Crash course to success
4 February 2013 | By Sam Chadderton
4 September 2013
27 February 2014
10 October 2013
4 September 2013
21 October 2013
Jeff Winn’s extraordinary journey from small-town solicitor to £10m-a-year road accident law mogul is proof that entrepreneurialism pays
Fifteen years ago, Jeff Winn’s life changed. The criminal defence solicitor was out driving his Jaguar when another motorist ran into the back of his car. Although there was no hint at the time of the impact the accident would have on his life, it kicked off a storybook-like narrative that has led to Winn changing his career course and creating one of the most successful business models in the profession.
Chances are you’ve never heard of his firm, but Winn’s peers describe the rise of his eponymous North East road traffic accident (RTA) specialist outfit as “astonishing”.
Winn Solicitors is part of a group of three related companies. The law firm on its own would have topped many of The Lawyer’s UK 200 measures in 2011/12, most notably the profit per equity partner (PEP) table. Bluntly, Winn Solicitors’ PEP figure destroys every other firm’s, Slaughter and May included.
The firm’s turnover growth of 30 per cent year-on-year, its distinctly decent £393,000 revenue per lawyer and its doubling of staff in the past four years are eye-catching enough, but it is the other metrics that jump off the page and scream ‘revolutionary business model’ or ‘new legal market paradigm’.
Most of all, cop a load of Winn’s take-home pay of £4.62m last year. And that’s just from his law firm. Group-wide, Winn is expecting to take home around £10m this year.
Yes, you read that right.
To find out more about this until now relatively unknown quantity The Lawyer braved the January weather and travelled north to the Winns base in Byker, on the outskirts of Newcastle.
Part of Winn’s fairytale is the impact on the local area. When I emerge from the metro system onto a frozen pavement and into a blizzard trying to shove me back down, I’m half-expecting a pack of huskies to whisk me to my destination.
I needn’t have worried. Winns is within a snowball throw’s distance from the station situated right in the heart of the community. It is not the most glamorous of locations and a lifetime away from the City skylines of the magic circle.
But Winns has invested in the region, doing its bit towards regenerating the area, and its MD is rightly proud of the office’s presence as a substantial local employer.
Clearly, the attention-grabbing pound signs are the starting point for our interview.
In a working-class city, this Boy’s Own success story should be shouted from the rooftops until the noise reaches the capital. From the germ of an idea Winn has embraced the North East culture of hard graft and created a game-changing business.
This is the story of how to become a £10m a year man, so read on.
Winn’s eureka moment came about because, despite not being to blame for his car accident, his insurer
settled and still upped his premium. He lost his no-claims bonus, had to pay the excess, lost value in the Jag which was not repaired to its previous standard and - to add insult to injury - was given a tiny courtesy car.
“I lost around £5,000,” explains Winn. “I was a lawyer and this all stemmed from going through my insurer. It seemed to present an opportunity to act for motorists and put them back in the position they would have been in if not for the accident, as well as pursue any injury claim on their behalf.”
At the time, there was reluctance among his fellow partners at his firm, Singleton Winn, to move this idea forward so Winn took his fledgling RTA department of eight staff and set up Winns in 2002, offering a dedicated no-win, no-fee, non-fault collision service.
Now, Singleton Winn Saunders may be just a five-minute walk away but its former partner would argue his practice has sped off into the distance.
In 2006 the growing firm bought a former Safeway supermarket in Byker as a low-cost base, moved in with 40 staff and began to build.
In the past four years alone, the group has grown from 150 employees to 278.
There is a triumvirate of businesses under the Winn umbrella. Along with the law firm Winn Solicitors there is credit hire agency On Hire as well as On Medical, which deals with the injury and rehabilitation side.
Winns specialises in non-fault collisions and runs every aspect of a claim in-house from first phone call right through to rehabilitation. The On Medical team even includes professional physiotherapists with personal injury representing up to 40 per cent of group turnover.
The group structure is paying dividends. It posted a 2011/12 turnover of £32.8m and is predicted to bring in £39m in 2012/13. It posted £8.6m revenues in 2007/08. That puts growth in the past five years at 350 per cent. Winn Solicitors’ turnover in 2011/12 was £14.5m.
Winn loves numbers, and here’s another one - 0800.
He might be a man who is all about margins and profits, but Winn is not blinkered by pound signs and insists on a freephone number to encourage potential claimants. He knows that for many of his clients, every penny counts.
