Outside investment in law firms.

The Law Society Gazette on 1st May 2008 carried an article saying that firms had to shape up for the stock market.

So how likely is it that a high street practice is going to be attracting the likes of Duncan Bannatyne from Dragon’s Den and receive pot loads of money to become a national player?

I suspect every solicitor knows the answer to this one and it would be simply that it is extremely unlikely that anyone would want to put money into solicitors firm. I suspect the only outside investment that will come into the high street firms and smaller regional commercial practices will be from legal executives and non-qualified family members. I would be extremely surprised if anyone with any business sense wanted to put money in as the returns are so slight on most legal work. The only difference is of course when work is done in bulk and there are reasonable profit margins about. However firms like Hammonds Direct, the other volume conveyancing operations have been the first to announce redundancies due to the recent credit crunch, and I think this is a good indication of the fickle nature of the legal markets in general, and this is highly likely to deter any investments into anything outside the magic circle firms in London.

One side effect of the bill permitting outside investment is probably unthought of yet, but there is the possibility that any potential trainee solicitor with money to invest could in fact buy their own training contract.

Whilst you may think this is slightly fanciful, I have at present registered with us a firm in the north east of England who has been running a successful property investment company for some years, and are is on the lookout for a firm to give him a training contract with the very good possibility that he would invest in that practice in return for the chance to qualify. Whilst this might sound slightly desperate, it is going to become more difficult for anyone other than students with straight A’s and B’s at A level, a good 2:1 from a red brick university, and a straight forward career to date to obtain the training contract. There are more and more legal practice course graduates out there without a training contract, who are going to be continuing to apply for training contracts for a good number of years. Whilst all the colleges are expanding the numbers on their courses are more out piecing students, and here to take more money off potential lawyers before they have the chance to qualify, this is going to get increasingly worse over the years, I think. It may even return to the old system almost of potential lawyers needing to have family connections to firms or the finances behind them to able to qualify as posts although look as if they are paid for the purposes of the Law Society minimum salary are actually posts where the potential lawyer is expected to invest in the practice from the outset, thus ensuring his or her commitment to the firm.

I suspect that the Legal Services Bill will make no difference at all to most practitioners outside the firms such as Clifford Chance and Linklaters, I am sure will eventually end up with external shareholders capitalising on the rather large profit levels that sort of firm that seems to make.

Jonathan Fagan is Managing Director of www.ten-percent.co.uk, specialist online legal recruitment consultant covering the whole of the UK and the international legal job market. He is available for comments and for free careers advice at cv@ten-percent.co.uk

The destruction of Legal Aid by the Legal Services Commission?

This week we have been retained by the not for profit organisation in Kent, looking for a housing solicitor to deal with housing law at three county courts in the south Kent area.

The post has been part funded by Lottery funding by the looks of it, plus other sources as well as the Legal Services Commission. It has amazed me in the time I have been in the legal profession, which dates back to the mid 1990’s, the number of firms and organisations out there covering specialist advice such as welfare benefits, housing, employment, the non-criminal legal aid side also dramatically, in such a short space of time. I have to say that it looks as if the Legal Services Commission have decimated the provision of advice that was out there, and it has ended up with a small number of firms dealing with the work in areas of high concentration and the rest of it being left to Citizen’s Advice Bureaus and charities to deal with.

I always recall from my own days in practice that it was often the most difficult clients, the most awkward circumstances, who were in specific need of this sort of advice, and that when the work was dealt with, often at least half your time spent with the client could not be billed for even back in the days when the Legal Services Commission did not query every single item on a bill.

I fear for the future of this area of law, as my anecdotal experience as a recruiter is that it is often left to trainee solicitors and newly qualified solicitors if that to deal with, although the vast majority of the work is probably covered these days by non-qualified advisors at not for profit organisations. Non-qualified advisors are often very good, and if they are specialists, usually known a lot more than some of the more generalist solicitors. However it is a damning indictment on the Legal Services Commission that such practitioners are giving advice on such technical issues without or being able to refer to solicitors.

I have had a positive response from the housing solicitors registered with us in relation to this post simply because of the shortage of posts further into London and the south east, and the need to carry on working. However the salary levels on the post are pretty shocking for a qualified solicitor and it just goes to show how far behind the legal profession is when it comes to dealing with the bottom end of the market and the salaries that are offered.

