Updated: Mar 1, 2022
In competing for work, expertise and experience are the table stakes for playing in the legal services game. But a deep understanding of the business, its operational culture, the internal politics, its industry, and how decisions are made inside the company is the type of information that gives you an unfair advantage when competing for work.
...expertise and experience are the table stakes for playing in the legal services game.
Privately-owned companies do not share much information about their financial condition or operations. Even public companies only share what is required by regulators. The most valuable information can only be gleaned through conversations with those who know the company. Take some time to get to know the business managers and staff who work for the company and ask them about their areas of responsibility. Ask others who have experience with the company such as other lawyers, former and current clients, competitors, and analysts. In doing so, you'll learn new perspectives and insights that you might not have from the top leadership of the company.
The following questions will help you better understand the company, its operations, its markets, and its competition.
Goals, critical issues, and challenges
What is the stated strategy of the company and what long-term goals have been set?
What has been the financial performance of the company over the past few years? (Consider revenues, profit margin, debt, cash, ROE, PE Ratio, etc.) Is the company growing or shrinking, meeting its financial goals, and what consequences or opportunities has the company experienced as a result of its financial performance?
Which divisions or products and services of the company have grown the most, shrank the most, and why?
What is the business model of the business? What makes the company unique? How is it differentiated in the marketplace? What is its value proposition and how does the business align its suppliers, processes, resources, and talent to deliver unique products and services to customers?
Who is on the Board of Directors, past and current? Which companies did they come from or unique disciplines and skills do they have and what does that imply about their strategic direction and resource needs? Are board members investors in the company?
Who are the key executives in the company? (Consider the CEO, finance, operations, marketing, legal, HR, regional presidents, etc.) What are their backgrounds, previous company experiences, and expertise?
What are their responsibilities? What decision-making authority do they have? Are operations compartmentalized (for instance, Regional Presidents have the authority to select attorneys) or are the decisions centralized? Which direction is the company moving toward in terms of centralizing or dispersing authority?
The company’s corporate tree and related companies
What other companies or divisions are part of the corporate tree?
What is the business structure and performance of these related companies? (Description of the products or services, operational structure, geographic reach, financial performance, etc.)
Is the company adding or subtracting from its corporate tree over time and what conclusions can you draw from these changes?
Key financial indicators
With public companies, this data will be easily accessible. Private companies will require a meeting with company leaders and structuring the conversation to get at this information. Where possible, compare this information to the company’s competitors and industry peer group to get a sense of the comparative performance of the company.
The Company’s Annual report- pay special attention to accounting and management comments - review the balance sheet (Assets, liabilities, and shareholder equity)
Review the company’s Liquidity - liquidity is a key factor in assessing a company's basic financial health. Liquidity is the amount of cash and easily convertible to cash assets a company owns to manage its short-term debt obligations. The two most common metrics used to measure liquidity are the current ratio and the quick ratio.
Review the company’s Solvency - closely related to liquidity is the concept of solvency, a company's ability to meet its debt obligations on an ongoing basis, not just over the short term. Solvency ratios calculate a company's long-term debt in relation to its assets or equity. The Debt to Equity Ratio is a good indicator of solvency for most businesses.
Review the company’s Operating Efficiency - a company's operating efficiency is key to its financial success. Its operating margin is the best indicator of its operating efficiency. This metric indicates not only a company's basic operational profit margin after deducting the variable costs of producing and marketing the company's products or services, but it also provides an indication of how well the company's management controls costs.
Review the company’s Profitability - while liquidity, basic solvency, and operating efficiency are all important factors to consider in evaluating a company, the bottom line remains a company's bottom line: its net profitability. Companies can indeed survive for years without being profitable, operating on the goodwill of creditors and investors. But to survive in the long run, a company must eventually attain and maintain profitability. The best metric for evaluating profitability is net margin, the ratio of profits to total revenues.
Key operational initiatives
What is the company’s growth in terms of revenue and profit growth, stock price, market share, and competitive rankings?
Which divisions or business lines generated the greatest increase in revenues. Greatest losses.
What initiatives are planned for the next one, three, and five years? What is the status of each? (Consider new products, cost-cutting, process improvement, new technologies, etc.)
Who are the major direct competitors of the company?