Winn is uncomfortable being labelled ‘the £10m man’, as he does not want his staff to think he is swimming in £100 notes at home. He is at pains to stress a lot of his money is reinvested.
But the figures keep on going up. Predicted for 2012/13 is a £16.7m legal turnover (up 15 per cent on last year’s £14.5m) with a £6m profit (up 5 per cent, from £5.7m) and a profit margin of 36 per cent.
For the group it is even better. Turnover is predicted to hit £39.1m (up 19 per cent on 2011/12’s £32.8m) with a £14m profit (up from £12.1m) and a 35.8 per cent profit margin.
The 37-lawyer firm runs a tight equity partnership equivalent, with three directors - Winn, his sister Dawn and Ghazala Bashey - bringing in revenue per partner of more than £4.5m. The fourth board member is non-lawyer Chris Birkett, the sales manager.
Winn pays around £5 per square foot compared with rates of £30 to £40 in big northern cities such as Manchester or Liverpool and £60 in London. The group’s annual property costs are £200,000. Winn contrasts this with an unnamed firm of similar turnover that has prioritised a prestigious location at a cost of £3.5m. He points out that that firm has to make £3.3m more turnover than Winns to pay “unnecessary additional rent and rates” before it sees a penny of profit.
What he spares no expense on is IT, with a staff of around 10 - big for the size of the company. IT efficiency is a big driver in the firm’s profits. The firm operates a paperless Eclipse system. When Winn enthusiastically explains the merits of this, it highlights the thinking at the heart of his success.
“Clerks use a two-screen system,” he says. “It might only shave off a couple of seconds per job, but add those seconds up…”
Winn leaves the equation hanging in the air. It speaks for itself. He talks about a “numbers game” when explaining that the firm does help with “at fault” claims, saying the only benefit is word-of-mouth about good service.
“We do a lot of work for free,” he says. “Traditionally, solicitors’ firms don’t like that, but those in the industry know we are a lean player.”
The business gets around 25 per cent of business through personal recommendations and a further 20 per cent via local advertising.
North East employment lawyer Stefan Cross, of Stefan Cross Solicitors, says the use of regional radio ad campaigns and local celebrities has raised the profile of Winns.
“Having a good name helps,” says Cross, referring to the slogans ‘Winn win’ and ‘Win with Winns’. “It’s an amazing story of how to turn a lot of profit from a relatively small turnover - astonishing really, in the context of the changes to the sector.”
The remaining 55 per cent of business is generated from professional channels such as insurance brokers - a market in which the firm’s brand is a byword for excellence, according to Winn.
Later, one of the members of the first response team - who handle all the incoming calls and allocate the work - tells me about the attention Winn pays to numbers.
“The first response team works at 70 per cent capacity, so it doesn’t feel like a call centre,” they say. “If the company suddenly takes on a big contract, we have scope for increased capacity. In that scenario, rather than panic hire, Jeff will recruit sensibly to gradually bring capacity back down to 70 per cent.”
Winn, the son of a former murder squad detective, admits he has never run a single RTA personal injury case, but it is his vision of a unique firm structured as a streamlined, customer service-focused business that has reaped such rewards.
“It’s not like I’ve got a yacht in the harbour,” reasons Winn, who holds 80 per cent of the shares. “Year-on-year profits have been reinvested into the growth of the company.”
The Winn group occupies a position that is the envy of an unstable RTA sector, preparing for a difficult future imposed by drastic government changes to fees. These will see the maximum recoverable costs for low-value claims fixed at £500 - a reduction from £1,200.
There will be a lot of instability in the market as firms move out of RTA as they can no longer make a profit on cases. The emphasis for Winns may be on low overheads and maximum profits but Winn bangs the drum of customer service so his staff do not lose sight of his crusade. The brochures in reception shout about a “one-stop-shop” and ask “Had an accident that’s not your fault?”, but Winns is far from the lazy ambulance-chasing cliché.
Winns is a national practice, with around 50 per cent of business in the North East, while the South East and London represents the fastest growing area.
With the scramble to get out of personal injury, Winn reveals he has been approached by a number of firms with small profit margins, offering a London office and their caseload.
“We’ve kept it tight, with only three equity partners, and margins have been better than we ever expected,” says Winn. “We’ve had several approaches but my feeling is we wouldn’t be able to buy small firms because we couldn’t make money out of it. We can run off their caseload for them, but for anyone in the sector with a margin of less than 10 per cent, it’s too big a jump.”
