Unlock Your Firm's True Value | Featuring Ben Hunter

Welcome to the firm report. The show where we pull back the curtain on what it really takes to build and grow a successful law practice. Each week, we'll be talking with attorneys, marketing pros, and operational specialists from law firms around the country. We'll dig into real stories, smart strategies, and then practical tips that can help you grow your firm and serve your clients better. Let's get into it. I think these masterminds do feel a gap to teach them something like the entrepreneurial experience that comes to market, and when it comes to what you do, finance, I mean, it's the lifeblood of a business. I think they tend to forget what they're trying to grow, that there's just leverage and the ability to exponentially grow what you establish. You can only be unlocked by a better inventor that understands the industry, the vertical, and what exposure they're willing to have to give you, I would say, the rope. It's good to go out there and reach, you know. It's well said, Zach, and I agree, 100%. There's a reason for specialization. I'm Zach Hoffman. We have our guest today, Ben Hunter with Pinnacle Financial Partners. He's the managing director and head of Legal Specialist. Welcome, and thank you for joining us today. Yeah, thanks for having me, Zach. For sure, for sure, how's everything going? Things are going fine, and we're busy. We're trying to get towards the end of the year here, and the holidays are coming up, so there's a lot of moving pieces, but all things considered, we can't complain. Yeah, holidays coming up, that means end of year, and end of year means taxes, and that price plays as a banker, right? That kind of plays into some of your clients' playbooks, I'd assume. Well, as a banker, we want our clients to have taxable income. That means they're being successful. So, from that perspective, our clients are very busy right now. They're looking to collect on all of their bills that have been sent out. They're looking to make sure that they have strong pipelines going into the new year and everything in between. Not to mention performance calibrations, year-end reporting, and all the fun things that go into running successful professional services businesses. Yeah, for sure, and I know we both work with a lot of lawyers in law firms across the country, right? They all have clients, and they have special particular needs. I know I've called you a few times here throughout the year where I'm like, I'm talking to a client, they have the best of problems here, and they need some advice, because I know that you've seen it more so than I, especially on the finance side of just ways to alleviate tax burdens, just, I guess, financially plan correctly, right? Because I mean, you're on that side of business. Well, so our side of the business is really, really twofold in big categories. As we've talked about in the past, we act as corporate bankers to the law firms and help them, and their executive staff operate as efficiently and strategically as possible in running their firms, like businesses, and then we also act as private advisors to the attorneys that make up those firms. And as you know, the legal profession is very broad and very deep in terms of coverage, and really, you've got two main factions there. You have a large, large corporate law, and all of the different echelons that go into it. Those folks have good problems of getting paid every six minutes, assuming they can collect on their bills. And then you have the other side of the house, which is the trial or your community, and those folks are only successful. They only get paid if they're successful in representing their clients in court. And so with that, you've got different tax considerations that each of those types of firms are going to experience now. Now for the record and full disclosure, we don't give tax advice. We're not legally licensed to do that, and so we don't foray into that arena. But with that, it does not mean we don't help firms take into consideration available options and resources to them and make sure ultimately we're empowering them and equipping them with the right questions to be asking their CPAs and other tax professionals that support them and their families. And that's a big part of our job, right, is to bring those ideas to the table, soundboard them with those attorneys and help them make the best decision that's going to ultimately lead to their success. For sure. I mean, definitely. I mean, in running any business, it's a huge part of business. It's like managing, managing getting new business, but then managing cash flow, managing, you know, just how you plan ahead and how you plan the day-to-day operations, right? Because we all start as an entrepreneur, where we all start as like a sole proprietor, and then everything starts to evolve. We start to have teams. We start to have, you know, expenses, infrastructure, and that's where we're planning comes in. And really, I think like crossing on people's expertise in a lot of ways. That's right. You have to ultimately have a plan. If you want to be successful in business as an entrepreneur, Zach, you know that there's the initial phase, right? You take the risk, you stick your neck out there, you know that something you have is of value and can be monetized. And so you bring that to bear to the marketplace, right? And then after that, you think, okay, how can I do it again? And how can I replicate those results? And then after that, you say, okay, how do I do even more? And how do I grow? And how do I scale? And in the course of that process, you have to evaluate my doing it too