn from the property world and subsequently inspired me to share my thoughts with you.
It’s fair to say that professionals involved in the property market continually ride the highs and lows of the property world, not unlike us lawyers in the legal world; the last decade was particularly turbulent and painful, and we’re in a new decade with similar challenges juxtaposed with opportunity. There is an obvious correlation with the property world and legal world where lawyers and law firms face similar ups and downs, challenges and opportunities in business.
I observed (at least) three fundamental things that companies in the property sector did (and do) in order to continually deal with the ups and downs. They are:
Think outside the house;
Act outside the house; and
Reinvent the house, where necessary.
Here’s how three companies did exactly the above and successfully steered their way to success.
Thinking outside the house
The founders of Cogress UK Limited thought outside the house / box and came up with a pioneering new investment model to help bridge the gap between the property world and investor (both sophisticated and Clapham Omnibus rider), at a time when the market needed new ways to ensure development build without traditional institutional support. Cogress came up with a solution by creating a property development platform for people to invest their savings with a chance of a higher return than can be found in a depressed stock market, and more.
Effectively, Cogress’s new model enables people with a small investment amount to access a big investment opportunity. This is not crowdfunding, I hasten to add. My understanding is that crowdfunding usually entails huge number of investors dealing in small amounts of £100 onward. But Cogress effectively underwrites equity for the developer where the minimum investment is £20K by an investor from within the vetted community of 17,000 people who choose to invest in a particular development opportunity.
I believe Cogress uses the word ‘community’ because it appears the company is inclusive; in essence they have come up with a winning formula business model to enable developments to go ahead by giving the opportunity to anyone with funds of £20K or more to be part of the property world and develop an interest in a portfolio of properties in prime locations.
Every project Cogress handles goes through a thorough due diligence process, with Lord Mendelsohn residing as chairman of the advisory board which carefully vets each option to ensure the needs of both the investor and developer are met.
Since 2009 the Cogress management team has invested in more than 150 projects globally including UK, US, Canada, Germany, Cyprus and Israel, with over £900 million of asset value.
Interestingly, the people who started Cogress did not come from a professional financial background. They came from a legal and property development background, the staff have a grounding in estate agency and the founding father, Tal Orly, is actually a qualified lawyer. Orly studied LLB law at East London University, qualified and practiced in Israel for 5 years and has been developing properties in London since the 1990s.
Clearly a lawyer with an entrepreneurial streak, Orly also possesses business savvy, not only in creating a new business model but also in his creative, smart and daring approach to spot opportunity. Curious in identifying value real estate, Orly has a talent for identifying up and coming neighbourhoods aka post-codes of value. He says: “when you think of beggars, you probably think of run-down areas, but the opposite is true. Beggars want to target areas where they know people have money so that they can get pounds for their time.”
Last Thursday Cogress announced it had completed 14 UK deals within a 12 month period, reaching a GDV (Gross Development Value) in excess of £200m albeit the company had only launched in the UK in 2014. The company aims to complete on 20 more deals before the end 2015. The figure reflects the ambition of Cogress and underlines rapid growth in the market. The announcement comes at a time where some analysts are suggesting a potential slowdown in UK property, with the ONS’ January House Price Index revealing annual price increase in retail property is at 8.4%, down from 9.8% the year before. However, Cogress’ rapid growth to date reveals investors aren’t perturbed and still see the market as an astute option.
Tal Orly, chief executive officer at Cogress UK, commented: “Our growth has been driven by the continued attraction of London residential property which, according to ONS figures achieved 13% growth in the last year – an extremely strong performance. We expect this trend to continue, but also for mixed-use and commercial property to improve throughout the year, including our own progress alongside the continued growth of the market”.
Worldwide, Cogress senior management team has completed 170 deals – worth a cumulative £900m – and intends on launching into mainland Europe this year.
We may think Cogress’s approach and ambition beggars belief, but it’s creative and has proven lucrative for all involved. Maybe the house of law can learn from the kind of creative approach taken by this private equity company?
Similarly, businesses of law could bridge the gap between the legal world and the business world by investing back into the house of law, being smart re. gathering investment, devising a new business model and being creative in how to find new opportunities and/or clients.
Acting outside the house
JLL, named recently to FORTUNE Magazine's 2015 Most Admired Companies List, came up with a strategy to deal with the ups and downs in its market, and its target markets by ‘acting outside the house’. It diversified whilst at the same time began focusing on prime sectors of interest and need.
Rather than being ‘all things to all men’ JLL identified 9 key sectors to serve; the house of law is one of them. There may be a common perception that JLL only acts for Landlords or large Corporate Occupiers in just an agent capacity; there is in fact much more to what JLL can provide including an entourage of consultative services for corporates, investors, developers and residential.
In essence, if we take the legal sector and only a handful of examples JLL’s diversified service offering includes:
Deal-maker - taking transactions to the law firm;
Helping with pre-merger and post-merger - looking at the buildings involved;
Evaluating risk at the start of M&A service – identifying the items and coming up with a strategy; and
• Consultancy in relation to reconfiguring the workplace and cost of floor space – for example, can you drive better cost efficiencies out of your floor place whether downsizing, sub-letting or growing? JLL helped Baker & McKenzie secure a 237,000 s.f. lease with superior economic advantages, saving them more than 35% on occupancy costs as compared to the earlier transaction.