Winn says high-profile credit hire companies will go bust because they won’t be able to get the efficiencies in place in time to continue servicing a large debt base with small profit margins.
Cross adds that innovation and the right business model show that it is possible to make money in the RTA sector in a difficult climate.
He says while some are “bleating and moaning”, others are developing their structures and economics to be nimble and “seizing the opportunities of ABS”.
The Legal Services Act enables companies to apply for an alternative business structure (ABS) licence to provide regulated legal services. For law firms, it allows non-lawyer involvement, the acquiring of non-legal companies to complement their services and the influence of business culture on the management board. In short, ABS means firms can seek external funding to boost growth and expand their reach.
Minster Law has the UK’s biggest RTA practice and handled 60,000 personal injury claims in the past financial year. Like Winns, the firm benefits from strong leadership, with a sole shareholder in chairman Adrian Christmas and a tight management committee emphasising investment in infrastructure and IT.
Yet even this success story made just £2.2m net profit from a £104m turnover in 2011/12. At last count its borrowings were £69m - the biggest debt pile disclosed in the The Lawyer’s latest UK 200 listings.
Even so, I ask Winn why other firms are not following the model of Minster and Winns.
The amount of capital the structure eats up is a big disincentive. Winn has continually reinvested profits to grow the business because of the amount of cash tied up in work-in-progress (WIP).
“All cases are taken on a no-win, no-fee basis but it means a long timeline of legal credit,” explains Winn. “The fees, credit hire and medical costs don’t get paid until they are recovered from the other party’s insurers, and the firm absorbs that.”
Last calendar year WIP, including net assets, rose from £33m to £46m while an invoice takes an average of 12 months to be paid, across the group.
Most firms will simply not commit that level of cash in the present market and, with draconian cuts in the sector, Winn forecasts that there will only be around a dozen significant players left out of around 2,000 firms claiming to do personal injury work.
“We will continue to invest and aim for 30 per cent growth until that dies,” says Winn. “There will be great consolidation in the market and it would not surprise me if there are just six to 10 personal injury firms that dominate 70 per cent of the market in two to three years’ time.”
The dilemma for these firms is that, under pressure from the insurance industry, the Government is abolishing referral fees and is set to introduce what Winn calls “Draconian” reductions in fees for low-value road traffic cases going through the RTA portal.
Winn says that would mean slicing off a chunk of the staff time spent on each case to keep them cost-effective. And that, he fears, will inevitably hit the care and consideration given to clients.
“Small players without efficient systems will leave the market,” Winn explains. “At this rate, I doubt even we can do it to that scale and the challenge is how we adjust to do work at a cost-effective rate. Realistically, we will not have the profit margin we have had.
“I’m anticipating we’ll have to get down to six hours per case at a rate of £80 per hour, but we can only do it that cheap because of our low-cost location and IT efficiencies.
“There will inevitably be a reduction in service to clients as a result of having to undertake the work in fewer hours than the job dictates.”
Winn is not taking the changes lying down. He is keen to explain to customers exactly who is to blame and says he is already redrafting the ‘scripts’ for the first response team which will explain the cuts and offer a two-option model.
The firm’s fast-track online system Fileview offers the client live access to the case so they can monitor progress, receive email and text alerts and recover 100 per cent of any damages. Currently, the firm has around 60 per cent of clients opting for that service but Winn expects that to rise significantly when the alternative will be the traditional model whereby the firm claims 25 per cent of the success fees to cover its extra costs.
Winn says it is the client that will suffer and claims the Government has been “blind-sided” if it believes hitting the personal injury sector comes without cost.
He cites the example of a motorcyclist client injured in a crash who, with immediate rehabilitation through Winns, fully recovered in three years at a case cost of £6,000. Winn argues that if lawyers are forced to cut away the extra time and consideration, the client may not get the necessary help, not recover and cost the state and the NHS hundreds of thousands of pounds in lifetime care and benefits.
With 50,000 people a month making personal injury claims, Winn is once again using numbers to paint a convincing, but painful, picture.
Rivals and departures
From a selfish point of view, Winn says the changes will mean rivals dropping out of the market and further opportunities for the streamlined firms and those with external backing.
One competitor imitating the Winn model is Quindell. The AIM-listed portfolio is using its financial prowess to buy in the integration Winns has built up organically.