quickly. Am I going too slowly? Do I have the right resources? Do I have the right partnerships in place to ultimately help do that the right way? And that's where companies like yours come in. It's where firms like mine come in. And so on. And hopefully, somewhere in the middle, we all meet. And we can have that meeting of the minds and lay out those different milestones and math strategies to get there. For sure, I mean, yeah, I know you've dealt with a number of law firms. You've probably seen associates that have gone out on their own or just, you know, you've seen just people evolved throughout the legal space as a whole. So, I mean, you've definitely seen it, right? Where a lawyer or a law firm comes into it, just a massive settlement, right? Or just a life-changing experience from like the evolution of a business, or it's like they're operating, they're operating, that's like, boom, something hits, that they've been working towards for a long time. For sure, especially as you think about the trial or your space tag. So, you know, you have these firms who say, hey, we will represent you, whoever you are. Something has taken place in your life where you are of the view that there's been a miscarriage of justice, right? You have a reason to seek remedy from our judicial system, right? And the firms that take on those types of clients, it can be anything from the, you know, business matter. And in the case where you and I spend a lot of time in the personal injury side of the business and the, you know, multi-district litigation side of business, oftentimes we're talking about people who've been, you know, actually injured physically. And there's a lot of complicated scenarios that go into that. The financial impact on those families and individuals or groups of individuals is significant. And you have attorneys who are willing to take on those matters. And they say, hey, we will do everything we can to help you based upon what we see as the merits of your case, right? And then when they do that, they are saying, we're going to invest our own capital, or capital we have access to, to go through this process with you. And we're going to do everything we can to see it through to a positive outcome for you. And it's only then, if they're successful, that they're able to reap a financial benefit. And let's say that they are successful in inside the courtroom or out. And they're successful in making a recovery on behalf of their clients. Well, in that particular time, when that recovery takes place, if it's large and significant, then yeah, it creates some specific challenges for those firms. What do I do with this, this fee that we've been awarded? How much of my sunk costs throughout the litigation process? Do I need to recapitalize? Is there co-counsel involved that I need to pay? Was I brought in by co-counsel? And does the total fee that's awarded ultimately go only to me in my firm? Or does it go some split between a group of us, right? And so every one of those scenarios is going to have a different impact. And to your point earlier, when you have that success, that creates some real first world problems. And you have to think about what is the best way for me to deal with this income opportunity? And how do I best plan for what I need right now, and what I need tomorrow, and the next day, and the next day, thereafter, with these dollars? For sure. And it was interesting how you positioned it. It's like these law firms are, they're infesting in the cases themselves. It's just not, you know, they take on a case, and then it's like tomorrow they get paid out. It's like if the case is, you know, just has potential. Typically, there's going to be a time horizon that they have to fight this case, and, you know, essentially, you know, expend across it, correct? That's, that's right, Zach. And so you think about the different nuances of the trial order community, right? I say nuances. It's really not correct. You think about the different practice areas, the niches within the niche, as it were. Some types of, some trial firms are working on matters that can be resolved somewhat expeditiously. You know, those matters tend to have smaller settlements as a result of it. And those firms are really focused on how do we execute well for our client? How do we get their recovery? And how do we move on to the next one? And how can we do that again and again and repeat, right? And really become very efficient. Those firms have pretty stable cash flow. It's not hard as a bank to lend money to them. It's not hard to forecast future cash flows. And it's not hard to plan for tomorrow. In other instances where the matter at hand may be more complex and there may be more moving pieces. You're right. The length of time between taking on a case and beginning that case to seeing it through to fruition. It can be, it can be months. It can be years, right? And in that time, there's a tremendous amount of capital that is sunk into that matter on behalf of representing those clients. And so firms and those arenas have to really be focused on their time. They have to be focused on their expense control. And they have to be focused on how they're sourcing capital and utilizing capital. And we talked earlier or at least alluded to some, you know, how do you grow at the appropriate rate and do it the right way? Where I see firms getting into trouble is when they take on a little too much non-recourse finance as a part of that process. If they do that too many times, too many tranches, you can end up in a situation where you actually have very significant negative equity on the firm's balance sheet, which by nature of