AAML NJ Blog

By: Sydney Weber of Marcum | AAML NJ Gold Sponsor

• Normalization adjustments are an essential component of any business valuation. They are necessary to ensure that the operational results and financial position as reflected on the subject company's financial statements or tax returns accurately indicate the anticipated profit or loss on a going-forward basis. Valuation experts make normalization adjustments to the income statement to eliminate expenses that are non-recurring or unrelated to the business, as well as to properly account for expenses such as rent or officer compensation that may not be accurately reflected. Adjustments may also be made to the balance sheet in order to remove non-operating assets or adjust assets to fair market value. This article focuses on adjustments commonly made to the income statement. 

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• The first step in normalizing the income statement is to determine the unadjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, or EBITDA, a key indicator of the profitability of a business. To do so, all interest, tax, depreciation, and amortization expenses are added back to the business’s reported net income. Once these preliminary adjustments are complete, the normalization adjustments are made to reach normalized EBITDA.

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• Following are some of the more common income statement normalization adjustments: 

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• 1.     Reasonable Compensation: In closely-held businesses, the owner typically draws a salary that may be considered “discretionary”. If the business is a sole proprietorship, the owner does not receive a salary at all. To ensure the business’s normalized EBITDA is accurately represented, it is necessary to make an adjustment reflecting the market rate that would be paid to a non-owner providing the same services. In this adjustment, the officer’s compensation reported on the income statement is added back to net income, and the reasonable compensation determined by the valuation expert through industry research is deducted. This adjustment removes the impact caused by a business owner receiving profits as a salary. It ensures EBITDA is not overstated by reflecting the appropriate market rate of compensation for the owner’s services.

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• 2.     Discretionary Expenses: Adjustments need to be made for expenses paid through the business that are not essential to its operations. Generally, any expense that would not be necessary for a potential buyer to incur to maintain the business’s operations should be added back to the reported net income. The types of discretionary disbursements that are adjusted can vary depending on the nature of the business. They may include all or a portion of travel and auto, meals, entertainment, club dues, and credit card charges. Following discussions with the business owner, expenses may be deemed partially discretionary in certain circumstances. In this case, a percentage is often applied. Additionally, discretionary expenses that may not be immediately apparent to the valuation expert can usually be identified through discussions with the business owner. It is important to note that an expense that may be deductible for tax purposes could still be classified as discretionary for valuation purposes.

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• 3.     Rent Expense: When the real estate from which the business operates is owned by the business owner personally or through a related entity, the rent charged to the business may not be representative of the fair market, meaning the business is paying either more or less than would be paid to an independent third party. A real estate appraiser generally determines fair market rent. If the business pays an amount over fair market rent, the excess would be added back to net income. Conversely, the differential would reduce net income if the amount paid is below fair market rent.

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• 4.     Non-Recurring Income and Expenses: Any reported income or expenses that are not expected to recur in the future can skew EBITDA and should be adjusted. The adjustment for a non-recurring income or expense item would decrease or increase net income, respectively. Examples of non-recurring income and expenses include settlement fees for legal actions, one-time expenses for repairs or maintenance, income or loss from discontinued operations, and gains or losses on sales of assets or other investments.

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• Income statement normalization adjustments play a vital role in determining a business’s expected ongoing operational performance. These adjustments help ensure the conclusion of value is both reasonable and adequately supported.

By: LEAP Legal Practice Management Software | AAML NJ Silver Sponsor

Family law firms are faced with many challenges when serving their clients due to the arduous nature of resolving these sensitive legal matters. Attorneys have a responsibility to ensure that the process doesn’t cause any additional stress to vulnerable parties that may include children, conflicting caregivers, and spouses. To provide effective service, family law firms should make sure each minute is optimized effectively, focusing on the needs of their clients. Attorneys and law firm staff can implement 5 strategies throughout the life of a family law matter to manage a heavy workload, prioritize tasks, and increase productivity without sacrificing quality.

• Stay organized: There are many details and files to keep track of throughout a family law matter, which may include case and client information, historical files and documentation, correspondence including letters and emails with clients and other parties, and court forms, to name a few. Law firm staff need to have access to one centralized digital file that accounts for updates in real time. Dropbox, printed files in manila folders, or files stored on local drives all run the risk of being lost or becoming quickly outdated throughout the progression of the case. Legal technology that provides case and document management creates organization not only for the firm, but for the client service they provide. This is effectively demonstrated when records are easily accessible. For example, if a client calls requesting an immediate response or if you are at court and need to reference case details without printed documentation, centralized and mobile storage allows for timely action and quality service.

