JND Legal Administration recently celebrated its 8^th year in business.  We have had a remarkable run for a company that started from absolutely nothing at the beginning of 2016 to become the leading Legal Administration firm in the Country today.  When my partners and I first embarked on the formation of JND we expected it to be easy.  We were veterans of the Class Action administration business having overseen the growth of another large company that was at the forefront of national cases.  We ran some of the largest administrations in history and counted as clients, lawyers from the largest plaintiff and defense firms in the nation.  We were well-funded, and we were not concerned with the competitive landscape.

While our journey ultimately proved to be a successful one, there were challenges along the way.  We encountered many hurdles along the way, some foreseen, some not.  What follows are the top ten lessons learned on our journey.  And while my experience in this regard is with respect to our particular industry, I believe many of these thoughts will resonate for others seeking to become entrepreneurs and strike out on their own.

 

1. Branding – choose a name carefully

 

In some ways, it is easier than ever to launch a company.  The world is online.  And creating a presence online is so much cheaper and easier than creating a brick-and-mortar presence.  Having a good website can provide instant credibility.  Some clients don’t do anything but check out a vendor’s website (which is a mistake for a different article).  That said, in order to create some interest and a lasting impression, you need a good name. 

Funny story about JND.  It was not our original name.  Our original name was stolen by a competitor who discovered our plans surreptitiously and then bought up all the URLs related to that name.  It turned out to be a blessing in disguise for us (and an expensive exercise for them in court).  While we are not branding experts and cannot claim that JND Legal Administration was the best possible name, the beauty in the name was in the simplicity.  JND stands for the first initial of each Founder’s first name.  Recently, my partner Jennifer Keough and I were at a meeting, and we introduced ourselves as we usually do – She is the “J” and I am the “N” in JND. 

The other name we selected – which was stolen – was too clever.  We see this problem in our market and in many others.  Sometimes people try to create a connection that doesn’t exist.  Or they take a name from ancient history or Greek mythology and try to tie it to what they do.  Witty maybe.  But not necessarily memorable and not conducive to the business agenda at hand.  Remember, you will, hopefully, have to live with the name for a long time – unless you are Twitter or X or whatever.  Pick a good one.

 

2. You can’t fake it till you make it

 

This adage may work in your personal career goals.  Sometimes you need to leap in and volunteer for something and try your best to figure it out on the fly.  It is probably good individual career advice, but not great corporate advice.  Faking it out of the gate is a recipe for disaster.  The last thing you want to do is stumble.  If you are not ready to handle certain kinds of clients or certain kinds of work, don’t take it on until you are ready. 

In the first year or so of JND we told a client that we could not handle a sizable project.  We wanted to do it but knew that we were not ready.  It was a good decision.  Had we tried to manage a project that was over our heads at the time we would have lost all credibility in the market.  We are now the leaders when it comes to handling large, complex projects.  Had we stubbed our toe early, we might not be.

 

3. Quality of clients trumps quantity of clients

 

This is a tough lesson to learn, especially when you are starting out and want any business that will come in the door.  But in almost all businesses, 80% of your revenue comes from 20% (or less) of your clients.  Those are the ones you want.  Clients that value service and product over cheapness; clients that respect your expertise; clients that always do the right thing. 

This doesn’t necessarily equate with the size of a particular client assignment at the beginning.  JND took on plenty of work from very good clients who initially engaged us on less than glamorous projects.  This is an investment worth making.  Proving yourself at the beginning on small matters (or with small orders) for a client who is likely to later have larger matters and be a partner with whom you want to work is worth it.  That is much different than working with clients who do not share your values, simply because you want to get some revenue in the door.

 

4. Beware investment dollars

 

Many start-ups look for investment from private equity and other places in order to get up and running.  It can be a deal with the devil.  Professional investors are in business for one reason – to make money.  They will do and say anything to woo you if they think you and your business will make them money.  And if you do make them money, all is good.  If you don’t, look out.  Running a start-up with someone looking over your shoulder and counting their money creates pressure beyond the self-imposed pressure to succeed. 

That said, JND got lucky with our choice of investment partner.  But as the saying goes, luck is the residue of design.  We did our homework.  We found a firm, Stone Point Capital, that had a good reputation in important respects, including giving management free reign to run things and not setting artificial time-tables for an exit.  You need to ask real questions when seeking out investment dollars, not just regarding the initial investment but with respect to oversight down the road.  Also, do your homework not just by speaking to the potential investors themselves, but also from third parties who know them.

 

5. Acquisitions of companies are really acquisitions of people

 

JND made four acquisitions within the first 5 years of our existence, with mixed results.  Perhaps the biggest lesson we learned as we continued to build our business is that businesses are people, not their clients.  This is particularly true in the service industry.  Sometimes you know there isn’t a good fit ideologically with the ownership and/or employees of the acquiree.  But the fit seems right from a business perspective.  That is a recipe for disaster.  One of the companies we acquired was led by a husband/wife team.  We found out, on the eve of the closing, that two of their employees were the daughters of that team.  After closing, we found out that there were cousins, boyfriends, etc. also working at the company. 

As if those were not enough red flags, during an initial lunch with employees, we were told in effect, “we don’t like change here.”  That would have been a good thing to hear before we closed.