The law firm sector is faced with just as many business pressures as economic tensions, including fluctuating demand, intensified competition, commoditization of legal work and client demands for more flexible pricing and innovative solutions. Alexander Low, Head of JLL’s Legal sector comments:
“As a result of both these macro and micro influences, many law firms have responded by placing productivity, efficiency and innovation at the top of their agenda. Real estate is increasingly a key ingredient to overcoming these challenges with firms structuring, operating and using real estate to achieve their business objectives ahead. And real estate will be even more critical ahead; firms will need to focus intently on real estate strategies over the next 12 to 36 months as the global outlook only improves for the economy and landlords across the world. Firms will need to counter that momentum with creative solutions and strategies for their real estate needs.” Accordingly, JLL diversified to accommodate their client needs. Maybe your house of law could diversify to accommodate yours?
Reinventing the house
Founded in 2000, X-Press Legal Services Ltd., a Warrington based family business, supplying solicitors, licensed conveyancers, property developers and auction houses with a full range of property related searches and risk reports to aid the house buying process, had to re-invent its service offering and come up with a new way of selling its prime service as a result of the changes occurring in the legal sector. David Lister (Managing Director) and his wife Lynne Lister founded the business on three main principles:
Only use good corporate disciplines (no office politics);
Be a bespoke provider (over service the clients); and
No bank borrowings (use available cashflow).
Today, they have grown their business into a respected player in the legal sector and in 2014 produced in excess of 325,000 reports on behalf of 480 solicitors practices, distributed via the Xpress network of 32 regional franchised offices located throughout England and Wales.
Although Xpress is doing exceptionally well as a group, this has not always been the case. As you can imagine the slump the property market experienced in 2006/7, the Government deciding to launch the much maligned Home Information Packs (HiPS) which totally distorted the market, the global recession of 2008 to 2012/13 combined with the Legal Services Act 2006 and competition squeezing the high street law firm client meant that Xpress’s turnover was hit hard and it was challenged to innovate to survive.
Radical thinking culminated in a pioneering and innovative course of action back in 2011. The X-Press social media campaign began, closely followed by a very soft launch of its new bespoke website, www.lawplainandsimple.com in 2013. 2014 arrived and X-Press launched Law Plain and Simple with a social media campaign combined with a sports marketing campaign that goes out on Sky Sports.
Law Plain and Simple, a home-grown website and legal service, was launched as a response to legislative reforms, the demise of legal aid, and the imported challenge to help consumers, businesses and law firms.
It is an online legal information and advice service linked to 400 law firms in England and Wales. The website explains the fundamentals of the law and its standard processes, as well as translating its terminology. It has step-by-step guides covering 39 of the most common legal categories, ranging from property law, bankruptcy, wills and trusts, and business law to guidance about social media and social networking and even image rights.
David Lister commented: ‘We wanted to take the mystique and fear out of the law for ordinary people. The website avoids legal jargon and has been written in very basic English to help people understand the law and how it might affect them in particular circumstances.’
Law Plain and Simple has been written by qualified solicitors. The idea for the website grew out of enquiries from members of the public directly to X-Press Legal Services Ltd. about legal terminology, particularly in the housing market. Co-director Lynne Lister commented: ‘We recognise the importance and value of professional solicitors with their extensive experience and knowledge so we are keen to enhance the service they can provide – not detract from it.’
With the numbers of users (consumers and businesses) visiting the website set to increase significantly due to publicity and awareness raising through offline and online activity by X-Press HQ, its 40 franchisees and 400 law firms in the network, and deals being struck with high traffic websites, this radical new business model and service is a win-win for all concerned – consumers, businesses, law firm clients of X-Press who are in the directory and providing legal articles on the website, and X-Press itself.
Perhaps what the house of law could learn from this property world company is that lawyers who, and law firms that, wish to succeed must possess these three things:
The ability to see around corners – to anticipate the radically unexpected; and
Create a service or product in readiness for the unexpected; and
Embrace a truly customer-centric business model which includes marketing to and providing for (and helping) your clients’ clients.
To conclude; three things the house of law can learn from the property world:
Think outside the house; invest in (and with) a new model and be hugely creative and smart to make things happen;
Act outside the house; diversify. Introduce new services to compete and stay relevant; and
Reinvent the house, if and when necessary; innovate. Find a new way of marketing and selling the same service to be a front-runner.
Taking on board some of the above just might help you prevent your house of law from crumbling or disappearing completely down a sink hole.
Chrissie Lightfoot is CEO of Entrepreneur Limited, a legal futurist, speaker, consultant and writer. Author of Tomorrow’s Naked Lawyer: NewTech, NewHuman, NewLaw – How to be successful 2015 to 2045 (Dec 2014), and its prequel bestseller The Naked Lawyer: RIP to XXX – How to Market, Brand and Sell You! (Dec 2010).