• Accurately and instantly keep track of your billable time: One of the most arduous administrative tasks for family law firms is legal time recording. This process is especially tedious and requires minute-by-minute recollection if done reactively or manually. Law firms can look to implement a system to simultaneously track time while working on a case, but they need to be careful that it doesn’t create additional work for other staff. While many software programs offer stopwatches or timers, a comprehensive legal practice management solution is most effective to ensure that legal time tracking instantly records across all key functions of a family law case.

• Automate administrative tasks: Sometimes, the most time-consuming functions for a family law matter do not include client and other party events like meetings or hearings, but consist of routine, but necessary, work such as creating correspondence, filling out forms, and sharing documents. It is necessary to eliminate double data entry and reduce the risk of input error for efficient production, and advances in legal technology allow firms to automatically and accurately populate case and client information. Reducing the time spent on filling out the Case Information Statement, Summons (Divorce), or Verified Complaint for Adoption, for example, allows staff to focus on other revenue- generating tasks such as responding to clients and creating invoices.

• Collaborate effectively: Clients and other parties contact firms frequently and through different channels to keep the case progressing. Secure file-sharing platforms optimize communication and ensure that sensitive documents are only viewed by authorized parties. Third-party storage and sharing systems like Dropbox or OneDrive create these vulnerabilities and are limited in functionality necessary in family law cases, like restricting access and requesting e-signatures. Legal file sharing and collaboration technology provides firms with the assurance that their information is safe, while clients can have the convenience and transparency of this secure storage.

• Make billing and invoice payments convenient: Family law firms that implement the above habits need to complete the case, not only with the resolution of the matter, but with the firm getting paid with a digital paper trail and in a timely matter. With family law practice management software that includes instant time recording, centralized accounting, and an online payment platform, the administrative work is reduced. Manual invoicing and processing payments is eliminated, creating opportunities for staff to focus on their existing clients or even new cases.

  When these timesaving practices are implemented, family law firms can ensure that they are efficient and productive. Client and employee satisfaction will increase when firms optimize their processes. This creates further opportunities for firms to increase their revenue and grow their business. To learn more about how legal technology can help your NJ family law firm, visit leap.us/new-jersey. 

By: Soberlink | AAML NJ Bronze Sponsor 

The Soberlink system is an advanced, portable solution for monitoring alcohol consumption, offering a blend of a high-quality breathalyzer and innovative features like facial recognition and tamper alerts. This enables detailed, real-time supervision of a person's alcohol intake throughout the day. 

For more than ten years, Soberlink has led the field of alcohol monitoring in Family Law, offering lawyers a reliable, evidence-backed method for handling alcohol-related issues. Its admissibility in child custody situations across the United States and Canada, coupled with its ability to offer Family Lawyers and Judges a trusted means of overseeing sobriety, has made it indispensable in protecting children from alcohol abuse.

Seth Nelson from Nelson Law Groureviews the value of Soberlink to him in reducing conflict, safeguarding children, and addressing or disproving allegations of alcohol misuse. Watch Review »

This detailed review provides an in-depth look at the Soberlink Device, explaining its operations and benefits for families navigating divorce.

The Soberlink System

Soberlink combines a handheld, professional breathalyzer with modern technology to measure, document, and communicate alcohol levels in users throughout their day. It's equipped with features to ensure the person tested is the actual user and to prevent any form of cheating.

Reagan Riddle of Armstrong Divorce & Family Law praises Soberlink for its technological edge in preventing result manipulation. Watch Review »

Soberlink's Advanced Reporting transforms testing data into a simple, color-coded calendar, making it easy to interpret test compliance at a glance.

Soberlink: How it Works

Utilizing Soberlink involves discreetly taking a breath alcohol test, which verifies the user's identity via facial recognition before sharing results instantly with predetermined contacts.

This system uniquely handles positive tests by initiating a Retest Cycle, ensuring accuracy by distinguishing between alcohol consumption and other sources of alcohol detection on breath, such as mouthwash.