We should have walked away as soon as we heard about all of the familial connections, even though we were so close to a deal.  And we should have conducted private interviews of key employees to get a sense of their culture, which ultimately did not align with ours about customer service.

Contrast this with our acquisition of Alloy Services, a small eDiscovery company, which formed the basis for JND eDiscovery.  The leaders of that company were eager to embrace change, understood the value of top tier client service and had a vision to grow.  Our eDiscovery service line has since developed and patented three apps and is one of the leading providers in the world of RelativityOne. It has been one of the great success stories at JND.

 

6. Be prepared to grow

 

A start-up needs to think about the future from day one.  Just surviving cannot be a goal, certainly not if your plan is to lead the industry.  At JND from the very beginning we said: “go big or go home.”  Our hiring, our spending, our marketing, everything was geared to becoming the company we wanted to become, not the company that was starting.  Did that create some anxious moments in the early days when we needed to find our footing?  Sure.  But it goes back to point 2 above.  You can’t be a leader in a space like ours without investing in IT security, for example.  So, pretending you have that covered when you don’t is a dangerous game. 

Hiring the wrong people because they come cheap is similarly untenable in the long run.  There is an old adage in business for people’s careers that goes something like this – dress for the job you want, not the job you have.  (These adages continue to have traction for a reason; there is always some truth in them.)  It is similar for a start-up.  Act like that is all you want to be and that is where you will stay.

 

7. Pick your partners carefully

 

Friends go into business often without any consideration about how well they will work together and whether they will have complimentary strengths.  You need to make sure you are all on the same page and have the same goals and aspirations.  There needs to be an understanding of where everyone is in their stage of life.  Is one partner just starting a family and looking for stability?  Is one partner getting ready to retire and wants a quick exit strategy?  Does everyone have the same risk tolerance about the money they are putting up to fund the company?

You may be compatible in life.  You may have the same tastes in music, interests in sports, etc., but that really has nothing to do with your compatibility in business.  At JND the three Founders had already been working together for many years, so we knew what we were getting into with each other.  We knew each other’s respective strengths and weaknesses, we knew each other’s work ethics and business ethics, we knew what kind of work we each liked to do and thrived on.  It didn’t matter that in our personal lives one of us liked to play golf, another was a runner, and another was a hockey fan.  You need to understand the business environment attributes of each other before jumping into the proverbial partnership bed.

 

8. Location, location, location

 

I realize today that “remote” work is the supposed future of business, but it isn’t.  You see examples every day of large companies “forcing” employees to return to the office.  Business leaders such as Jamie Dimon know full well that there is more productivity and collaboration when people work in an office together.  And younger employees, while perhaps enjoying the flexibility of some remote work, hunger for the comradery and mentorship that only comes from an in-person environment. And while no doubt there is a segment of the population that may still clamor for some level of remote work, many industries simply cannot do that.  A lot of remote workers driving around in their Teslas need to rely on people showing up to a factory to build them.

The legal administration space has largely gone remote, except at JND.  We never fully closed during the pandemic, and we continue to operate with a significant workforce on site every day.  We do things like handle mail and handle sensitive phone calls that cannot possibly be done at home.  Moreover, our team collaboration is much better in person than via zoom.  And let’s face it, working from home often means things like running errands, watching TV, and otherwise procrastinating.  Perhaps that isn’t true for everyone, but a lot of people are nodding their heads right now.

So, if you are going to have an office or a factory or other brick and mortar business, you need to choose the location carefully.  Perhaps the most important consideration is where are you going to find the best people to fit your organization.  Do you need a college-educated workforce?  Does your business rely on IT professionals?  Is your location in a city and state where candidates would like to move to if given the chance?

Often times companies think first (and only) about cost.  Where land and rents are cheap is not necessarily where you will find the best staff for your particular industry.

 

9. Mistakes happen, own them

 

Nobody wants to admit when they have made an error.  Companies are particularly loathe to do so when that admission might cost them money.  While JND prides itself on the quality of its work, in our industry, with hundreds of millions of class members and tens of millions of claims a year, it is impossible to be perfect.  In the few instances when we have made a mistake, we have let our clients know and we have accepted financial responsibility.  It might sting at the time, but in the long run, clients come to understand that they can trust you and that you have their backs.  Particularly in our industry, there is nothing worse than hiring an administrator who hides the ball.  With the amount of scrutiny involved in these cases, the truth will come to light.  It is better to hold yourself accountable than wait for others to do so.

 

10. Hire the right CFO

 

While some of this advice might seem ethereal, this last item is a simple, practical step.  As your business grows, so will financial issues and headaches.  The right CFO will help you navigate these issues in a way that protects the company and its assets.  The problem is a good CFO is expensive and it is difficult to rationalize paying that much money to someone who isn’t helping build the business in terms of client development, client service or product development at the beginning.  JND cheaped out early in our existence and hired people like bookkeepers and controllers, instead of a real CFO.  (Go back and re-read section 6.)

Once we realized that we were hamstringing ourselves by treating finance as an afterthought, we went out and hired Flora Bian.  Her addition to our company was instrumental in our growth and she was invaluable during acquisitions.  The right CFO can help your business in many ways besides handling the books.