Quindell recently acquired claims management company Accident Advice Helpline and law firm The Compensation Lawyers to add to claims handling specialist firm Silverbeck Rymer.
Full speed ahead
A combination of direct competition, upcoming changes in the sector and the subsequent opportunity to benefit from the fallout has led Winn to accelerate his strategy.
“Our strategy is to drive up efficiency and consolidate,” says Winn. “But five years of planning will now be squeezed into 18 months because of the Government changes.”
His response has been to push forward with ABS status and step up talks with potential investors.
Winn indicates he is “quite well advanced” in negotiations with a potential investment partner. That will enable the firm to grow quicker, purchase WIP books worth £2m to £4m from failing rivals and credit hire firms that want out of the sector because they can no longer make money from referral fees.
The ABS application is in and awaiting approval from the SRA. The group will then add a financial director to “run a closer eye over the margins”.
“Even 11 years ago we knew ABS was coming sooner rather than later,” says Winn. “So in 2004/05 we chose a company structure so that we could reinvest profits, build and then, when it is as big as it can get, we have the option to get out.
“Traditionally, solicitors have no easy way to get their cash out. The question for them is how to sell some shares and realise their value. But with an ABS you grow the business knowing you have a way out.”
The recent high street woes of Comet, Jessops, HMV and Blockbuster show that businesses must adapt to changing markets to survive. Winn is convinced it is no different in the law. A recent survey of more than 150 medium-sized five- to 10-partner personal injury firms found that referral fee payments as a proportion of fee income fell by more than 50 per cent last year.
Inflation is chipping away at profit margins for firms in challenging sectors. Quick decisions need to be taken and Winn advocates the company structure over of the traditional partnership model to make them.
He also says it is about a culture change. Five years ago, when he introduced the Fileview system, Winns lawyers were “up in arms”, and asking ‘what if I’ve not done anything on the case?’.
“The clients were doing my job for me,” says Winn. “Now, the lawyers are in the mindset of the client and the fee-earners love it - they get a lot fewer phone calls.”
Look and learn
And then there’s the anecdotal evidence.
“I once had a complaint from a man because we were claiming against his insurers on behalf of a client,” recalls Winn with a wistful smile. “He was incredulous and telling me it wasn’t right, whereas I was arguing the other side.
“A few days later I saw a new claim come into the system and recognised his name as the claimant. I couldn’t resist and rang him up. He said ‘Yeah, well, I listened to what you had to say, and when someone ran into my Porsche I came straight to you’.”
If there’s any doubt that Winns is a narrative that every law firm should be following, heed the words of Barclays’ Tom Wood, who heads the UK’s biggest bank’s professional services team.
By supporting the financial requirements of law firms, Wood is well-placed to comment on what is - and what is not - attractive in a business.
“Jeff’s a bright guy - entrepreneurial, and the legal sector needs more like him,” says Wood. “He’s found a niche and set up a business model to exploit it.
“There are some good partnerships run with profit, but the sector needs to become more corporate in terms of its thinking and business-focused in how it is run.
“I think other law firms across the board can learn from the Winns model.”
Personal injury sector woes
Forster Dean chief executive Gregory Shields has just had to make 13 redundancies at the personal injury firm.
Shields says: “The proposals the Government has in the offing will have a massive impact on the sector.
“Anybody operating predominantly in RTA is going to have a difficult future because many firms will see their fees cut by three-quarters - this is a very tough time.”
He adds: “Our model is to have a qualified lawyer in each of our 29 offices. I don’t subscribe to the belief that you can reduce law to something anyone can do without proper training.
“The question I have for any firm in the sector is - what’s your route to market?
“Many either buy the work in or pay the equivalent in advertising. Buying work in is going to be banned in April and I don’t know how you’re going to be able to pay for TV adverts on revenues when RTA fees are cut to £500.
“It’s such a crowded space,” Shields concludes. “RTA makes up 30 per cent of our work and we’ve gone our own route to try to embed ourselves in the community and do something that is relevant to people’s lives. The harsh thing is that you’ve got to run it as a business, and that can be tough.”
How to make a million
The first indication of the investment in IT systems and efficiencies at the firm comes when The Lawyer gets a tour of the office. Winn’s PA Janet McCrindle opens a door using fingerprint technology.
The team leaders of the legal clerks are either senior clerk or solicitor-led, with a ratio of around five to one. On average, senior clerks have in excess of 10 years’ experience - treated as the equivalent of a three-year qualified solicitor.