professional services is already thin to begin with. And in that instance, it's very, very challenging for firms to find additional capital for working capital purposes, capital expenditure for increase in capacity in the firm, etc, etc. Because you're right, they're investing in cases. They're investing in how do we, how do we one source them to? How do we execute upon them? And it costs money. And there's a lot of money out there for it, but there are strings attached to many instances. And so finding that right optimal mix of really making the firm's balance sheet work for them and really having a laser focus on that cash flow, it's so important. Well, I know this might be, I guess a little bit of a loaded question, I have to ask it, right? So it's as an entrepreneur and I'm not, I'm not on their side of the business, but we assist a lot of lawyers in entry law and marketing, right? And as a business person, I understand like what it tranches look like when they're like, you're trying to go out and get capital. How many years you have to be in business? How you have to be established? You know, you know, the one thing that I hear out there a lot is I'm 42, so there's a lot of, you know, people in my age range that are, you know, trying to get out there and they want to be that next guy that's aging out, the 60, 70 year old, but they're like, this guy's going to stop at some point or I'm going to be the next one in my market, I'm 35, I'm 40, you know, I want to start getting to that next level. As, you know, being on the finance side, like how many years in the game do they typically need? Like what type of revenue they need to be generating? I'm just kind of like curious as a business guy, just looking on, you know, as an outsider looking in, you know, when they're trying to like build up their success or associate, they just left the big firm. They start to get a few cases from referrals or like doctor relationships they had. Now they're looking at like, I want to market, I want to go out there, get a line of credit. I want to start to like build up the firm to its next level. I understand that, you know, my, you know, the guy ahead of me was doing before. I mean, how many years, like what do they need to be doing like to prepare for that? Because it's kind of like you said, it's like they're not necessarily an asset-based business, like, you know, typical finance side or banking, but, you know, just looking at it from that perspective, you know, like that mid 30s, you know, or that's getting out there and all of a sudden they're like, hey, their eyes are glowing and they want to get to that next level. Like what type of like rungs and goals and milestones they need to be hitting before they, you know, start working with the guy with yourself? Well, there's a lot in that, the way you frame that Zach and whether it's loaded or not, we're going to unpack it and walk through it. So, yeah, so let's first take a step back, right? And who are the kind of firms? What are the firms that that we've worked with, our practice group works with on a regular basis? We have firms ranging from the single-man PC all the way up to very, very large, you know, millions of dollars in gross revenue firms. In some cases, the upper echelon, the day's gone by, you know, billion dollar plus law firms in top line revenue. So the scale is very, very broad when you wouldn't think of it from that lens. But commonly, we see, you know, I'll call it the startup firm that is a splinter from a larger, more established firm and it, you know, happens for any number of reasons, right? But as you think about the crux of your question, what's the right size for us? Where do we become interested? What does a firm need to be thinking about when they, that lawyer thinking about, you know, when they go and hang their own shingle, either on their own or with a consortium of friends, right? And I'll come back to a comment I made at the very beginning. We want to see cash flow. We want us, but we specifically want to see income. And so, as you know, as an entrepreneur, when you're scaling your business, if you're talking to a lender, the first question is going to be, hey, so talking about your EBITDA, what does that? What does that gross, that gross profit look like after, if we really get down to, to, you know, delivering some kind of value and getting paid for it, right? And so that's where you have to start initially from a lending perception, right? Most banks, they may have some kind of professional services group. There's only a few in the country that are dedicated to the legal space, my firm being one of them. And so with that, we do want to see some revenue. It's hard for us to put capital out there on a purely speculative basis. We're not venture capitalists for law terms. That's not what we're, that's not what we're doing. So the firm that hangs at shingle needs to be thinking about, you know, what clients I'm not going to be able to bring with me. If they're practicing law on a more traditional basis, meaning that billable hour basis, you want to be thinking about how do I run a lean in mean operations so that I'm have very, very tight focus on expense control. I don't necessarily need that art collection in the lobby, you know, from day one, you know, you got a nice piece of art right behind you there with your monotony man. But you don't need that from day one, right? You need some technology, you need some phones, you need some servers, you need a real good cybersecurity resource, right? Because that's the law firms are very much targeted these days due to the sensitive information that they that they have as a part