If a three year qualified solicitor cannot earn more that £30,000 dealing with an area of law, I do not think it will be long before the vast majority have simply moved into other fields or cross qualified into another career and left the way open for yet another solicitor to come through and realise how awful practice can be in certain fields and areas of the UK. This may sound slightly disgruntled, but I am unable to see how the current situation will change in years to come unless providers like the legal services commission recognise the need for such a service, and start to fund it again.

I accept entirely having been in practice myself that there are a number of unscrupulous law firms out there who simply rack up the bills in order to get paid without actually providing much assistance to their clients. However the vast majority of law firms do not practice in these areas to make a massive profit, they practice in the area because it is their chosen career, their line of expertise and because they wanted to make a difference and help others. The problem with the Legal Services Commission, I suspect, is that they have no interest at all in this, and are more interested in budgets and accountability.

Jonathan Fagan is Managing Director of Ten Percent Legal Recruitment, www.ten-percent.co.uk. He regularly commentates and provides advice to solicitors and law students free of charge at cv@ten-percent.co.uk

Jobs for Australian law students

Every year we get emails and telephone calls from law students and graduates in Australia, New Zealand and South Africa with requests for advice. Usually the advice comes in the form of an email about two pages long and lists all qualifications the person has and requests assistance or advice in finding a suitable law job in the UK.

Often the person is fairly gifted, has a bit of work experience, and is travelling round the world on a student visa. They contact a lot of agencies in the UK to see if they can pick up some work whilst they are travelling.

It has got to the stage now where our agency (www.ten-percent.co.uk) is unable to help or even read their emails simply because of the number, and we have to delete them without giving detailed advice.

Therefore I hope this blog entry is picked up by Australian and New Zealand law students as the best advice that our company can give.

Firstly, we are unable to assist you find temporary placements or get work experience in the UK. Our agency primarily deals with solicitors and legal executives with UK experience. Although we do locum work, this again tends to be for qualified solicitors and legal executives and not law students or graduates.

There are agencies in the London area who deal with such placements on a regular basis and are often on the lookout for suitable candidates for short term contracts. I am unable to give details of these agencies, because I am not sure they would be grateful to me for the referrals as I suspect they are fairly inundated with applications. The sort of work you would be doing would be photocopying, proofreading, collating and answering queries on files. It tends to be done en masse, with rather a lot of others checking similar documents in a large room or in a basement. You could find yourself working for the likes of Clifford Chance, Linklaters or Freshfields, being paid a reasonable amount of money for the work.

If you were thinking of doing high street work or smaller commercial practice work it is probably not going to happen for you, as the competition to get unqualified legal work is immense and the posts simply do not come up in enough numbers to enable any one agency to have regular placements for anyone travelling and looking for a few months work. It is possible to get it, and it is also possible to get work in local authority and government departments dealing with legal issues but again, it does tend to be more on an ad hoc basis than with any certainty that the post will be there.

In summary, my advice is that www.ten-percent.co.uk is unable to assist with such legal recruitments, but there are agencies out there who are able to help, although you will need to find them.

Jonathan Fagan is Managing Director of Ten Percent Legal Recruitment (www.ten-percent.co.uk). He regularly writes and commentates on the state of the legal profession and gives advice to law students and graduates free of charge on the website or by email at cv@ten-percent.co.uk

Referral fees. What’s the point?

In the Law Society Gazette last week was an article on referral fees with a leading insurer questioning whether solicitors could actually afford to pay them.

My experience of referral fees relates to personal injury, company commercial, conveyancing and medical negligence matters. It also relates to experience in the recruitment industry, where one agency will pay another one a referral fee for cross-referring into different fields.

I have to say that I am yet to come across anyone apart from claims management companies who appear to have made any money out of paying referral fees. Often the fees are fairly hefty, and eat into the profit margins quite substantially. I seem to recall a firm telling me they had signed up to an internet conveyancing referral site that was charging in the region of about £200 to £300 for each of its referrals. If you consider that an average conveyance will only cost in the region of about £500 to £700, it does not leave much left for a solicitors firm to make any profit on.

