© CTS Inc. - 2013

Top Challenges Facing 21st Century

Law Firms

1

An informative study on how you can survive the legal ‘buyers’

market and thrive among your competition

© CTS Inc. - 2013

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Researched and produced by…

Sponsored by…

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Why we commissioned a study…

• We understand that recovering from the recent recession has been especially difficult for lawyers and law firms nationwide

• Client demands are greater than ever

• We wanted to help find solutions to the challenges the law industry faces

• So we hired an independent research company to look into these problems

• We are pleased to share this executive briefing with you!

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Areas covered…

• Unveiling the challenges law firms are facing in today’s difficult economy

• How administrative challenges are affecting liability and bottom line profitability

• What the major drivers are of innovation in today’s legal industry and how law firms can capitalize on these opportunities

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The Law Industry Today

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More lawyers every year . . .

1980 1990 2000 2010600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000Number of U.S. Attorneys • Over the last 30 years the

number of lawyers has nearly doubled – marking an increase of 93%!!

• Projected growth of 13% by 2018 would mean an estimated 150,000 additional lawyers will be joining the workforce

Sources: Labor Force, Employment, and Earnings, No. 672. Employed Civilians, by Occupation, Sex, Race, and Hispanic Origin: 1983 and 1997, US Census Bureau; 1990 STF-4 Occupation Groups and Their Redistribution into the Census 2000 SF-4 Occupation Groups, US Census Bureau, 2005; NAICS 54111, Offices of Lawyers, BLS, March 2003; National Lawyer Population by State, American Bar Association, 2010

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Law firms were not immune to the recession

• From 1997-2007 the law industry almost doubled in revenue

• However, during the recent recession, legal business dropped nearly 11%

• More lawyers and less business equals a fierce competition for clients

1997 2002 2007$1.0

$1.4

$1.8

$2.2

$2.6

Revenue Growth 1997-2007 (in billions)

85% Growth!

Source: BTI Premium Practices Forecast 2011, BTI Consulting, 2010

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How did clients respond to the recession?

• Clients started applying more scrutiny to bills and demanding more for their legal expenses

• Even though cost continues to be a major concern, it is no longer the client’s top priority

• Their top priority is the perceived VALUE they derive from their investment

Source: BTI Premium Practices Forecast 2011, BTI Consulting, 2010

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And… client expectations have skyrocketed

• We know clients expect a great deal of VALUE from the law firms they engage and if they don’t get that value – they move on

• 60% of companies report having fired at least one law firm used by their company during the past year

• 7 out of 10 clients do not recommend their primary law firm

Series170%

30%

Sources: Lawyer Responsiveness: How Small and Mid-Sized Firms Can Stay Competitive in the Face of High Client Expectations, Blackberry / Research In Motion Limited, 2006; Nearly 70% of clients dissatisfied, Law Marketing Portal, April 13, 2006

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v

What is driving this dissatisfaction?

Cost over-runs

Delays Poor Quality Work

57%52%

44%

Reason for Termination When asked why they terminated a law firm, business executives cited the top 3 reasons:

1. Cost overruns – lack of perceived value for the cost

2. Delays – many clients attribute this to administrative incompetence or case overload

3. Poor quality of work – minimal ROI, return on their investment

Source: Research: Companies Want Law Firms to Help Them Increase Revenue and Cut Costs, Law Marketing, July 2, 2009

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Challenges continue to intensify

v

Let’s dive into the 5 challenges law firms face in providing the value that their clients want in this difficult and highly competitive environment

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Challenge #1

Client Retention and Turnover

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Clients were asked:

What are the most undesirable attributes in a law firm?

Failing to control expenses and disbursements

Overworking projects

Poor quality work

Mishandling critically important matters

LACK OF RESPONSIVENESS

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Working harder… not smarter is today’s reality

• The State Bar of California found that lawyers “Often find themselves so overworked that they miss deadlines or fail to communicate with clients”

• Due to the recession, the number of cases lawyers take outside their area of expertise has heightened

• These mistakes are fundamental to the reasons clients are firing their firms . . .

Source: Research: Companies Want Law Firms to Help Them Increase Revenue and Cut Costs, Law Marketing, July 2, 2009

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What are the results of traditional cost cutting measures?

