← Personal Injury Mastermind w/ Chris Dreyer
Personal Injury Mastermind w/ Chris Dreyer
422. You Don't Have to Sell Out: Navigating MSOs and Hyper-Growth w/ Tim McKey
00:32:42
Your competitors are securing private equity war chests. Here’s how to use MSO structures to your advantage, deploy your marketing dollars ruthlessly, and fix the $600,000 intake leak that costs you cases.
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- [00:02]
A
The legal landscape is changing. Private equity is entering the chat and managed service organizations, or MSOs are changing the way law firms scale, access capital and compete. You don't have to play the PE game, but if you want to stay competitive, you have to understand it. Today we're talking with Tim Mackey, CEO of Vista Consulting. Tim knows this world inside and out. He recently served as a key strategic advisor on a landmark private equity deal that that transition Dudley DeVos your injury lawyers into an MSO structure. We're breaking down exactly what an MSO is. How to protect your firm's core values if you bring in capital. And we even play a little game on how to deploy a marketing budget as a startup versus a scaling eight figure firm. This is Personal Injury Mastermind. I'm Chris Dreyer, founder and CEO of Rankings IO, the elite performance marketing agency for personal injury law firms. Let's get into it. First of all, just what is an MSO for our audience?
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B
Yeah, a managed service organization is simply an entity that has employees and know how and has licensed name, image, likeness from someone else and it then provides services to another organization. So it's a managed service organization. In this case. If you picture a law firm before a managed service organization, everything is within that one entity. All the paralegals, the copy machines, you know, the know how, the systems, the processes, all that are is within one entity that also practices law. And what an MSO is is simply the creation of a new entity and you take all of the support and you drop it into another entity and it provides services back to the law firm. So and going the step further, the private equity or anyone who wants to invest in this service industry can, because it is not a law firm. So the law firm has to be owned by lawyers, except in Arizona, Puerto Rico and D.C. where they have some non lawyer ownership provisions. But by and large in this country, lawyers have to own law firms. But with this creation, we've got a service business that provides just about 100% of the support services to the law firm. Lawyers are still in the law firm. They're not over here. Their practice of law is in the law firm 100%. All the decisions made on cases and all that within the law firm support services over here. So that's a very brief explanation of something that gets a little bit more complicated, but that's what it is.
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A
Yeah, thank you for that. So that makes sense from a, you know, you got a way, a means of getting capital in or out of the business. Let's talk about the pros what are some of the cons? And we need to talk about it versus the ABs. But like what are some of the pros and cons just come to mind?
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B
I'll compare ABS to MSO first. Abs, meaning alternative business structures, which is the type of entity that has been created in Arizona, Puerto Rico and in Washington D.C. they are law firms that can actually have owners that are not lawyers. There were some rules that were amended, changed or erased. Even in Arizona, where non lawyers can own law firms, that's an abs. The pros with that is what you would think. Then you can get capital. The people that come in non lawyers may have capital to inject into the business. The big con is that not all states recognize this alternative business service. In fact, there are some states that are now writing into their bar rules that hey, this particular state cannot share legal fees with a ABS law firm, a law firm that has non lawyers in it. So you've got these cross state lines problems, which is huge because, you know, I thought of it when it happened that it had to be a domino effect. You know, every state had to fall. Well, not many have fallen in the three or four years ABS came about. Really only one or two dominoes have fallen at all. And there's been a lot of resistance. However, I want to contrast that now with the MSO structure, which I already explained, which it's not ownership of the law firm by non lawyers, it's ownership of a support service by non lawyers, or at least part of it. In the transaction that I was involved with, you know, private equity bought a piece of the support entity and with the idea that they bought a platform firm, a Dudley de Bossier, and people know who that is. And that was the most public or really the only one that I know that's been totally publicized in the country right now. They went from the acquired to the acquirer right after closing. So they were acquired with the idea that they, along with private equity, were going to fund additional acquisitions to come under their mso, or at least maybe a sister MSO beside it. So