of, you know, conducting business. But really thinking about that revenue stream is number one, where I want people to spend some time. The second place I want them to be thinking about is having their personal financial house in order. Cash is king, having unencumbered liquidity, even at a modest level is important because if I'm extending capital to you in the early days of your firm, first two, you know, three years of existence, that kind of thing, I'm going to want to know that the people behind the firm, which by the way, those are the most critical assets of any law firm or its people. You know, I want to make sure that those people are in good order, so that if something does take a little bit longer to materialize on behalf of the firm as a business, then I've got some principles behind the firm that have the capacity to make sure the firm is able to cover its obligations. But through its people and certainly its lenders, right? Those are two of the most important things, right? Cash flow, meaning revenue, and with a tight expense control, and then also liquidity, so a little bit of personal liquidity on behalf of those principles, right? That's where there needs to be emphasis. So if a group of lawyers are thinking about splintering away from their larger firm, these are two big considerations that they need to have in mind, and it may not be that we can go right now, the minute we're ready to go. It may be we need to be a little more strategic about this, a little more thoughtful, and we need to think about what are the steps that are necessary to put us in the best position to stand up our own firm and be successful. To the firm's, typically, we need to have like an age of, you know, like they need to win a year or two years, three years, or they out the gates, they're bankable, if they have history at another firm, you know, some, you know, Warchester, I would assume they're ready to go. The Warchester will negate the need for an extended period of years in existence, right? Most banks are going to say we want to see at least two years of operations before we're ready to, to put senior debt out there on your behalf. The caveat to that being is if you stand up a firm and you have principles who are well healed implies the wrong thing, but if you have principles that have done a good job of maintaining and building and maintaining their own personal liquidity on an unencumbered basis, meaning it's not collateralized, it's not securing some other type of credit facility, right? In those instances, banks can be a bit more flexible in terms of putting senior debt out there. Again, it comes back to having that that strong principle standing behind the firm, backing the firm, right? And so two years, to answer your question directly, two years is really where you're going to think about it on a minimal basis. I'm not going to speak for my friends in the hedge fund communities and the alternative finance communities that would say, okay, we're going to give you access to all these tranches of non-recourse funding as a function of your case rosters and all that. I'm not going to get into that role because it's not mine, but I'm going to say, you know, from the traditional lending land you need to have a couple years on your belt or you need to have some good liquidity to stand behind you. For sure, and yourself, I know we met on a flight of all places. We were flying out to mass torts made perfect, which whenever I'm meeting like an aspiring entry lawyer, I'm like, you've got to go to mass torts made perfect, it's like the land of legends, like every major advertiser, every major market or any market that you've never even heard of is out there learning or, you know, particularly entertainment, enjoying Vegas and just meeting with vendors to understand the way of the land or how to be more successful. And that being said, what's your geography do you cover? Do you cover just specific region of the country or do you cover the entire country? Yeah, that's a good question. So from an office standpoint, my firm, pinnacle financial partners, we're in eight states. We're primarily in the southeast, but in terms of client roster, we have clients all across the US. And so if you're in the Continental US, we're happy to work with you. I'm going to knock on some wood here and say we might have someone that's not in the Continental US that we serve in some way. I don't know who they are, but it's not outside the rental possibility. But that's where we are. And you're correct, you and I met on a flight and hit it off. And we've been consistently keeping in touch ever since. And so I think you raise it's a one-off scenario that emphasizes something that's also critically important to be being successful as an attorney, regardless of your practice type. And that is relationships. It's relationships with with people who you can come to for advice, where you can pressure test ideas, you can get input and perspective. And at the same time, when you have needs, it may not be directly within your network, where you can find that need fulfilled. You may have to go outside your network. And that's where having folks like yourself or myself or whoever, right? Having those relationships with partners that you trust, you say, hey, I've got this need. How do you think I should address it? What do I need to be thinking about, right? And through those relationships, you can find additional resources. And every business leader really needs to have their own, what I call it, an inner circle, but they need to have a number of folks in various industries, various walks of life, where they can get that input and