• The lawyer-to-secretary staffing ratio used to be 1-to-1

• Firms are now at a 4-to-1 ratio

• The usage of paralegals has steadily increased over time – they are taking on more and more “critically important matters”

• Cost cutting has been a major focal point and now many clients feel that VALUE has been compromised

Poor Quality Work

Mishandling Critically

Important matters

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Quality control gaps are widening

One reason law firms struggle with retaining clients is because their management of people, processes and technology has not kept pace

• There are too many ways to make mistakes

• There are too many people involved in processes, • increasing risk of mistakes made

• Law firms are not making the best use of advances in technology to prevent errors in service

• …and the amount you’ll pay for these mistakes (in client loss, potential liability, and risk) is rising sharply

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Challenge #2

Lack of Competitive Value

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How does cost relate to value?

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• In a recent survey, only 1/3 of clients mentioned cost as an important factor when considering a law firm

• This means 2/3 of clients rank other aspects of service as more important than cost

Source: What Clients Want from Law Firms in 2009, Law Marketing, January 17, 2009

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What are industry experts saying?

v

• Many law department lawyers and Chief Law Officers surveyed believe firms should maintain or increase profits through innovation and increasing the value for their services

Not through regular price increases and more billable hours

Source: Law2020™ The Future Starts Now, The National Law Review, August 19, 2010,

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Billable hours are always climbing

v

• During the ’60s, attorneys at large firms billed about 1,500 hours annually

• Today they average from 2,000 to 2,400 billable hours a year

• However, client satisfaction has not increased at the same rate

• Retaining and attracting clients through increasing perceived value requires change

Source: Billable hours enslave lawyers, WORLD Magazine, October 27, 2010,

196019701980199020002010

1000

1500

2000

2500

Billable Hours Increase

85% increase!

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What do clients want & what do they value?

v

• Today’s clients demand:

Fast response Accurate results

Transparency and collaboration

• That’s bad news for law firms because:

Working faster means increasing mistakes and today’s clients have zero tolerance

The increased transparency today’s clients demand means your mistakes are more visible than ever

The bottom line is: Your cost goes up, your billable hours go down and your risk increases

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Adding value to legal service also includes:

v

• Improving efficiency

• Adapting to the changing needs of clients

• Consolidating key functions

• Adopting tools to increase responsiveness

• Increasing transparency

So, how are firms dealing with these

changes?

Source: Lawyer Responsiveness: How Small and Mid-Sized Firms Can Stay Competitive in the Face of High Client Expectations, Blackberry / Research In Motion Limited, 2006

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According to the National Law Review…

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• “law firms have not engaged in widespread or radical innovation” in response to the very clear call for change from their clients

• Too many are holding tight to the antiquated way of doing business

Source: Law2020™ The Future Starts Now, The National Law Review, August 19, 2010

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Challenge #3

Lack of Competitive Value

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Firms are not evolving in this technology age

• Four of the top ten (40%) reasons law firms lose money are directly related to lack of technology innovation

• Law firms reported in 2009 that:

75% of planned technology purchases were put on hold

Source: Paperless Archiving and Document Management Solutions, Archive-CD, 2009

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Working harder, not smarter diminishes productivity

A recent study of law firms showed:

• On average each employee wastes 8 hours per week on paper documents

• Firms spend:

$20 in labor to file a document

$120 to find a misfiled document

$220 to reproduce a lost document

• Lawyers spend around 10% of their time reading information but up to 50% of their time looking for it!

Source: Paperless Archiving and Document Management Solutions, Archive-CD, 2009

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Research also shows…

• Computer-aided review of documents can save 75% to 90% of time and labor over similar reviews done manually

• Law is an ancient practice seeped in tradition, but the industry needs to recognize the importance of

implementing readily available technology

Source: Computerized E-Discovery Document Review is Accurate and Defensible, Inside Council, January 1, 2011

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Challenge #4

Increased Liability

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Litigation is on the rise

v

There are 35,000 malpractice suits against lawyers every year

Administrative errors account for almost one third of reported claims in the Profile of Legal Malpractice Claims studies

Source: ARE YOU AT RISK? The Biggest Malpractice Claim Risks and How to Avoid Them, Law Practice Magazine, July/ August 2010

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Are clients getting the attention they deserve?