In the claims management industry, we watch every year as a claims management company opens and another one closes down. There seems to be a fairly consistent pattern of firms opening and closing and struggling to find any real consistency because of the fact that the profit margins are so low. The heady days of people stood in streets asking passers by if they have had an accident so that the company could refer the matter on to a firm of solicitors appears to have disappeared, and in fact the whole industry was a bit of a myth anyway because when figures were looked at there was no increase in the overall number of claims across the UK even when solicitors were suddenly marketing their wares.

I recently had a car crash and was injured in the crash and required the services of a solicitor.

I recalled a solicitors firm advertising in the local paper saying that they could give 110 percent of your claim back, so rather than just getting 100 percent of your claim, they actually got an extra ten percent on top.

However, the fact that you could get 110 percent back on a claim hadn’t registered with me the name of the solicitors firm, and I simply resorted to knowing a good firm in the area myself and phoning them to deal with the claim.

The moral of this tale is that the advertising and the claims management that has been going on over the years probably has not made that much difference to the actual provider that most people would think of going to. A lot of solicitors work is by recommendation, in a similar way to recruitment consultants (we pick up a lot of our good candidates from referrals from other good candidates and this is how we often make our placements).

So when it comes to referral fees, we are not sure whether the quality of the referrals sufficiently merits spending such large amounts of money on receiving them in the first place.

It can be likened a little bit to the jobs board industry that has sprung up across the world, and the rather expensive costs of sourcing candidates via them. The obvious exception being Chancery Lane at www.chancerylane.co.uk, which charges very low fees and covers a whole wide range of fields of law and concentrates on solicitors.

Jobs boards charge thousands of pounds to agencies to advertise on them, yet the quality of the candidates you usually receive is fairly poor because the majority of the people registering with the job sites register with all of them and with all the agencies, and this means that when you get a decent CV it is likely to have been with at least three to four other agencies at the same time.

In summary I suspect that the vast majority of referral fee arrangements do not actually produce a large amount of work for the solicitors firms involved, or if it does, the profit margins are so slight that the work is second rate and the solicitors firms try to avoid doing any work in the first place. Each time a new marketing idea come along, solicitors seem to take the recommendations of business consultants and jump on board and see where that particular marketing exercise is going, without auditing or weighing the effects or the results that they may or may not get.

Jonathan Fagan is Managing Director and business consultant with www.ten-percent.co.uk, specialist legal recruitment consultancy in the UK. He can be contacted for comment or advice at cv@ten-percent.co.uk

Sole supplier agreements – what is the point?

Ten Percent Legal Recruitment offer sole supplier arrangements with solicitors firms, in house departments and local authorities up and down the UK. We have been offering them for a good number of years, and almost every campaign we have ever run has resulted in a successful placement. In recent years quite a lot of firms have tried to avoid them in the hope that they pick up more candidates by going to multiple recruitment consultants and sourcing candidates from various locations, websites and publications.

What is the point of having one agency handling your recruitment for you?

The first benefit is the cost. If you take a retained consultancy with our company (www.ten-percent.co.uk) the fee is automatically reduced by at least 30 percent, if not higher. The actually fee depends on the length of the contract, and also the quality of the type of placement that you are putting with us. However if you consider that our usual fee is 15 percent you are likely to be paying around ten percent, if not closer to 7.5 percent depending on the circumstances, the advertising and the sole supplier arrangement we agree.

Secondly, we handle all the advertising for you. We place adverts across the web on various job boards, forums, chat rooms and with paid advertising as well if necessary, as well as advertising fairly prominently on our own website. We also get discounted advertising from the Law Society Gazette, who give agency discounts with incentives for such arrangements, so that we can offer you advertisements in the journal that your firm might not have been wanting to pay for or been able to consider.

Thirdly, we can design the advertisement for you. This means that you receive our expertise as recruiters knowing what is going to attract a candidate to make an enquiry, both passive and active searchers. Quite a lot of firm place advertisements that we look at and shudder, as we know that the sort of response they will get unless a candidate is desperate is going to be minimal, whether this is because they have included too much information on one issue or whether it is because they have missed off some of the information a candidate would need before they made an application.