the pros of that is an ability to grow in a way that, that is scalable, potentially provides capital. If you think about it, you know, the daily demos guys, they may have been doing really well, but they weren't ready to go out and buy five other law firms. So this is a methodology of doing that. You know, it's not right for everyone. I mean, you, you're relinquishing some, some of the management, or at least, you know, input to management. To someone who, whether they're a lawyer or not, to me makes no difference. You relinquish it to somebody else. You know, you have a partner now. You know, the three guys in Dudley Devozier have been together for 15, 16 years and now all of a sudden you're letting someone in that's going to own a piece of your management company. And look, whether or not it's private equity or Joe Blow or whoever, that's still a big decision, you know, to bring in a partner. So a lot of the discussions and frankly my involvement with these guys were much more before the letter of intent was signed with hey, is this what we want to do and why? What makes sense for us? And running all those traps, for lack of a better word and the why
- [06:19]
A
I think the capital in allows for the opportunity for the expansion. You know, the other thing too is, you know, currently securing those non attorney all stars, right? I know there's the LTIPs, those long term incentive plans with the phantom equities and the dividend stuff. But that's not the same as through and through equity.
- [06:39]
B
No, it's not. The law firm decisions have to be made by lawyers. It's over here. There's a clear distinction. But here we've got a potential exit strategy for practitioners who want to, you know, maybe are older and want to get out or maybe they're younger and aggressive and want to be a smaller piece of a much larger pie. There's a lot of different ways to play in this, but we need to get it right.
- [07:03]
A
Let's talk about second order effects, right? The, you know, with Dudley, they have one of the seven powers of, of scale economies, right? So when they start doing this and they start acquiring and just the MSO vehicle itself lends itself to scale economies, then they have pricing power to go buy, you know, broadcast television and all these things at a discount. How does that impact, you know, the mid size guy trying to advertise the B2C?
- [07:32]
B
I think it's something that not just midsize but small firms should pay attention to and know that competition may be increased as these firms get larger and go statewide section of the country, regionally and then potentially nationally. I do think that there will be a look at economies of scale. But I also know that when the MSO and the, the firms that are doing this, not just Dudley debosier, but the next one and the next one, more than likely they're going to be acquiring firms that are okay to stand alone. In other words, they're not Going to need a lot of heavy management right away. I think that will be phase two. I think there will be some accumulation of firms. Then there will be what I call integration where they will be looking at those economies of scale because you don't want to be forcing someone right out of the, you know, right when you hey, we're going to change this, this and this. That is not the goal. That will be a gradual change in my opinion, because that's how it can get traction. And yeah, I think, you know, if you want to do a national buy for TV or marketing services, I think that's an easy one. But when you start talking about hey, should we all be on the same case management system? Should we all have the same tech stack? Should we all be doing this, this and that? I think that may be a little bit further down the road, Chris, as this structure evolves. And it just makes sense because you don't want to go in, you know, and overhaul everything. Look, this is day job. When we go into firms and look at their operations is to decide how to debottleneck. In other words, where are the problems? How can we help this firm be more efficient and effective? And we don't want overhauls, we want a tweak. You know, we, and that's, you know, everything we do is extremely custom to the general public. You know, the education that I'm trying to get out there is you should be aware of these things that are coming, but don't think that you've got to be a part of it. It may not be right for you, but it's, you need to evaluate, understand what your competition is. I think that there will be a time when in the not too distant future the firms will start looking at other case types. They're mostly looking at plaintiff personal injury firms. I can see down the road where you bring bankruptcy, family law, all these different case types under. And I use the example of Walmart, you know, that, you know, you can buy bananas and you can buy a hundred inch high tech tv, you know, in Walmart we should be aware of these things, that it's coming, you know, what can you do? You can specialize, you can, you know, there's lots of different ways to attack it because we still have the corner hardware store that does very well because they're so service oriented. I want to make sure that these larger firms stay that way. That's kind of my personal goal.