Jeff Domen of Goranson Bain Ausley sees Soberlink as a game-changer for handling alcohol issues in divorces, emphasizing its simplicity for daily use and the accountability it provides to parents. Watch Review »

Pricing Details for Soberlink

To view Soberlink's pricing, visit their official pricing page. The system requires purchasing a device and a monthly monitoring service. Prices start at $299 for devices, with monthly plans beginning at $129.

Soberlink's programs cater to different needs: The Level 1 Program focuses on testing during parenting time, while the Level 2 Program requires daily testing. Each program offers Basic, Plus, or Premium plan options, varying in features and the number of recipients for test results.

Starting with Soberlink

Purchasing Soberlink is straightforward via their website. The process involves selecting a program, plan, device, and commitment level, followed by device purchase and completion of a monitoring agreement. This agreement, crucial for clarity and responsibility definition, distinguishes Soberlink from other self-monitoring options.

Soberlink in Divorce Contexts

Soberlink devices offer real-time alcohol monitoring, providing Family Courts with accurate evidence of sobriety, crucial in child custody decisions. It aids not just in proving sobriety but also in disproving false accusations of alcohol misuse, offering peace of mind and fairness in custody cases.

Soberlink shines in Family Law due to its non-intrusive monitoring, immediate result sharing, user-friendly software, and the reliability of its facial recognition and tamper detection technologies. Supporting Family Law professionals further, Soberlink provides comprehensive support, including AI-powered reporting, expert evaluations, and dedicated training, reinforcing its role in fostering decisions that are safe for children and equitable for all parties.

By: Zach Petersen of Marcum | AAML NJ Gold Sponsor

Imagine you are the owner of a famous and well-respected restaurant. In your employ are master chefs and culinary experts covering a range of different backgrounds and techniques. Among them are a saucier, creating various sauces used throughout the menu, and a pasta chef, responsible for imagining and delivering some of the menu’s entrees. There is also a pastry chef and a chocolatier, together creating beautiful and imaginative desserts. And, of course, you have a sommelier to select the perfect wines to pair with each dish.

Each night, the kitchen is tasked with providing a top-notch experience to the guests, with a menu that changes regularly. Every dish is thoughtful and well-executed. Each specialist works together to build a memorable experience and must know their role in relation to each other to deliver excellence.

Now imagine each dining experience is its own case, and you, as the owner, are the attorney responsible for delivering excellence to your customers (clients). You must direct your team and understand the capabilities and limitations of each member to produce an effective and cohesive approach.

Likewise, litigation can require several different experts in different fields to build the arguments necessary to prevail. Experts are necessary to review the facts, parse the technical requirements in their field, and provide an analysis or opinion based on their work. A chocolatier will not be qualified to present wine pairings for the guests in the same way that a financial expert cannot opine on the adequacy of manufacturing safeguards. Generally, professional standards expressly prohibit opinions on matters outside the expert’s scope. Although the expert may have a general understanding of how effective manufacturing safeguards can reduce overall risk to a business, they cannot be expected to deliver an opinion on what policies, procedures, and equipment are considered effective.

Depending on the facts of the case, much like our imaginary kitchen, several different experts may be needed to provide analyses within their specialties to provide a comprehensive and effective service to the client. Although a financial expert can certainly serve as your only expert if all relevant issues fall within the scope of that individual’s field of expertise, you should still consider carefully. Some issues may seem like concepts on which your expert can provide an opinion, but sometimes, they fall outside that scope of expertise or veer into legal determinations.

It is also vital that each expert is informed of their specific role for what they are being asked to do, even if the task is already within their field of expertise. If the kitchen has a theme for the evening, such as “An Evening in Tokyo," you probably wouldn’t want your pasta chef delivering authentic German spaetzle that night. Similarly, although a valuation expert can provide the value of a business under the fair market value standard, complete with a formalized report, if the jurisdiction governing the dispute only allows the use of the fair value standard or if valuation schedules would have sufficed for settlement purposes, the expert will have ultimately spent extra time developing valuation discounts or writing a report, to provide a conclusion of value that would not be appropriate for the client’s needs.

Experts, particularly financial experts, are a powerful tool for litigants and their attorneys. However, we, as experts, must be careful in providing opinions that are within the realm of our expertise. It is required, both from a legal standpoint and from the rules set forth by the associations we are members of. It is essential that experts, attorneys, and clients are all on the same page regarding what we can and cannot address. Being as specific as possible helps ensure our work is unambiguous, appropriate for the client's needs, and within the confines of our expertise and professional requirements.

