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What Is a Managed Firm?

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  • Written By: Jan Fletcher
  • Edited By: Shereen Skola
  • Last Modified Date: 16 November 2016
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A managed firm is one that provides professional services and has elected to designate a manager to run the operations for the firm. Hiring a business manager frees the firm’s professionals from having to waste valuable time performing administrative tasks. An administrator does not typically require the extensive training and licensing that an attorney, accountant or architect would usually need. The firm’s highly valued workers are thus freed from routine managements tasks. This allows the firm’s trained professionals to maximize time spent in producing billable work.

Professionals including lawyers, certified public accountants and architects generally bill for their services by the hour. Frequently, some or all of the professionals in such firms are also partners in the business. Each partner has ownership, or equity, in the company. This means that most partners have a vested interest in increasing their firm’s level of productivity. Some firms decide that it is more profitable for them to hire a manager to handle all of the firm’s business operational tasks.

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These administrative responsibilities may include managing accounts payable and receivable. Maintaining compliance to government-mandated reporting and taxation may be another duty delegated to the firm’s business manager. By becoming a managed firm, and hiring a manager to handle those administrative tasks not directly billable to the clients, the firm’s professionals may increase their own billable hours. This also increases the firm’s profitability. Other challenges professional firms may face are controlling work flow, managing potential conflicts, and increasing personal productivity.

Since transitioning into a managed firm does entail relinquishing some control over the firm's operations, some professional partners may elect to share in the administrative tasks. Instead of a business manager, the firm may hire an administrative assistant. The assistant may answer the phone, or schedule appointments, but he or she may not be involved in major decisions regarding the firm’s personnel or business strategy.

Smaller firms with multiple partners may choose this option. The deciding factor for having a managed firm is often the size of the firm’s client base. In a smaller practice, particularly if the business is new, the firm’s professionals may not have enough clients to fill a full time workload. If the firm transitioned into becoming a managed firm, some business management experts claim the extra expenditure will be recouped in increased profitability, allowing the firm to grow.

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