- [10:25]
A
So I think there's a lot of truth to everything you just said. You know, I was reading Brad Jacobs book, you know, how to make a few billion dollars. And he was talking about looking at these fragmented industries and, and the impacts of consolidation like he did with waste management and talking about the back office, you know, the integration of tech and data and those advantages pretty hard to compete against from a B2C perspective unless you do have, you know, some specialization. I think that belly to belly, old school and just a boutique willing to have a specialization, a certain case type is going to be really that much more valuable.
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B
I think that you're absolutely right and that's why the fact that this consolidation or this investment of capital into this service organization in the plaintiff law firm space is so interesting. But you don't have to play. You can decide there are other things that you can do. There's no industry more fragmented than the plaintiff personal injury space. The insurance companies are very consistent in their message to the public. You know, where you're in good hands, we're going to take care of you. All the things that you hear and the plaintiff personal injury are all get your check today, blah blah blah, this or that. You know, it does confuse the buying public and I think there's another opportunity here to have some education to the public as well.
- [11:49]
A
So thousand percent agree. I was looking at Media Radar and some of the data, the data components of on the other side, right. State Farm, Geico Progressive, you know, their advertising vehicle on say television and they, they do the national buys that they're not doing the local spot buys, you know, and think about the buying power and, and the cost per impression that they get versus the PI and just the, the data intelligence on the negotiation aspect. It's, it's so I, I support the mso. I think it's a move in the right direction. We'll see how it plays out. Even up is a specialized proactive AI built for personal injury law firms. Personal injury is in their DNA. Visit evenuplaw.com to learn more. It's easy to talk about high level private equity and eight figure budgets, but what happens when the rubber meets the road? I wanted to put Tim on the spot with his operational experience, looking under the hood of hundreds of firms. I threw a hypothetical at him. How do you spend your first million in a highly competitive market? Let's say we got a startup with a low budget, say a million bucks, you know, you're coming into a competitive market, you know you're trying to advertise B2C and I know these are all hypotheticals and probably, you know, what do you do with $1 million, you know, and then we'll do, hey, let's, let's jump it up to 10 and then let's jump it up to the big boy.
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B
Yeah. And I'm gonna, I'm gonna play the consultant because it depends. Are you a startup you got just coming out of school, Are you coming out of another firm? You know, do you have any type of customer base? Do you have, you know, there's so many different angles to this.
- [13:43]
A
Yeah, let's. Let me give you, let me give you a scenario here. Let's, let's say Chicago. Let's say I'm, you know, I'm a typical auto, you know, I'm not a through and through litigator. Maybe I've tried a couple cases, but I'm not someone that's going to be, you know, doing a really specialized trial. I'm just an, you know, an auto practice. Trying to get your foot, get, get traction. Yeah.
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B
I would go visit as many other attorney firms that are a little bit larger than you and try to arrange something to get the cases that may consider to be too small. That's very cheap. It's a lunch, it's a bottle of wine. It's one of those things because that you said, I think belly to belly that in the startup is going to be as important. You know, if you're, you know. Yeah. Are you going to do a little bit of maybe SEO and looking to something like that? A little bit. But you got to get, you got to get some inventory to be able to leverage from. And the best way to do that is, is through relationships. And again, if you've moved there from, who knows, Ottumwa, Iowa, and you don't know anybody, look, I might question your judgment of going to Chicago, you know, so again, I'm not trying to be flippant, but every case is going to be a little bit different. But if you're there, you're coming out of a firm say, you know, unless it was a bad relationship or something, hey, do this, you know, these cases give you a good, good referral fee split. You got to build up your inventory, build up your panache, if you will, and you talk to others, you talk to the service providers. You know, you do what you do in any business to drum it up. Just because it's a lawyer doesn't. Again, I was a general business consultant before we, we narrowed into plaintiff law. So, you know, we looked at lots of different industries and how to get, to get clients. And the best one, the cheapest one is Relationships, and I'm going to say one other thing and get off the subject for a second, is even the largest advertising firms, and I'll just say in Chicago, but this is everything that we've seen. Their largest cases still come from a referral or a relationship without exception. Okay, they can chum the water is what I call it, with all the tv, the billboards and all that. But treating a client well when they came through, or having a very important referral source, maybe a pastor or policeman or someone like that, that you built a relationship. Refer. That's where the rubber meets the road, Chris, on any size firm. So get that right first and then move up from there.