Describe the competitive experience of the company in terms of a number of competitors, types of competitors, pricing pressure, etc. Which players have the largest share of the market?
What alternative substitutes to the company’s services or products are available?
What are the four to five most important trends or market forces affecting this company’s business? (Consider changes in demographics, technology, sourcing, distribution, economic forces, international trade, regulations and legislation, etc.)
If different, what market trends are affecting the company’s industry, individual locations, or another segment of the company’s operations.
The customer bases
Who are the key or largest customers of the company?
What is the profile of the typical buyer of the products or services of the company?
How long do customers tend to remain with the company?
In what ways does the company build client loyalty or integrate with business clients?
The suppliers (and other dependent relationships)
Who are the major suppliers in the company’s value chain?
What product, service or role do the suppliers play, and where in the delivery chain do they come into play?
How critical are the suppliers to the company’s ability to deliver to its customers? Are there numerous alternative suppliers or are the suppliers specialized and scarce? Does the company have easy access to suppliers in the U.S. or does it use foreign suppliers? What are the regulatory issues that affect the company’s suppliers?
Partnerships, alliances, associations, and regulatory ties (independent relationships)
What companies act in concert or partner with the company to deliver its services or products?
What associations or alliances act in cooperation to influence the market for the company’s products or services? How critical is their role and how large or influential is the group? How influential is the role of the company in the group?
What regulatory authorities work to facilitate or monitor the delivery, quality, impact, research, or other output of the company?
What are the core values of the company? How would you describe the company’s culture?
What is the company’s mission?
How do people inside the company describe the company’s culture?
What societal challenges does the company care about?
Is the company involved with or a member of a specific community or professional organization? Name those the company is most active in.
What evidence can you cite that demonstrates the company’s commitment to perpetuating the company’s culture and societal or community commitments? (Consider hiring practices, community involvement and charitable initiatives, investments, statements by the top executives, decision-making process, vendor selection criteria, etc.)
Legal issues management
Does the company have lawyers on staff?
Do any of the board of directors or C-suite positions hold law degrees?
If so, what practice areas do these individuals and those of the in-house lawyers practice in?
How is the legal department organized?
What vendors do they use for knowledge management; e-discovery, case management, e-billing, etc.?
What types of litigation has the company faced in recent history? Is there a pattern in the types of cases or matters or the type that are taken to trial?
Is there open or pending litigation currently?
Are there any areas of litigation in which the company expects to have to deal with in the near future? Why? (Consider litigation sparked by product development, research, consumer access to services, facilities, or products, changes in the regulatory environment, demographic changes, pending or proposed legislation, etc.)
Mergers and acquisitions
What are the companies that have been acquired or have merged with the company in recent history? What types of companies were they? What size were they and what has been the history of their financial performance? What new capabilities did these acquisitions bring the company?
What was the strategic objective for each of these acquisitions? (Consider financial performance, cost of acquisition factors, securing resources, securing suppliers, securing distribution, acquisition of new products or product line extensions, new geographic or demographic segment access, international expansion, acquisition of talent or human capital, etc.)
What intellectual property filings have been submitted recently? (Consider patents, trademarks, and copyrights.)
What Patents does the company or its key executives own? Are they patented products or business processes?
What are the trademarked products or services of the company?
Decision Process and controllers
Who are the key decision-makers and how do they determine when to hire outside counsel? Is there a regular review process? How are ad hoc hiring decisions made?
What impact can you have on the company’s operations? What implications are likely to occur in the company as a result of the work that you do? How might the company need to change its operating model or aspect of its operations? What are the inherent risks and rewards of addressing the issues for the company?
Who are the stakeholders who have influence in the matters that you handle? What role do they play in the decision process? Where might objections to the changes in operations emanate from within the company?
How are budgets determined for legal matters? How are priorities set among competing projects?
There are a thousand questions that you could ask to understand a company’s business. But this list will at least get you started. The objective is to formulate a good understanding of the company and how it operates. In this process, you may also find legal issues that can be the basis for sales conversations.
Keep in mind that it often takes asking questions in different ways or numerous times to get truly meaningful information for your analysis. Gently probe for more information about each subject area until you get information that helps you gain a thorough understanding of the company’s operations and strategy. Expect that this process may take several meetings and lots of independent research. But it is worth it for the most desirable companies in your target list.