Fourthly, all enquiries are handled by the agency, which means that none of your staff get pestered by potential applicants enquiring about the post. This also means that other applicants who would not have otherwise applied can call us in confidence and discuss the application without them needing to be embarrassed that you may find out who they are before they have made a firm decision to apply to you.

Fifthly, you get no telephone calls at all from other agencies, job boards or publications trying to sell you advertising space for your job, which is a fairly regular occurrence – for example, I recently placed an advertisement in the Law Society Gazette and had three telephone calls in two days, one of which was from The Lawyer magazine wanting me to place the same advert with them. This is fairly standard practice and I think that every time I have ever placed an advertisement in the Law Society Gazette, The Lawyer have immediately called me to see if I want to place it with them.

Finally, you do not actually pay any fees at all until the agency has found you a suitable candidate, which means that all the work undertaken is completely free of charge if the eventual agreement does not produce you the results you require. Obviously you have to pay the Law Society advertising costs, but the remainder of the cost, for example the Chancery Lane advertising or the job boards online or the forum work is all entirely free. We may also, if we know anybody in the area who may consider the post, actually telephone and headhunt on your behalf, and again, this is at no cost. The other massive benefit is, of course, that you get the candidate search done through our own databases as well and this is free of charge. The arrangement can be cancelled at any time and you do not have to stick with the sole supplier arrangement for longer than four weeks if you do no wish to. Most of the time, they are successful, but of course, in this game, nothing can be guaranteed and some assignments can be particularly harder than others. It does mean that you can hand over a particular recruitment task to someone externally and sit back and wait to see what happens, without needing to worry about it for the time of the sole supplier arrangement.

If you would like to enquire about a sole supplier arrangement with us, please get in touch either by telephone on 0845 644 3923 or cv@ten-percent.co.uk . Further details can be found on our website at www.ten-percent.co.uk/er.html

What fees do recruitment consultants charge?

What fees do recruitment consultants charge?

There are over 40,000 recruitment consultants working in the UK at this present time. I recently read an article where it said that the recruitment market in the UK is one of the most developed in the world, with other companies less likely to use agencies for permanent work than companies in the UK. Agencies cover just about every walk of life, be it a librarian, a lorry driver, shop assistant or even a solicitor. The reason they have sprung up in such numbers is because of the tax advantages of using one. The entire bill is tax deductible and it means that advertising, time spent dealing with applications by staff, administration costs can all be factored into one fee by handing over assignments to recruitment agencies.

Obviously there are good, bad and horrible recruitment agencies, and some truly dreadful ones. The whole industry has a trade body called the Recruitment Employers Confederation (REC) and there are a couple of smaller rival trade bodies as well.

The sort of fee that you could expect to be paying a recruitment agent can range from ten percent up to 45 percent, depending on the assignment and level of candidate you are looking for.

If you are looking for a lorry driver or a shop assistant on a permanent basis, most agencies charge about ten percent if not less for the placement. If you are looking for a solicitor earning £45,000 a year with partnership prospects, then most agencies will be looking to charge in the region of 25 to 30 percent of the first year’s salary for finding that candidate. If you are looking for a sole supplier to headhunt or source you a chief executive, then it is possible that you would be looking at a bill in the region of about 40 percent of the first year’s salary.

So why are the fees so expensive?

Firstly, they do not have to be. Coming onto the market now are new providers, such as www.ten-percent.co.uk who charge a standard fee across the board, with Ten Percent, for example, charging 15 percent (and donating ten percent to charity, hence the name). The larger companies working on the high street or in office blocks have to charge higher rates because of the overheads of running a recruitment agency. Time after time I have been in business, I get informed by the owner of a company that all I have done to place a candidate with him is send him a CV, and he or she has had to do all the other work. He or she is unable to see that the recruitment agency has had to find the candidates in the first place to send to the company, something the company may have struggled with. They cannot see the hours of processing the candidate and sending through vacancies, for sometimes up to five or six years before they find the right post, and neither can they see all the abortive interviews that have gone before for that candidate. A lot of work goes on behind the scenes at recruitment consultancies that companies and firms are unable to see or to quantify in terms of cost. The fees charged reflect these overheads, but also a good profit margin on top of this. A recruitment agent charging 25 percent fees is probably looking at about 60 percent profit margin on that fee. Obviously if an agency is charging less, but not dealing in bulk, then their profit margins are much lower.