- [16:24]
A
I couldn't agree more. I think you know that bni, you know, those B and I, those associations where the people in those are trying to build a community and that like they're, they're wanting to expand. They have reached those realtors, the plumbers, the municipal people that go off and start a their own side business or what have you.
- [16:45]
B
So Vista has a network. You know, we've been in these 300 firms. I can't tell you how many calls over the years I've gotten from someone in Rhode island that said, look, I've got a case that I need to refer to Georgia. Who, who do we. Who. You know, how does it work? You know, those are the kind of things that, you know, I call this to the straw that stirs the drink. Sometimes we're not the drink, but we're the straw that stirs.
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A
That's great. That's great. I love that. Let's do, let's do one other. We won't, we won't stair step. Let's do one other. Let's say you're. That you just peaked over that eight figure, right? So you got a nice body. Maybe you're 200, 300,000 ahead employee, maybe 40, 50 people. You got that big time, you know, back. Or maybe, maybe your big case, you got a little bit of capital to deploy. Like, what's the mix? Are you still leaning into broadcast television, you know, radio? Like, like, what are you thinking?
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B
Yeah, and I want, I'll say this. You know, we're more operational consultants and experts than we are marketing. But I would, I would say TV is still here. It is slowly dying, but it is dying, but it's still the master right now. So if you're, if you're heavy into tv, I would say remain there. But also, there's so many other areas now to look into. But, you know, being really redundant here. Having a robust system of reaching back and keeping your name in front of the clients that have come through is imperative, you know, no matter what, because of what we said before. That's where the bigger cases come from. Now that is marketing, but it's an operational function. Okay. My good friend Mickey Love, who you probably know the name, she talks about touching clients seven times a year and different by different methods and that kind of thing. And again, all of this, you know, knowledge is somewhat shared and I always give credit if it comes from someone else, but, you know, I really like it. And you know, how you touch, you know, what your swag is that you give. Those things are much more important than you think. It's sexy to say I'm going to throw a million dollars at TV or I'm going to do this or I'm going to do that. I would propose to you, make sure that you cover basics. You know, I'll go back to blocking and tackling. You know, you win football again, you win football by the basics. Blocking and tackling still wins. Okay, so get that right first. So again, I'm probably not answering your question exactly like you thought, but would I go pour money into other methodologies? Probably not. I'd probably reinforce what we have and especially that internal marketing, it's so important.
- [19:25]
A
Marketing gets the phone to ring. But what happens next dictates your profitability. I see it all the time. Firms obsess over their cost per click and TV spend, but ignore the massive leaks right at the finish line. Tim is about to break down the actual math on why simply fixing your intake process can add over a half million dollars to your bottom line without spending a single extra penny on ads. Thoughts on intake. It's so important, I think, when I, when I think of the core functions outside of like, you know, HR and, and finance, I think of, you know, the attraction. Then you've got the sales, the intake, and then you got the delivery side. It seems like at least a lot of the clients that I work with, they kind of skip the intake and want to move on to being a lawyer. So thoughts on that?
