In comparison, according to WorldCC, poor contract management costs companies 9.2% of their bottom line. This is 184 times more financially important than the entire legal budget and 1840 times greater than a 20% reduction in external lawyers` fees. The slight improvement in the legally supported business process of concluding a contract has a much greater commercial impact than the «economy» (i.e. elimination) of the legal budget several times. · Exploration and analysis of unstructured data residing in the legal function for wider business use and contribution to the enterprise data lake; Data is not a substitute for legal judgment; It is an amplifier. Data-driven lawyers speak the language of business and are much more credible to senior management than «hunchbacks.» There is no «legal data,» but information that resides in the legal department and can be shared with other business units to solve «hybrid challenges» that drive business value. Risk management, compliance, optimizing contracts to shorten the sales cycle, and process avoidance are among a variety of examples. Each offers the legal function enormous potential to create and prove value. The legally defined value of the document or record. Legal proof of a power of attorney or business transaction, enforceable rights or obligations, or the basis of a claim any other legal value. The company defines the value (mainly). Above, I joked that in-house lawyers don`t define «value.» The legal function cannot prove its value to the economy if it does not coincide with it.
This means partnering with other business functions and focusing on customers – how to best anticipate and meet their rapidly changing needs and expectations. It is at the heart of the digital imperative, a technological reinterpretation and reconfiguration of how products and services are delivered to customers in a more accessible, competitive, transparent, consistent and satisfying way. The legal function can and should play an important role in this large-scale transformation of supplier/customer dynamics. Throwing the «lawyers and non-lawyers» mindset overboard is a good first step. While in-house counsel may struggle to communicate what constitutes value to the outside world, the most important conclusion here is that defining value internally is primarily an exercise in understanding. Highly simplified in-house lawyers do not define the value, but the value of the company. It is the responsibility of the internal consultant to understand how the company defines value, and then align to create or maintain that value. In United States v. Cartwright, 411 US 546, fair market value (FMV) is defined as «the price at which the property would change hands between a willing buyer and a willing seller, are not obligated to buy or sell, and both have reasonable knowledge of the relevant facts.» The FMV is used in many laws and regulations such as the Internal Revenue Code and the Insolvency Act. In the United States, FMV is usually determined by the judge at a hearing, but in some jurisdictions, courts are required to hold fair market hearings even if both parties have waived their rights to such a hearing. In Canada, FMV means «the highest price» of the item, according to the Canada Revenue Agency. In an article for the ABA, Dale Lash, managing partner of RubinBrown`s business valuation services group in Denver, said, «Capital assets – equipment, furniture – are relatively easy to value.
Goodwill – this is the intangible asset you`re really looking at, because that`s what a lawyer or professional services firm transfers. Goodwill, if it contains value, results from the seller`s ability to successfully transfer a ledger to the buyer. «The earnings approach looks at the company`s future earnings forecast to determine the value of the business. The market approach to a company`s value uses real market signs to determine the value of a business by comparing similar businesses to obtain a reasonable selling price. This transformation was part of the transition from a legal mindset of excellence in problem identification to a business mindset of organizational empowerment – from the no department to the ministry of how (unless no is the only right answer). Making the most of the legal function starts with a cultural restart and a change management journey. This involves collaborating and adapting the legal department to existing business resources, problem-solving methods, metrics, processes, technologies, and data. The focus is on how they can be used, refined and shared not only within the legal department, but also across the company. The legal function can no longer be isolated.
It must be part of the company`s digital journey, whose mission is to increase results, value and customer experience. · Create a culture of collaboration that supports other business units to improve customer satisfaction and a positive user experience for the end user. Business value is company-centric. Legal departments often ask me for metrics. My answer is nowhere near as definitive as you would like. I recommend that they start with the customer – incorporate the metrics the company already uses, and then proceed accordingly to develop the additional internal metrics (for the legal department) needed to manage the department in supporting business objectives. While business valuations may be necessary for the business, they can also lead to litigation in many cases. For example, a business valuation may involve disputes with other parties, such as: Business valuation becomes necessary in many different situations, especially when the overall value of the business is in question. Here are some examples of when a business valuation may be required: As mentioned earlier, there is no «right» way to value a law firm.
But every law firm has value. The first thing you need to know is that there is no single way to evaluate a law firm. Well, you might think it sounds tedious and time-consuming, but fear not. We`re here to help. We`ve put together some tips to help you understand your business valuation process. In addition, the financial considerations used to determine the value of the business include non-financial considerations such as the location or brand of the business. A company`s location and brand name are often considered and considered in a company`s valuation to get the most accurate value. In addition, due to the time, energy, and money invested, it can be difficult for many business owners to accurately determine the value of their practice, which can lead to a false sense of increased value. In particular, it becomes significantly more difficult when the legal department is responsible for defining business value in areas – contract protection, litigation, compliance, data protection, intellectual property, ESG – where value preservation is paramount and where lawyers (and other professionals in a similar situation) must act as experts in the field. I stand by my position that every organization, no matter how venerable, is like a rodeo of goats from within.
The poor strategic discipline of imperfect people working in imperfect systems leads every employee to regularly ask themselves, «What is this?»