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• Another conflict that leads to malpracticesuits stems from “benign neglect”

• This neglect is due to the practice of lawyers taking too many cases and failing to give each client the VALUE they deserve

• Reasons for neglect may also include:

Failing to streamline

Failing to outsource key elements

Slow to adopt technology

Sources: Lawyers Overseeing Lawyers: Can lawyers police themselves? A new look at self-regulation, Insurance Journal, July 3, 2006; “Investigation and Prosecution of Disciplinary Complaints Against Attorneys in Solo Practice, Small Size Law Firms and Large Size Law Firms”, The State Bar of California, June 2001

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Even if you don’t get sued . . .

v

• The liability for any mistake is growing and losing a big client can be a death sentence for your company

• In a field where accuracy is key and respect is key, your reputation means more and more - it’s the capital you trade on every day

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Challenge #5

Not Adapting To the Speed of Business

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The speed of business has changed

• You have to do more with less and do it faster

• You can’t do it all yourself anymore!

• You have more partners and vendors than ever and your reputation is in their hands

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Small mistakes can lead to big consequences

• The number of mistakes partners and vendors make add to your liability and increase your costs

• Losing just a handful of top client could cost you millions!

• Nestle dropped a major national firm when a series of mistakes (including a misdirected fax) became too much to overlook

Sources: Clients declare the unforgivable law firm mistakes, Oct 2010 Lawyers Weekly

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Resources are scarce for those you partner with

Robbing Peter to pay Paul:

• Many state budgets have restricted innovation of business filing processes through the following methods:

They now divert a percentage of filing fees to other departments Secretary of State’s budgets have been cut by up to 25% over the last 2 years!

Source: Business Information Modernization (BIM) Proposal Update, California Secretary of State Debra Bowen, December 1, 2010, http://www.sos.ca.gov/business/pdf/processing-times.pdf

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Too many documents, too little time

• This dramatically increases the amount of time it takes to process filed business documents

• Today, some Secretary of State offices process over 1 million Statements of Information each year – that’s 3,846 documents every DAY!

• No one can afford delays, not you or your clients

Source: Business Information Modernization (BIM) Proposal Update, California Secretary of State Debra Bowen, December 1, 2010, http://www.sos.ca.gov/business/pdf/processing-times.pdf

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Time is valued by clients

• The entire filing process for an LLC, merger or acquisition can take 10 to 60 business days depending on demand and staffing

• If a single item of the filing is incomplete or misfiled, the entire process MUST BE REPEATED, doubling the filing time

• Long delays can severely hinder business transactions – especially in complex merger and acquisition cases

Source: Forming a California LLC: Mistakes to Avoid

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Today’s reality. . .

• Declining margins/demanding clients mean the consequences of poor business decisions are now more expensive and more immediate

• Change, innovation, technology and outsourcing must be embraced to provide a competitive advantage in tomorrow’s world

• Let’s look at four cost-effective strategies a law firm can incorporate that will streamline their business and improve their bottom line

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Strategy #1

Embrace the Value Challenge

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What is the Value Challenge?

v

• The Association of Corporate Counsel’s (ACC) Value Challenge is founded on the premise that…

After years of price increases and minimal innovation and efficiency, the connection between the value of legal services and the price has been severed

• The Value Challenge is an effort to restore balance between value and cost

Source: ™ The Future Starts Now, The National Law Review, August 19, 2010

VALUE COST

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What do clients perceive as value?

v

Let’s compare what law firms believe clients want and the reality

Source: Lawyer Responsiveness: How Small and Mid-Sized Firms Can Stay Competitive in the Face of High Client Expectations, Blackberry/ Research In Motion Limited, 2006; Law Firms in Transition, Altman Weil, 2010

More price competition

Successful results

Responsiveness and accessibility

Honest evaluation of

client’s position

Quality work

Use project management to improve efficiency of service delivery

More non-hourly billing

Law Firms Clients

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Initiatives and suggestions of the challenge include…

v

• Offering a flat monthly fee or other non-hour based fee structure for services provided

• Increasing the scope of functions you provide so that clients can group contracts together

• Offering Request For Proposals on services to increase transparency

• How do you do these things without increasing your administrative burdens?

Source: Law2020™ The Future Starts Now, The National Law Review, August 19, 2010

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How do you get to the next step?

v

Incorporate Technology

Outsource Time Intensive Processes

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Strategy #2

Incorporate Technology

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Technology enhances communication

• Technology is a cost-effective way to provide real-time updates & enhance communication between multiple parties

• It can increase transparency throughout all aspects of the process including:

Showing all possible outcomes

Expected length of time and fees

Enhanced notifications of changes needed

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Real time communication is VALUED!