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B
Intake is deceptively complex. We spend a lot of time with our clients on intake and the first thing we generally ask is, you know, do you, do you keep statistics? And again, a firm of any size, do you keep statistics? A lot of times we get, well, what do you mean? Well, how many leads do you get from what sources of those leads? How many meet your firm criteria? We call them wants W A N T S, how many do you want? And then of the ones you want, how many do you sign? And, you know, without that information, most firms will tell us or most owners, oh, we get everyone we want. Well, you know, are you measuring it? No. Well, then I'm going to be a little bit. I don't know if I believe you. Okay, well, then we start measuring it, and we figure out that they're getting about 80%. And again, this is. These are all made up numbers, but we're getting 80% and we know that they should be getting 93%. And if you then look and say, okay, the difference in cases per month from 80% to 93, and I'm picking a number out of the air is five cases, just five case. Okay, then I'm going to pick a average case fee of $10,000. So, okay, we got five cases a month. Time $10,000 is 50,000amonth. Time 12 is $600,000 per year. That, you know, if you get intake right, then you hadn't spent another nickel on marketing and you've increased revenue by $600,000. That's a freaking win, you know, and those are the kind of things we look at with our clients to try to understand where they are. And then we move into case management, which is another thing I usually tell people. There's really only four ways to grow a law firm, and they're not secret. One is you got to get more cases. Number two, you have to increase the resolution value. Number three is you have. And this is a subset, you have to have a experience or the client, well, they will refer back to you. So you've got to have a great client experience cycle. And then number four is every system and process should be as efficient and effective as it can be, which generally allows you to get higher case values. So more cases, higher case value yields a more profitable firm. And if you do it well and get good, efficient throughput, you can serve more. So that's what we're talking about. And again, I still say that comes back to treating the client right. Understanding when a case should be, for lack of a better term, fast tracked. Hey, we're only going to get X number of dollars out of this case because of liability or injuries or whatever it is. But then recognizing that, hey, you know, we need to ask the question, how are you doing? And they say, I'm okay. You say, well, if you get that by text, you're going to say you're okay. That if you're talking to them, which we highly recommend you've got to communicate. Oh, you're. That didn't sound like you're okay. Well, yeah, you know what, I got some tingling in my left hand. Oh my gosh. You know, nerve damage. You know, we've got to, we're going to need to get, do something else here. Those are the systems and processes that we see as business. That's the best way. But it also iners to the benefit of that client. So if we can get it right, increase case volume, increase resolution value. It's a win, win, win. It's a win first for the client. It's a win for the people who deliver the service and the win for the, the owner entrepreneur who has, has started the whole thing. And that's what we're looking for.
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A
Fantastic. The deal size, the average deal size and stuff, that's not my expertise and that's one I'm always curious about. But one on the, on the intake side, I always, at least the, the firms that we work with, I just, I feel like they, they extremely under index on the amount of bodies and, and love. You know, the AI. I know you got, you, you got your, your backup, your overflow. But I just do the math and it's like, you know, if you got a, you know, 20% conversion off, off of just raw leads, you got a hundred leads, you know, you know you got 20 cases and it's like, why wouldn't you have an intake specialist every 100 to 150 leads. It just, it's a lot of times it's like one or two people and you know, no supervisor quality assurance. It's just wild to me. Like if I had 500 leads, I want at least five intake specialists.
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B
Yeah, yeah, we, these are things that we look at when we evaluate firms and you know, you know, our, I say our day job is to make firms more efficient and effective. And the way that we do it is we have to first assess what they're doing. You know, and so intake is right up near the top. You know, one we hey, do you have a vision? Do you know what you want to be when you grow up? And by the way, that's changing, you know, with what we've talked about earlier, you know, what do you want to do here? But then do you have the right people or at least identify this the positions. And you just talked about intake positions where we could say, you know, we believe that around the 35 team member mark, you probably need a full time HR person at that point. So there's different criteria or different levels of moving from one growth space to another where different things happen. And when you start to grow, you know, especially when you double or you, or you grow by half, again, things break. Your systems and processes break. Your supervisors aren't there. And that's where, you know, again, we come in and say, look, we need good reporting. You know, your team members shouldn't just do their job. They have to report that they've done it. So we can manage and hold accountable. Not hold accountable with a hammer, but hold accountable as a coach, you know, and like you said, if you, you're you, you see that you're getting so many leads. These leads are qualified and you're not signing up 93 or 94% of them, then you have to evaluate. Why. Wait a minute, were we overrun? We're just not doing. Do we not have training? There's three or four things that can happen in there, Chris, that we need to evaluate. It's like going to the doctor and saying, you know, my knee hurts. He doesn't know until he does tests whether you got a torn meniscus, one leg shorter than the other, you know, whatever the problem is, you know. So, you know, we assess before we recommend because, you know, every firm's different. Some firms you can have two or three intake people that are really volume, they're really good. Some other firms, you need more training, you need this. And that's where the evaluation comes in and the custom work that we do. So I hope that helps a little bit.