On the temporary side, there is usually a margin charged by the hour and although the agency I work for does not tend to do these very often, I have heard it said that the usual rate is between 12.5 and 25 percent margin on the hourly rate being paid to the employee.

Jonathan Fagan is Managing Director of Ten Percent (www.ten-percent.co.uk), legal recruitment consultants in the UK charging flat 15 percent fees. He can be contacted on 0845 644 3923 for press comment or emailed at cv@ten-percent.co.uk

How much should a company spend on marketing?

How much should I spend on my marketing budget?

This question is probably asked by every business owner in the UK of any business consultant they meet and the answer is almost guaranteed to be, “I haven’t a clue”.

There is no rule of thumb or guide as to how much you should be spending on your marketing or advertising budget. It should obviously not bankrupt you, or eat into your profits sufficiently to affect you, and every piece of advertising or marketing must be audited and measured to determine its effects.

I was looking on the telephone directory this morning and noticed that a conservatory company had obviously paid a fairly substantial amount of money to be placed on the front of the telephone directory at the bottom of the page. I was thinking about this afterwards and wondering whether this was effective marketing or a complete waste of money, as if I was thinking of buying a conservatory I am not sure that I would look on the front of a telephone directory for a conservatory company, rather under conservatories. I am not even sure if I would have noticed the advert sufficiently to pay any attention to it or to recognise the brand name, as it was the same colour as the colour of the directory front, and did not really stand out.

This got me thinking about marketing, particularly amongst law firms.

On our website (www.ten-percent.co.uk) we have a number of Google Ad word banners and also search boxes that generate a small amount of income for the company every time somebody goes onto the site and clicks through on an advert. It is a quite amazing the number of solicitors firms that advertise on our site, possibly without realising that they are. Costs of a click can vary widely, but some clicks are now costing in the region of about £4 to £5. I wonder if any of the firms who are using Google Ad words have actually audited the effect or usefulness of it or whether they have in fact picked up any clients by being on it.

Perhaps another example is the lengthy radio and television campaign run by some local and national firms of solicitors looking at personal injury claims.

In recent years, a firm in Liverpool ran a campaign on our local radio station that was extremely well presented and seemed to present their case quite nicely for being a market leading company, one that you could trust and use.

However, the cost of that campaign must have been phenomenal, and I wonder to this day whether or not it was justified for that solicitors firm and how much extra business it actually picked up for them.

I have also seen advertising on the backs of buses, or in years gone by solicitors firms providing custody sergeants in police stations with pens, cups or mouse mats so that they remember the name of their firm when a prisoner was asking about local firms of solicitors. Quite a lot of marketing I have found is more a test to see what works and what doesn’t. For example, in the legal recruitment business I occasionally dabble with the notion of spending a lot of money on advertising in the Law Society Gazette with big advertisements on a regular basis with all our vacancies on. I also spend a fair amount of our advertising on Google Ad words, but I avoid as much as I can the content network, which is where Google place the advert on other sites like ours for people to click through on as I remain very suspicious as to whether some of these sites are actually fraudulent and are spending a day clicking through themselves or getting others to click through for them.

As a rule of thumb I reckon that every company, regardless of field or area, ought to be spending in the region of ten to 20 percent of its turnover on advertising or marketing. This has certainly been the case for us. There was a legal recruitment company called Integral Legal Recruitment not so long ago that was running full page adverts in the back of the Law Society Gazette quite regularly. There then followed a news report that Integral had gone into administration and that their database of clients and candidates was up for sale. That has always stayed with me since and I am aware of the danger of overspending on advertising like Integral did. We had a marketing review done of our business, and the research had discovered that if Integral had been paying full rate for their advertising in the back of the Law Society Gazette, they would have spent in the region of about £270,000 in one year, would mean that in terms of placements, they would have to be making over 80 placements probably just to pay the cost of the advertising which is quite a substantial amount for a legal recruitment consultancy!

Jonathan Fagan is Managing Director of Ten Percent Legal Recruitment. He is also a management consultant working for the Ten Percent Business Improvement Service. If you would like to contact him, please email cv@ten-percent.co.uk