So, next time you engage an expert or are engaged as an expert, make sure the expectations are clear to all parties, both verbally and in an engagement letter, as to what the expert is being asked to do. You’ll find better client outcomes and just might save everyone a headache.

By: LEAP Legal Practice Management Software | AAML NJ Silver Sponsor

Family law firms are faced with many challenges when serving their clients due to the arduous nature of resolving these sensitive legal matters. Attorneys have a responsibility to ensure that the process doesn’t cause any additional stress to vulnerable parties that may include children, conflicting caregivers, and spouses. To provide effective service, family law firms should make sure each minute is optimized effectively, focusing on the needs of their clients. Attorneys and law firm staff can implement 5 strategies throughout the life of a family law matter to manage a heavy workload, prioritize tasks, and increase productivity without sacrificing quality.

• Stay organized: There are many details and files to keep track of throughout a family law matter, which may include case and client information, historical files and documentation, correspondence including letters and emails with clients and other parties, and court forms, to name a few. Law firm staff need to have access to one centralized digital file that accounts for updates in real time. Dropbox, printed files in manila folders, or files stored on local drives all run the risk of being lost or becoming quickly outdated throughout the progression of the case. Legal technology that provides case and document management creates organization not only for the firm, but for the client service they provide. This is effectively demonstrated when records are easily accessible. For example, if a client calls requesting an immediate response or if you are at court and need to reference case details without printed documentation, centralized and mobile storage allows for timely action and quality service.

• Accurately and instantly keep track of your billable time: One of the most arduous administrative tasks for family law firms is legal time recording. This process is especially tedious and requires minute-by-minute recollection if done reactively or manually. Law firms can look to implement a system to simultaneously track time while working on a case, but they need to be careful that it doesn’t create additional work for other staff. While many software programs offer stopwatches or timers, a comprehensive legal practice management solution is most effective to ensure that legal time tracking instantly records across all key functions of a family law case.

• Automate administrative tasks: Sometimes, the most time-consuming functions for a family law matter do not include client and other party events like meetings or hearings, but consist of routine, but necessary, work such as creating correspondence, filling out forms, and sharing documents. It is necessary to eliminate double data entry and reduce the risk of input error for efficient production, and advances in legal technology allow firms to automatically and accurately populate case and client information. Reducing the time spent on filling out the Case Information Statement, Summons (Divorce), or Verified Complaint for Adoption, for example, allows staff to focus on other revenue- generating tasks such as responding to clients and creating invoices.

• Collaborate effectively: Clients and other parties contact firms frequently and through different channels to keep the case progressing. Secure file-sharing platforms optimize communication and ensure that sensitive documents are only viewed by authorized parties. Third-party storage and sharing systems like Dropbox or OneDrive create these vulnerabilities and are limited in functionality necessary in family law cases, like restricting access and requesting e-signatures. Legal file sharing and collaboration technology provides firms with the assurance that their information is safe, while clients can have the convenience and transparency of this secure storage.

• Make billing and invoice payments convenient: Family law firms that implement the above habits need to complete the case, not only with the resolution of the matter, but with the firm getting paid with a digital paper trail and in a timely matter. With family law practice management software that includes instant time recording, centralized accounting, and an online payment platform, the administrative work is reduced. Manual invoicing and processing payments is eliminated, creating opportunities for staff to focus on their existing clients or even new cases.

  When these timesaving practices are implemented, family law firms can ensure that they are efficient and productive. Client and employee satisfaction will increase when firms optimize their processes. This creates further opportunities for firms to increase their revenue and grow their business. To learn more about how legal technology can help your NJ family law firm, visit leap.us/new-jersey. 

By: LEAP | AAML NJ Silver Sponsor

Family law is continuously evolving due, in part, to shifts in societal attitudes, legal reforms, and changes in family dynamics. For NJ law firms specializing in family law, staying ahead in this ever-changing environment means being able to handle a wide array of sensitive issues—ranging from adoptions and divorces to cases of domestic violence—with efficiency and empathy. This is where legal practice management technology and automation can help revolutionize the way family law firms operate.

Automation creates efficiencies around the complexities of family law cases, and when utilizing legal practice management technology, it’s easier for lawyers to focus on what truly matters: their clients.

Let’s explore the features of legal automation, its benefits for family law firms, and how legal practice management technology is paving the way for the future of law firm efficiency.

