Ramy Fahmy is the Managing Partner of Hayle Consulting and provides financial & economic advice to leading international firms.
What is Hayle Consulting?
Hayle Consulting is a specialist financial and economic planning consultancy firm, it was established in 2011 in the UK and established in Cairo in 2015.
The firm’s main purpose is to ensure the effective delivery of financial forecasting, economic planning & strategic structuring for client’s businesses through the delivery of “OFEMs” Operational Financial Economic Models.
Hayle manages and coordinates the long-term strategic planning of businesses whether it be law firms or oil and gas companies. In doing so we carry out analysis budgeting and planning for related business units.
In addition to providing such services to law firms, we also work alongsideacquisitions, by where we implement processes & systems in line with planning & control model of the organization during pre-acquisition phase (i.e. due diligence process, validation of business models) and post-acquisition/integration phase.
Hayle has ongoing projects in Egypt, Sudan, Kenya, Uganda, Pakistan, Saudi Arabia, Emirates, Turkey, Lebanon, Canada and London.
Over the past five years, Hayle has undertaken oil & gas projects (Upstream & LNG) at a value circa of $60 billion in addition to technology, medical, aviation, food & beverage, and law firms.
What Is OFEM (Operational Financial Economic Model)?
OFEM simply put is a tailor-made model for a business. Using this model, a law firm, for example, can make decisions such as maintaining necessary reserve cash, expansion, and development of its practice. Even down to assets handling.
Most of the time the main tool is excel due to the flexibility it offers. It’s important to understand that this is not about Excel. Knowledge of Excel itself is just a basic prerequisite. Modelling is a distinct skill, don’t confuse it with “Excel”, which is just an environment for modelling. The most important talent a modeller needs is the ability to simplify complex things without losing their essence. Accordingly, the mixture between modelling techniques and the environment used to reflect those techniques must be mastered to build a successful model.
A good model should:
- Be relatively simple
- Focus on key cash flow drivers
- Clearly, convey assumptions and conclusions
- Evaluate Risks
Financial modelling methods can be used to forecast a picture of a security or a financial instrument or a company’s future financial performance based on the historical performance of the entity. It includes preparing detailed company-specific models which are then used for the purpose of decision making and performing financial analysis. It is nothing but constructing a financial representation of some, or all, aspects of the firm or given security. It can also be a mathematical model of different aspects of the financial health of a given company and this model can be made on a simple, not book paper or in excel, with later it is easily possible to analyse the impact of different assumptions or change in value of various variables hence gives the more flexibility. Financial modelling is a mirror which shows whether:
- An Organization is in need of additional funds (debt or equity) or not;
- How a business will react to different financial situations or market conditions;
- In which company we should make investment for better returns i.e. comparative analysis;
- Analysing and defining the risk level;
- Has the company had a change in direction that is a loss of customers, expansion etc.
- Identifying of Strategic and Business Plans through finding strengths and weaknesses; and
- It’s a technique to value and analyse Firms, IPOs, and FPOs.
- Coordinate Management reporting activities for the business by defining the guidelines and methodologies for the branches, and ensuring the information flows to the strategic planning function.
- Coordinate internal and external benchmark analysis and special projects aimed at improving operational efficiency.
- Implement processes & systems in line with planning & control model of organization.
- Business variance analysis: Analyse the dynamics of the key performance indicators both for the business and for each branch, identifying the main reasons of variance vs. the planned course of business and delivering information to support decisions and carry out corrective actions.
- Profitability analysis: Analyse and evaluating profitability and financial compatibility of investment proposals submitted by domestic and international branches of the business and formulate recommendations for the relevant partners.
- Investment analysis: Perform, in coordination with the strategic planning, periodic evaluation of the businesses ensuring use of best-recognized practices; compare internal evaluation with market consensus, and with the value of invested capital for value creation analysis.
So what are the real benefits for law firms?
Even though most of what I have said you will understand but if I were to break it down as to the benefits I have seen my clients gain:
- Proper financial planning ensuring that the law firms are always financially stable;
- Giving time for the partner of the law firms to concentrate on what’s really important – getting new clients and ensuring quality of their firm;
- Allowing law firms to look into the future and diversify their business, for example by simply setting aside a percentage of profit for investment into anything by law;
- Making decisions on currency exchange and when to increase or decrease hourly rates; and
- How many fixed fees and rates should a law firm give?
All these are some of the elements are solved by using an OFEM.
So how easy is it to use?
What we normally do is build the model from scratch as every business is different with many individual variables and requirements. Once it is built we hand it over to the law firm’s financial analyst, giving training and brief on:
- Spreadsheet design
- Assumptions documentation
- Linking and not hard-coding
- Data entry locations
- Ability to use Consistent Formulas
We then follow up once every quarter and provide reports to the partners. We also help them make decisions that need not just an accounting perspective but an economic one too.
Can you give us an example?
Famous historical examples of how proper cost analysis & optimisation can make a difference:
In the 1980s American Airlines meals cost analysis showed a great deal of inefficiency as the airline paid its caterers based on the number of ingredients in the salad: 60 cents for four items and 80 cents for five. The given advice was to promptly remove the salad customary olive as it turned out that the olive was the fifth item. This move saved more than $40,000 a year. In 1994, Southwest Airlines followed another suggestion and removed the company’s logo from rubbish bags, saving the carrier $300,000 a year in printing costs.
Any advice for partners of law firms?
Yes, having a good financial analyst is essential and required but look into getting an economist on board as a consultant too. Law firms have little tangible assets and are generally cash rich, having cash is great but not moving it is not. An economist will advise you not only on how to move it but the most efficient way of spending it at the lowest risk on any idea you have. This is now becoming common practice in law firms across the world especially when law firms such as Gateley are IPOing!