perspective. Because, you know, Zach, as you know, you're running your company, your company's your baby, right? And you started it, you stuck your neck out there, and you've grown it to what it is. You may have blinders on because you're too close to it. Same's true in the legal profession, same is true in my profession. And so having that network, having those relationships, it really matters. It makes a difference. And you mentioned the master's made perfect conference. A lot of great folks out there, plenty of friends, plenty of trusted, you know, trusted partners on, you know, for me, as an example, that it's in that conference. And so it is, there are great ways to, to meet people that conference and others across the US that can really, you know, help support your practice and help you grow. For sure. I mean, it's a big trend in every industry and vertical. And I think it's empowered by social media and just the connections of the world. It's the mastermind. It's where people can come together and basically, you know, niche together and start to learn from each other. I mean, you see it with, they figure firm, you see with crisp, you see like just these massive masterminds are starting to happen on top of the trade shows and seminars that, you know, we attend as well. And they're teaching, you know, and it goes for law school, medical school, you know, the law school in particular, it's like they don't necessarily teach business, right? So I think these masterminds do fill a gap to teach them some like the entrepreneurial spirit when comes to marketing. But when it comes to what you do, finance, I mean, it's the lifeblood of a business that people, I think they, they tend to forget when they're trying to grow that there's just leverage and like, the ability to exponentially grow what you've established can only be unlocked by, I believe like, a veteran banker that like understands like the industry, the vertical and what exposure they're going to have to give you, I would say the rope to go out there and reach, you know. It's well said, Zach and I agree 100%. There's a reason for specialization, especially as you think about, you know, the community that we serve within the legal space and look, let's take law firms and stand them up and let's dig deeper into that. How many different practice areas do you see in today's law firm? They're plenty. It's myriad, right? And it doesn't matter whether you're on the defense side of the house, whether you're executing transactions, whether you're on the litigation side of the business, there are going to be niches within that niche and each one has its own unique characteristics and nuances and that's why you see such a diverse community of legal professionals, especially in the traveler space. It's not one-size-fits-all and I can tell you this banking is not one-size-fits-all. Banking for law firms and attorneys and advisory services for law firms in terms is not one-size-fits-all. It's not the ABCD menu of options that you pick from, well, hi, which one would you like and let me show you my placard, right? That's not how it works. Now there are plenty of banks that operate that way, there are plenty of financial advisors across the country that operate in that way, but that's not where we fit, right? Penical financial partners, we pride ourselves on delivering distinctive service, meaning deep relationships, open lines of communication, being responsive, quickly responsive to our clients and our future clients and delivering effective advice. And it's that center, that advice center approach that we have where we spend a tremendous amount of time internally making sure that we're staying as up to speed on all the ever-changing landscapes of our client base, we're making sure that when we bring an idea to the table that it's going to truly benefit the person on the other end receiving it, right? We're product agnostic. It's not about the ABCD menu list for us. It's not about the shiny new object. You've probably heard me use that analogy before. It's not it's not the thing that you need today and you need two more of them tomorrow. That's that's not what we're about. We're about meeting our clients where there are today, understanding their needs, understanding their future aspirations and putting together a meaningful set of resources to help them get there. It may not be that we're directly delivering that resource. It may be through partners and through trusted associates of ours. I just say, "Hey, it's not something I can solve for you, but I've got an idea of who might." And making those connections happen and take place. And that's where you end up in a position of true partnership. And that's where the kind of relationship that we hope to grow and foster. That's where it's delivered. That's where the magic happens. And that's that's ultimately the opportunity that's in front of people today with our firm. I mean, as long as you've been in the business, getting to the head of a division and everything, you've had to have led your clients to long-term success and they've stuck with you for a long time, I assume. And do you have any notable great stories you can tell? Just, you know? Well, that's right. I think you're anticipating what I was about to say, Zach, right? And so, it's called private client services for a reason. I don't broadcast my client roster and it's not bragging rights for me when I'm at a cocktail party, you know, at some function, that kind of thing, right? So, I'll keep the names completely anonymous just to, you know, protect those who put their trust in me, right? But I would say as opposed to highlighting, you know, transactions