Planning an ABS?
Two years since the genesis of alternative business structures, the term ‘ABS’ is no longer synonymous only with braking systems for cars.
Two years since the genesis of alternative business structures, the term ‘ABS’ is no longer synonymous only with braking systems for cars; rather, it is starting to permeate numerous sectors where businesses are seeking to capitalise on this radical development which – for the first time – enables non-lawyer ownership of law firms.
Over 300 ABS licences have been issued by the Solicitors Regulation Authority (SRA), but this figure represents only 3% of law firms in England and Wales. Why such a small number given the opportunities presented by the legal sector?
One reason is that the SRA has struggled to efficiently process applications; over 60 prospective ABSs have withdrawn their interest while others have waited over a year for a decision.
Another cause is difficulties in reconciling the commercial considerations of the applicants with the SRA’s risk-based approach to regulation which accords priority to the interests of consumers.
Naturally, these delays, coupled with widespread criticism of the regulator’s processes, have deterred others from applying (although to be fair to the SRA, the process has improved since it first started to licence ABS).
However, one recurring theme is the fatal error of failing to design or follow a comprehensive and realistic project plan.
So what are the key ingredients of a plan? Before even considering submitting an application, it is necessary to decide upon a timetable (with contingencies) for the process and to analyse your proposed business model with a view to identifying the inherent risks.
Next, your business plan must be articulated to the SRA along with an explanation of how the ABS achieves the regulatory objectives.
A conciliatory and pro-active approach is more likely to gain the regulator’s trust.
Sometimes, this phase of the process can be time-consuming and labour-intensive, but the opportunity cost of failing to plan effectively will be more significant and could cause irreparable damage to your proposed business and its competitive position.
The above article was printed in the Manchester Evening News on September 23rd 2014.