“All people (you, your clients, your outsourcing partners) want to access their applications and information when, where, and how they want”

– The National Law Review

• The highest cause of client anxiety is not knowing the status of a case

Source: Law2020™- What Will It Take for Law Firms to Thrive?, The National Law Review, December 24, 2010

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Cloud computing can bring everyone together

• According to an International Legal Survey, 39% of law firms are either currently implementing or actively considering future use of cloud computing within various facets of their business

• hey have found that using this technology can increase communication and reduce administration expenses

• They also want their outsourcing partners to have this technology as well

Source: Law2020™- What Will It Take for Law Firms to Thrive? The National Law Review, December 24, 2010

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What is it?

• Cloud computing is location-independent computing, where shared servers provide resources, software, and data to computers and other devices on demand

• It is real time information and collaboration that’s accessible anywhere in the world at any time as long as there is an internet connection

Source: Law2020™- What Will It Take for Law Firms to Thrive?, The National Law Review, December 24, 2010

CloudComputing

System

Filing Company

Paralegal

Lawyer

Client

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Cloud computing provides flexibility and agility

Lawyers want to be mobile: Over 70% of American Bar Association members say they at times telecommute from a wide variety of locations and use various mobile devices out of office

Source: Survey Documents Rise of Telecommuting Lawyers, ABA Journal, July 9, 2010

88%

32%21% 14% 12%

Telecommuting Locations

95% 89%79%

Use of Mobile Devices Away from the Office

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Libr

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Strategy #3

Incorporate Outsourcing

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Clients value deadlines

• So… how do you meet or beat deadlines?

• Outsource to companies that specialize in areas of legal administration

• This frees up human resources so that personnel can focus on:

• Core competencies

• Streamlining processes

• Responding more effectively to increased workloads

Source: 2010 Law Department Outsourcing Study, ALM, 2010

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Consider the following firm’s experience

• Phillip J. of Burnham and Associates had two clients merging their companies to form a new LLC

• This was a $12.3 million deal with a large loan accruing approximately $3,000 per day in interest while the deal was waiting to be closed

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Consider the following firm’s experience

• After due diligence had been completed by one staff member, Phillip assigned another to send the documents to a filing company to process the merger articles with the Secretary of State (SOS)

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Small oversights lead to huge problems

• After a three week delay the documents came back to Philip’s office via courier

• The documents had been rejected by the SOS due to a name duplication and a missing signature on one of the forms

• The filing company had experienced continual staff turnover forcing 3 different employees to handle the transaction

• . . . hence no one caught the errors before the documents were sent

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The results…

• Philip had to notify his two clients of the delay

• He also billed his clients the cost of recreating and resubmitting the documents, along with duplicate payments of state fees the second time

• Understandably, the client was livid

Delays were costing him thousands in interest each day

And the deal remained unfinished

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The solution

• Philip instructed the paralegal to fix the mistakes and send the documents to a different filing company as soon as possible

• Because the new filing company operated through a cloud computing system, the paralegal simply uploaded or scanned the documents into their system

• This allowed both clients, Philip, all the paralegals and the filing company to have immediate, secure access to the documents

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Attention to detail

• Philip instructed the paralegal to fix the mistakes and send the documents to a different filing company as soon as possible

• Because the new filing company operated through a cloud computing system, the paralegal simply uploaded or scanned the documents into their system

• This allowed both clients, Philip, all the paralegals and the filing company to have immediate, secure access to the documents

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Ultimate results

• The account manager advised Burnham and Associates to upgrade to a 24 hour expedite filing service because she had checked with the SOS and the filing turnaround was backed up to 3 weeks

• The filings were accepted and the merger completed within the next 2 days

• Both clients expressed their ultimate satisfaction in the transaction results due to the quick turnaround of events after initial mistakes had been made

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The ROI of outsourcing can be substantial

Source: 2010 Law Department Outsourcing Study, ALM, 2010

. . . especially when utilizing a cloud computing system

• You should hope to expect:

Real time information and filing updates between all parties involved

Response time can be reduced by 500%

Notification of need for additional documents is instantaneous

No lost files!