Key Features of Automation and Legal Practice

Management Technology

Legal automation creates efficiencies for law firms, making it easier for attorneys and their support staff to manage their day-to-day activities. Legal practice management technology offers family law firms a suite of features tailored to the specific needs of managing sensitive and complex family law cases.

These features include:
Case Management: Organizes all family law case-related documents, communications, and information in one centralized location, facilitating easy access and management.

Client Communication Tools: Provides secure and efficient communication channels for attorneys and clients, ensuring confidentiality and timely exchanges of family law correspondence.

Document Automation and Management: Automates calculations and the creation of standard legal documents, saving time and reducing errors. It also helps in organizing and storing documents securely.

Time Tracking and Billing: Efficiently track billable hours and create accurate invoices so family law firms can enhance transparency and trust with their clients.

Calendar and Task Management: Helps in scheduling meetings, deadlines, and court dates, ensuring that critical tasks are not overlooked.

These key features of legal practice management technology improve the operational efficiency of family law firms and enhance the quality of service provided to clients.

The Benefits for Family Law Firms

The adoption of legal practice management technology with automation brings multiple benefits to family law firms, especially in handling cases related to adoption, child support, divorce, domestic violence, and family mediation. Here are some of the key advantages:

Enhanced Efficiency: By automating routine tasks and centralizing case information, family law attorneys can focus more on their client's needs rather than on administrative burdens.

Improved Data Accuracy: Automated document generation reduces the risk of human error, ensuring that legal filings and calculations are accurate and compliant with current laws.

Better Client Communication: Secure messaging platforms facilitate prompt and confidential client communication, fostering trust and satisfaction. Centralized Case Management: The ability to easily access and manage all aspects of a NJ family law case from a single platform helps in developing more effective case strategies.

Cost-Effectiveness: Reducing the time spent on administrative tasks and minimizing errors leads to lower operational costs and, potentially, more competitive pricing for clients.

For NJ family law cases, which often involve high emotions and sensitive situations, these benefits translate into more compassionate and efficient client service.

Setting a Standard for Family Law Legal Services

Legal practice management technology is not just changing the current operations within family law firms; it's setting the stage for a future where efficiency, accuracy, and client satisfaction are paramount. As these technologies evolve, family law firms will be able to handle cases more swiftly and with greater precision, offering tailored legal services aligned with unique family law circumstances.

The adoption of automation by family law firms represents a significant step forward in how legal services are delivered. By embracing these technologies, firms can enhance their operational efficiency, improve the accuracy of their work, and provide superior client service. It’s not just about keeping up with the times; it’s about setting a new standard and meeting the expectations of family law legal services that clients are looking for. 

By Wilmington Trust | Leading provider of Investment Management and Financial Advisory Services | AAML NJ Bronze Sponsor

Wilmington Trust’s Meghan Shue, Head of Investment Strategy & Portfolio Construction, and Christy Watkins, Regional Investment Advisory Lead, discuss how women face unique challenges that highlight the importance of making planning a priority. They explore the characteristics that make women adept investors, and where opportunity exists for women to fulfill their potential as captains of their financial destinies, which is particularly important after divorce.

Read the full article: Women & Investing: A Stronger Grip on Their Financial Futures (wilmingtontrust.com)

Contact Sharon L. Klein, Head of Wilmington Trust’s National Divorce Advisory Practice at 212-415-0531 or sklein@wilmingtontrust.com to discuss ways Wilmington Trust can help your clients successfully navigate transition.

By: Nicholas Fecci | AAML NJ Gold Sponsor Marcum

Marital Lifestyle (Analysis):

The marital lifestyle or the standard of living experienced when a couple resides together during marriage can be a crucial element in divorce proceedings. Financially, how did the couple live while they were married? What amount and type of income supports this lifestyle? How much alimony/child support should be awarded to sustain this lifestyle? These questions can be answered by engaging a forensic accountant to perform a lifestyle analysis.

 

What is a Lifestyle Analysis, and what does it provide?

A Lifestyle Analysis is a thorough examination of the standard of living that a couple enjoyed during their marriage. This analysis is crucial to help establish a factual basis for the couple’s spending and saving patterns and overall financial status. Forensic accountants can paint a factual picture of the marital lifestyle and expected future spending through a diligent review of historical financial records such as bank, credit card and investment account statements, as well as tax returns, property records, and loan documents, to name a few.