They are focused on fast turnover, are “commercially minded” and “extremely IT literate”.
It may sound like a factory but Winn - and his staff - are keen to stress this is no call centre atmosphere. There is a calm professionalism rather than a clamouring chorus of phones, clattering keyboards and chattering call-handlers.
The firm has an in-house costing department which saves on charges usually incurred by outsourcing billing and provides Winn with extra scrutiny of the fee-earners.
And ‘transparency’ is a word that continues to crop up. Indeed, as we talk, Winn has immediate access to bulging files containing monthly KPI reports. He says the attention paid to billing allows him to “benchmark” fee-earners.
When Winn established the trials team, dedicated to complex, high-value cases where liability is denied, he brought in 15 to 20 experienced personal injury lawyers. A mistake Winn has learned from.
“The lawyers we recruited from other firms were not used to the levels of scrutiny here,” Winn explains. “They were used to doing their own thing and the costs team was saying they were not putting their time on the files.
“We had four or five external hires on the trot who were ‘old-fashioned’ lawyers and found it difficult to have a senior solicitor looking at their files, making notes and reporting upwards on what had been missed.”
Winn dislikes estimated time on files because he says accurately recorded costs are more likely to wash before a sceptical judge.
“We run it as a business, whereas more traditional firms do law first and worry about the money afterwards,” argues Winn, who now prefers to bring trainees into the clerk teams for three to four years before moving them on to the trials team.
Another “edge” Winn claims to have over rivals is that the firm “backs its own judgement” with litigation.
“You’ll have some firms that have the difficult cases on the shelf gathering dust or simply settle because they don’t want the hassle,” says Winn. “They do the quick and easy cases that turn over the fees. We fight. We probably contest twice the number of other firms.”
How the Winns model works
Tom Wood is head of the professional services industry team at Barclays and manages the bank’s relationships with legal, accountancy and property consultant clients.
“The key thing about Jeff’s model is that the RTA sector is a commoditised or scaleable area of law where you don’t need large numbers of highly paid partners at the top of the pyramid,” explains Wood, who advocates running law firms as businesses. “A lot is done at junior level, and if you get the right processes in from start to finish and scale it throughout the system you can drive profit much more easily.
“In a traditional law firm structure, generally there would be too many senior lawyers dealing with cases and the cost of time per lawyer is high. Also, because they don’t handle the same volume there’s not the same investment in practice management or expertise in handling the caseload, which brings cashflow issues.
“Jeff doesn’t have this problem because my understanding is that he’s not buying cases in. The problem comes if you’re not the originator and buy cases off claims management companies.
“An RTA case can have a long life and a firm only makes money at the end, often after paying out on day one via a disbursement fee to the claims management company. When work comes direct to the firm the only cost is lawyer time, which doesn’t negatively affect cash.”
Wood adds: “Jeff’s is a factory-type model, run out of a centre with more people processing more cases. Smaller law firms in the regions try to do that as part of their normal working practice, but with more expensive resources carrying out the generic work.
“In this area of law, given the potential of scaleability, taking more cases and running a slick system to turn more and more profit is an attractive model for a third-party to invest in.
“Under the Legal Services Act, firms looking at how they might be able to take third-party investment on board should look at the scaleability of their model - once they’ve got it up and running, can it be built up without the associated costs getting much higher?”
Government cuts and the personal injury sector
Around 80 per cent of personal injury claims are the result of road traffic accidents.
The Ministry of Justice RTA Portal is a streamlined process for dealing with low-value RTA personal injury claims of between £1,000 and £10,000 in damages. This is to be raised to £25,000.
The portal enables the secure transfer of information between parties and sets fixed recoverable legal costs at £1,200, but this is to be reduced to £500.
Referral fees - whereby a law firm pays a claim management company an agreed amount to take a case - are to be banned, while success fees payable by claimants to their lawyers are to be capped at 25 per cent of the damages.
The Law Society has described the Government proposals - due to come into force from April - as “woefully inadequate” and says that many solicitors will not be able to afford to continue doing RTA work.
Many RTA practices buy in cases, so when referral fees are banned a lot of claims management companies will go out of business and the work will dry up.
Firms that specialise in RTA work will need to look for a way to advertise their own brand rather than rely on claims management companies.
Also, when the maximum recoverable cost of a case is reduced to £500, many RTA practices will find they cannot make any profit and leave the sector.