Reduced costs through reduced administration

Higher perceived client VALUE

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Strategy #4

Choosing the Optimal Outsourcing Partner

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Vetting your vendors

• Are you as careful when hiring a vendor as a new associate?

• Make sure the partner you entrust with confidential client materials is equipped to protect those materials

• Do not assume that all providers are fully capable of delivering

Source: Easy mistakes to make when embracing LPO, Outsourcing Beta, 9/10/10

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What should law firms value?

• In a recent survey, 77% of law firms said their #1 criteria (VALUE) for choosing a vendor is customer service

• What does customer service entail?

Quick responses

Prompt resolutions

Assistance with problems specific to

their area of expertise

• Firms become dependent on vendors to provide accurate and excellent results… just like their clients!

Source: Vendor Satisfaction Survey: Help, Please!, Law.com, June 23, 2010

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Customer service also includes . . .

• Accuracy

• Uniform, high level of support

• Speed

• Innovative technology that incorporates cloud computing

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State of the art technology systems

• Consider vendors with technology capabilities that allow secure collaboration between the vendor, you and your client

• We know clients want access to all processes and information . . .

• Consider how access 24/7/365 to important documents would increase your work speed, make your workload easier and give clients what they want

• Make sure your vendor is staffed to accommodate the work you send their way

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Agility matters

• In order for you to show innovation, vendors you partner with need to demonstrate agility

• Look for partners who have evolved their organization of people, process and systems for optimal responsiveness

• Expertly trained and dedicated account managers with years of experience will adapt their service to fit your needs

• An organization with tailored service is the kind of vendor you want to build a long term relationship with

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Who here has learned something of value today?

We hope you learned that despite a difficult market place, there are ways that firms can decrease their administrative challenges and provide more VALUE to their clients

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This study was sponsored by…

Allow us a few minutes to tell you about our company . . .

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Who we are . . .

• Founded in 1979, CTS is a public document filing and retrieval service company

• We are proud of our position as leaders in the industry and take extra effort in serving our clients’ needs

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Agent Representation

CTS offers professional registered agentsin many states including:

Arizona

California

Washington DC

Delaware

Florida

Louisiana

Nevada

New York

Oregon

Texas

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Technology is key

• We use a state of the art cloud computing system unique to our company

• This allows you to share documents with your clients and in-house collaborators with a level of transparency that not only decreases risk of mistakes but heightens service in both decreased time and increased quality

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Other benefits we bring…

Cost Effective & Efficient

• Partnering with attorneys, banks, escrow, and CPA firms, we provide the most cost effective and most efficient filing and retrieval service in the industry

• We provide the highest quality service for the price

Highly Skilled Staff

• Our staff has many years of experience and is highly trained

Each account manager averages more than 8.5 years experience with our company

• A major portion of our on-going training program includes complete instruction on all Corporate and UCC law changes

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Making you look your best

Timely Turnaround

• At CTS your time is valuable

• If you need special or urgent attention, let us know and we will do everything we can to help you

Outstanding Customer Support

• We take great pride in providing the highest quality service and customer support in the industry

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What our customers are saying…

Thank you Kristy!!!!! My stress level just dropped 100%. Thanks to you we can close. I will definitely let all parties know that CTS, you in particular are one of the reasons we will be able to close.

- Larry

We have been using CTS for the past ten years, and have found their customer service to be outstanding, knowledgeable, reliable and helpful.  We have had a wonderful experience using their services from filing documents with the California Secretary of State and other statesthroughout the United States. We would highly recommend using their services.

- Sherrie M.

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“ “

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What our customers are saying…

Like an exceptional friend, CTS is always there.  CTS has been Berliner Cohen’s “go-to” filing service and resource for over 12 years, and in all that time they have not failed in providing us with excellent customer service while going above and beyond.  When we have questions or last minute filings, solutions arrive promptly and professionally.  We wouldn’t go anywhere else.

- Berliner C.

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“

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Our gift to you

We would love to be your choice vendor and ensure filing accuracy and top speed in all your searches and filings.

Trial Package:

6 month free UCC monitoring in California

We’ll invest in you because you’re going to love our service!

10 complimentary California UCC searches

© CTS Inc. - 201376

www.caltitlesearch.com

(916) 448-1397 or (800) 482-1497

1005 12th St Ste.E, Sacramento, CA 95814