or big deals or things like that, I'm going to answer your question a little bit differently. And what I think about is really what's important in driving results, right? You have to have a folk, you have to understand where you are, you have to have an understanding of where you want to go, and then from there, you've got to figure out what's the process going to be to get there, and how do I hold myself and my team's accountable along that journey? That's critically important. I think about the importance of really serving others, right? So, yeah, I've had a really great career up to this point in my life and it's been a learning process, it's been through a lot of different economic cycles, a lot of different investment cycles, and what has always stood out to me is that the more I place my client's interest above my own, the more successful I'm going to be, said differently if you continuously give, you will always have. And my clients have rewarded me in that way by knowing that if I'm taking care of them, they're going to take care of me, they're going to be loyal to me, and they're going to make introductions on my behalf and so on. And in professional services, that's relevant across the board, whether it's in banking and finance, whether it's in legal services, whether it's in healthcare, if it's in your world, it's critically important. And I think also it's about how do I get partnerships established with people who truly understand the nature of my profession and how can I leverage those resources appropriately for my benefit. And that's where I think you are uniquely positioned to help facilitate that process because that you're right. They don't teach you how to run a law firm in law school. They teach you the law and they think they teach you the legal process in law school. They teach you how to pass the bar, hopefully. And with that, it's up to you as to how you run your firm or how you run your practice, right? And so you got to have the right people around you to help you go through that process and tell you what may not be an easy message all the time, an easy message to hear or receive. Yeah, and I mean you said it best, it's where you are, where you want to be, getting there and holding your team accountable. Accountability is, you know, everything and building that up, you know, through the wrongs and through, you know, just the experience of where you got your clients and the journey, right? It's not having not setting false expectations. It's helping them get to where they're aspiring to be as they're going down this, you know, entrepreneurial journey of, you know, as I say, even if they're leaving a major firm, that's an entrepreneurial journey that they're setting upon for sure. Well, that's right. And the larger the firm you're in, the harder it is for you to sometimes see the fact that you own your practice and that you own your client experience. And so I say that because, you know, as leaders in business, we also have to be, we can't just singularly focus on the client. We also have to focus on our teams. And as leaders, we've got to make sure that we're nurturing our teams in the same way that we're supporting our clients. At the end of the day, I'm one person, you're one person. We can't be all things to all people and we can't be everywhere at once. And so we're going to have to rely on our teams to really execute on behalf of our firms for our client mandates. And so, you know, a lot of, a lot of folks break away from their larger firms to go to smaller firms or to start at their own because of that experience, because of that environment. And with that, we as leaders have to always be thinking about how are we supporting our teams so that our teams are in good shape individually and professionally and so on so that they can deliver that distinctive experience to our client base. We do those things. We've got loyal teams. We also have loyal clients. It's a symbiotic relationship. You lose one piece of that, then the rest begins to fall off thereafter. For sure, for sure. Well, definitely, Ben, definitely appreciate you joining us today. And, you know, you brought a lot to the table as to how people can be driving results just, you know, through that marriage of professionalism, banking and, you know, the whole finance side. Where can people find you? Well, I'm not hard to find. Thankfully, I have a pretty good digital presence myself. I'm on LinkedIn. If you Google my name, Ben Hunter, and Pinnacle Financial Partners, you're going to find the press release for myself in our practice group where we join the firm. You're also going to find links online to our individual advisor pages on pnfp.com. And so you'll be able to see us pretty easily. But we're very easy to find, and we're very responsive. And, you know, certainly we're here to serve. We're here to help. So, Zach, it's been great. I appreciate you inviting me onto your podcast and really appreciate all the great work that you're doing and all the great results you're delivering for your clients, because they do speak and they speak very, very well of you. I appreciate it. Well, thank you, Ben. Definitely, it was a pleasure today and I'm sure we'll be talking soon. You bet. Thanks. Sounds good. That's it for today's episode of the firm report brought to you by Exults. A full service digital marketing agency helping law firms reach new heights. If you enjoyed the conversation, make sure to like, subscribe, and share the show with someone who'd find it valuable. You can find us on YouTube, Apple Podcasts, Spotify, or wherever you listen to podcasts. Thanks for tuning in, and we'll see you next time.