By reviewing the above documents as well as interviewing the spouse who manages the financials (if that is a feasible option), a Lifestyle Analysis can play a crucial role in the divorce process, especially when it comes to the calculation of alimony/child support, uncovering hidden assets and identifying various sources of income.

 

Spending:

A look into historical spending from a party’s marriage can provide a benchmark for the future spending of each person. A review of the bank statements allows a forensic accountant to categorize individual transactions into the income and expense categories identified from the Case Information Sheet, taking into consideration the following:

·        Spending of the parties both individually and jointly.

·       Recurring and non-recurring expenses.

·       Dissipation of marital assets (depletion of marital funds), if any.

·       All of the above considerations can paint a picture of the amount required to maintain a similar standard of living post-divorce to help the parties and their attorneys determine alimony and/or child support payments.

 

Hidden Assets:

During a divorce, it is not unusual for one party to attempt to conceal certain assets from the equitable distribution process. Through a review of bank statements provided, forensic accountants can uncover various hidden assets by analyzing transactions within the account statements, such as the following:

·       Transfers to additional bank/investment accounts not known by one of the parties.

·       Payments to loan institutions uncovering additional assets purchased during the marriage.

·       Transfers of money to corporations or entities for investment in their business.

·       Uncovering hidden assets is essential to ensure a fair and equitable division of property during a divorce. Even though parties are required to be transparent in their financial disclosure, a thorough lifestyle analysis is an essential step in ensuring that all assets are on the table and considered during divorce proceedings.

 

Other Sources of Income / Earning Habits:

The Lifestyle Analysis can also provide insight into additional sources of income that may not have been disclosed, including but not limited to the following:

·       Spending in excess of reported income without accumulating debt can indicate additional, undisclosed sources of income or assets.

·       Review of the income tax returns can identify investment income such as interest, dividends, and capital gains. These income sources can also be identified and confirmed through analysis of bank statements.

·       Direct deposits from additional employment unknown to one party.

 

Once the entirety of income is disclosed there is a clearer picture of the true funds required to support the standard of living of the parties.

The above discussion is a glimpse of why a well-prepared lifestyle analysis can be essential in ensuring all income and expenses are identified during divorce proceedings. It helps to ensure the likelihood of an equitable settlement by revealing any discrepancies between the lifestyle maintained and the income and assets reported. It can also help the court make informed decisions based on the true economic partnership of the marriage, ensuring the dissolution process is not only legally sound but also adheres to the principles of fairness and equity for both individuals as they transition to their new, independent lives.

By: LEAP Legal Software

3 Habits of Successful Family Law Firms: Business Tips for Legal Professionals 

As a legal professional working in family law, you’re an expert in navigating legal matters, but your legal education might not have prepared you to successfully navigate another critical but often overlooked aspect of the profession: namely, how to manage the business of law. While business obviously isn’t the focus of family law, it’s important to remember that family law is also a business. In order to achieve the highest levels of success for you and your clients, you need to be able to negotiate the financials of lawyering in addition to the practice of family law itself.

In this article, we’ll look at 3 common habits of successful law firms to arm you with practical business tips that you probably didn’t learn in law school.

1. Dedicate time to building the firm as a business

For many lawyers practicing in family law in New Jersey, the word “sales” is an anathema. However, to maintain and enhance the financial security of their firms, attorneys have to get over their aversion to drumming up business.

If you want more clients and matters, you need to “sell” your firm, plain and simple— but it’s crucial to do this in a way that leaves your clients feeling satisfied and respected at the end of the interaction. Successful firms do this by ensuring that there is constant alignment between the legal services that they offer, what their marketing material says, and what they and their staff say when they are actually selling the firm’s services. It’s this alignment and consistency of messaging that builds a powerful reputation, which will eventually repeat more business and greater cashflow.

Tips for action:
Have a vision for the future of your firm and share it with your staff Be attentive to the concerns of disgruntled clients
Have a coherent and consistent marketing plan

2. Employ smart people and treat them well

In most family law firms, people are both your biggest expense and your greatest asset. When morale is low and the workplace is less productive as a result, your people can feel like a cost. On the other hand, when your team is satisfied, respected, and properly equipped to do their jobs, your firm will produce more value for its clients; in fact, research from the London School of Economics shows that satisfied employees do more for their companies. This rule applies to law firms both big and small.

