Most law firms are still too frightened of external investment to take advantage of the opportunities it can offer, according to entrepreneur James Caan.
The former Dragon’s Den judge, who invested in Knights Solicitors more than two years ago, today told the London Law Expo that several investors are keen to pump equity into the legal profession.
Caan (pictured) said he met with considerable resistance from staff at the firm at first, encountering unease about huge spending on technology and changing working practices.
And he said there remains reluctance from most firms in the wider profession to invite external investors into their businesses.
‘[Law firms] are still struggling with the concept and ambition of giving equity away to a third party,’ said Caan, who is the founder of equity investor Hamilton Bradshaw.
‘You’re still sitting on the fence and are not ready for it yet. There is a fear of the unknown.’
Caan said it is impossible to enforce any decision on staff who do not want it, and stated that investors are looking for all partners to support the idea of another party involved in ownership.
With Knights, he said the firm has doubled its number of lawyers since 2012 and increased turnover by 100%.
But the transition involved educating and mentoring senior staff who were unsure about investing more than £1m in the firm’s IT.
‘People genuinely didn’t believe it would make a big difference,’ he said. ‘Their view was “we have done this for 250 years and it’s not broken so why should we invest that much money?”.
‘Pretty much every decision we made came with massive resistance but the overriding feeling was the organisation needed to move forward. I took the partitions down and got rid of individual offices to go open plan and they looked at me like I was from Mars.’
Caan added that constantly seeking to recruit was a key factor in any successful business – and not just when a vacancy becomes available.
He also said firms should discuss the issue of performance-related pay, citing an example of a finance officer who significantly cut the number of lock-up days when she was offered a bonus for doing so.
‘If somebody is billing £400,000 and someone billed £20,000 and their income is the same, I’m not sure that [model] works for me,’ he added.