Most good firms set a minimum book. Do not bring us anyone under $800,000. It sounds like discipline, and it is the single most expensive rule on the page, because it filters on the one number that tells you least and it ends the conversation that would have told you more.
A book is not a figure. It is a set of relationships, some of which travel and some of which do not, worth different amounts at different firms. What follows is how we actually value one.
First question
Not how big is the book. How much of it is genuinely hers.
Revenue attached to a person moves. Revenue attached to an institution frequently does not. A partner may sit on ten million dollars of billings and own the relationship behind two of them, and the difference is the entire valuation.
The courts draw the same line, which is why this is not a matter of opinion. They distinguish a lawyer’s own clients from firm clients she has barely touched. So do we, and we do it before anyone relies on a number, because a portability figure taken on trust is just a number somebody hoped for.
The awkward version of this question is the useful one. If she left tomorrow and called every client herself, which ones would follow, which would stay, and which would go out to tender? A partner who cannot answer that about her own practice has told you something important.
Why the minimum costs you
The book that was under the minimum, and worth almost $2 million a year.
Our founder presented a candidate carrying a $250,000 book to a firm with a $750,000 minimum. She also had a verifiable relationship worth more than a million dollars that had not yet moved to her. The firm declined on the number without taking the meeting. She went to a competitor, and that one client became almost $2 million a year for the firm that took her.
Recounted in Win the Talent Game
A minimum is a filter, and every filter has a false negative rate. The question worth asking is not whether your minimum is right in general. It is whether anyone at the firm has authority to override it when the numbers and the common sense disagree, and how often that has actually happened.
Worth to whom
There is no general figure. The same practice is worth materially different amounts at four firms in the same city, and for reasons you can check before you make an offer.
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01Conflicts that end when she leaves
Work she cannot currently take, because her firm acts for the other side, becomes work she can take at yours. This is frequently the largest single number in the valuation and the one least often calculated, because it does not appear anywhere in her current billings.
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02Rates, in both directions
If your rates are higher, some of the book does not follow and the rest is worth more. If they are lower, the book may travel intact and bill less. Either can work. Assuming the book simply arrives at your rate card is the error.
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03Whether the book can grow here
A larger footprint, a deeper bench, more practice areas. If a client has been sending work elsewhere because her firm could not staff it, your firm may be buying the practice she has and the practice she has been turning away.
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04What you are buying twice
Where the practice compounds a strength, it is worth a premium. Where it duplicates a bench you already have, you are paying for capacity and importing an origination argument. The second one is worth less than the spreadsheet says, sometimes considerably less.
What it costs to land her
Money is the ultimate driver for most lateral moves, and it is still only one of three things you are paying with.
Cash, correctly understood
- Not buying lawyers. A clear route to earning more on an ongoing basis.
- Through the compensation structure, through conflicts that end when she leaves, or through a footprint that lets the book grow.
- Nobody has ever wanted a pay cut. If your model needs her to take one, revisit the model.
Culture and camaraderie
- Culture is the second most important factor. How things are done here, visible in the comp system, the work ethic, and how partners treat the staff.
- Partners have declined a raise over culture alone. We have watched it happen.
- The relationships at her current firm can hold her in place. The ones she sees at yours can pull her across. Your own lawyers are the most persuasive recruiters you have.
The one way to overpay that can end a firm
Pay a premium for a genuine superstar. Be extremely cautious about guaranteeing it for years.
Significantly overpaying laterals on lengthy guarantees helped put a number of firms out of business, some of them among the largest and most prestigious in the world at the time. The mechanism was not subtle. They took on debt to fund the guarantees, and they infuriated the partners already there, whose own compensation was lower and was not guaranteed.
A one year guarantee is defensible. Two on rare occasions. Three, four or five is where firms have historically written the check that closed them.
We verify this before you rely on it
What is portable, what the conflicts release, what the practice is worth at your firm specifically rather than in general. If it does not clear, we say so, including when the candidate is the one everybody wants.
Keep reading
Valuing a practice means asking for information, and some of it you are not allowed to have. Where the line falls in lateral diligence, and why crossing it is worse than doing none. Or the eighteen ways a lateral hire goes wrong, of which relying only on the numbers is the twelfth.