- [26:36]
A
Yeah, that was very helpful. And Tim, we've touched on it, but give me the overview of Vista Consulting. Let's say somebody listening is interested in engaging Vista Consulting. Like, like, what's that look like? What services do you guys provide?
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B
Yeah, I mean, I say we're a full service operational and strategic consultant, which means we want to understand what your strategy is from a high level first. But operations, you know, looking at things like what are your systems and processes within our feed in is to help firms be more efficient and effective at delivering their services to their clients. That's what we do.
- [27:16]
A
Well said, very valuable. You know, and I know, Tim, we talk about this offline, I believe, and kind of circling back to the mso, I believe you have an event coming up. So tell us a little bit about the event coming up.
- [27:28]
B
No, well, look, thank you for reminding me about it to at least say something about it. On May 7th in Baltimore at Camden Yards, Oriole park, we're going to have an event called A Seat at the Table where We are bringing in the Dudley DeBoer guys, the investor that invested in their MSO. We're bringing in ethics attorneys, we're bringing in an investment bank, bringing in the attorneys that actually helped on both sides of the transaction. I'm going to be talking about the things before the, before the letter of intent, you know, what are the options now? You know, because this is. I don't want anybody to think that I'm pushing people to do this. It's got to be right for you. This is a whole educational event too. That's. We're also inviting private equity firms and we're inviting law firms because I think there's education on both sides. The intent is education. That's what it's about. To remove hopefully some of the fear or at least, you know, have owners start thinking that they have another option as an exit strategy potentially.
- [28:28]
A
I think that's fantastic. And I think anybody. It's worthwhile to just understand how this is going to impact them or to be a part of it or potentially create it, you know, themselves. So this is excellent. Tim, for our audience listening that has follow up questions that wants to connect with you. What's the best way to get in touch?
- [28:46]
B
Probably the website first, which is www.vista v I s t a c t.com it's Vista consulting team. We just shorten it to CT vista c t.com my email address is T M C K e y. @vista ct.com we're on social. If you look at Vista Consulting on Facebook, Instagram, LinkedIn, we put out a tremendous amount of content every week out there. And you know, we'd really like to have as many people as we can, not because of just volume. We think this education is going to be extremely valuable. Where to go, what to do? First of all, you've got to have the roadmap. And this will help you start building that road flat Roadmap, our blueprint for your firm. And there are other options now.
- [29:33]
A
Tim, thank you so much for coming on the show.
- [29:35]
B
You are, you're very welcome. Anything I can do to help you, just let me know.
- [29:39]
A
Thank you. The legal landscape is getting more aggressive by the day. With private equity and MSOs giving competitive firms massive war chests. The margin for error is shrinking. You can't afford to leave money on the table with, with the leaky intake process and you definitely can't afford lackluster marketing. If you want to dominate your area, outmaneuver the competition and secure the high value cases that actually move the needle, you need a partner who delivers proof over promises. Head on over to Rankings IO. See how we help elite personal injury firms scale. I'm Chris Schreier. Thanks for listening to Personal Injury Mastermind. Catch you next time.