To make sure that your firm’s employees remain satisfied and productive, it’s important to provide proper and regular training, equipment, and support, and in many cases, smaller law firms are turning to legal technology to help their employees succeed. 84% of law firm employees in a recent Statista report said that legal technology had improved their firm’s productivity. Proper technology, a welcoming environment, and regular training can help your firm do more with less.

Tips for action:
Organize regular training for your staff
Provide an enjoyable workplace environment
Provide the best tools for your employees to do their jobs

3. Become an expert in customer service
Attorneys don’t learn customer service in law school, but strong customer service

skills are one of the most important keys to success for smaller law firms.

Smart customer service begins with thoughtful communication; from the moment the clients walk through the door until the matter (no matter how big or small) is completed, successful attorneys keep the client fully and repeatedly informed about the progress of the matter. In doing so, they consistently demonstrate how the firm values the client, which helps build the firm’s reputation and bring in new business. Referrals from satisfied existing clients are a primary referral source for many firms, but lawyers sometimes forget this and, as a result, can often overlook the value of good customer service.

Successful law firms know that the success of the customer is integral to the success of their firm. These firms and their employees are always coming up with

new ways to better serve their clients, including self-service portals where clients can book appointments, pay bills and make deposits, view their matters, and more. Great customer service requires a smiling face—but it also requires proper tools and equipment to meet the client’s needs and expectations.

Tips for action:
Create a workplace culture that values good customer service Reward employees who go above and beyond for the client Keep in constant contact regarding matter updates

Smarter Business Practices Benefit Everyone

When you implement smart business practices at your firm, you’re doing your due diligence to secure its financial success, and, in turn, the livelihoods of everyone you employ. But even beyond that, New Jersey attorneys should understand that financially healthy firms provide a higher standard of service, which benefits their clients and the community at large.

For more practical tips on how to succeed in today’s legal world, download the free whitepaper, “11 Habits of Successful Law Firms.” 

By: Christopher Byrnes, MBA I Marcum LLP

Accuracy is not just a goal in business valuation—it's a necessity. Marcum LLP performs valuations regularly and understands that precise calculations and judicious adjustments are essential for reliable valuations. One of the most critical adjustments we make is determining 'reasonable compensation' for business owners, an aspect often overlooked yet vital for presenting an authentic financial portrait. This article delves into the nuances of reasonable compensation and its profound impact on business valuation, sharing why it must be carefully assessed to reflect the true economic health of a company.

Reasonable compensation is a critical adjustment in a business valuation as it ensures that the profit/loss recorded by the business reflects the true economic picture by adjusting for the appropriate level of compensation for the business owner. If an owner is over-compensated, the business might appear less profitable than it actually is, as would under-compensation inflate its profitability. Both scenarios would lead to inaccurate valuations. 

Numerous resources can be utilized to provide a guideline for reasonable compensation, as would using industry statistics of compensation within the owner’s industry. However, reasonable compensation is not simply based on job title and hours worked; it must also consider the annual performance. For example, the CEO of a consulting firm whose revenue is $5,000,000, where the CEO generates a small portion of the business revenues as compared to a CEO who brings in almost all $5,000,000 in revenue. If valuation experts were to utilize statistics based solely on the industry, the revenue of the company, and hours worked, they would have arrived at the same reasonable compensation for both CEOs listed above. However, this would not portray an accurate picture as an owner who generates $5,000,000 of revenue would obviously be entitled to a much higher compensation level than that of a CEO who originates very little in revenue. In this scenario, replacement compensation should consider what benefits the CEO brings to the company instead of only focusing on their hours worked and job title. 

For example, let’s compare the reasonable compensation levels of professional athletes. There are thirty-two teams in the National Football League, each with a starting quarterback. Over the course of a season and career, there will be significant differences in their statistics and success despite all having the same job and working the same hours within the same industry. If an athlete were hypothetically replaced, the amount paid would vary based on their actual accomplishments. The same approach must be utilized when considering each business owner’s reasonable compensation.

The art of business valuation hinges on the fine balance between numbers and judgment, and nowhere is this more evident than in establishing reasonable compensation. As we have seen, this is not a simple arithmetic or a one-size-fits-all approach but a complex consideration of individual contribution and industry standards. This is why choosing a firm with the experience of having valued thousands of businesses, such as Marcum, is paramount.