K Street’s gains felt at boutique firms, too

K Street’s gains felt at boutique firms, too
© Greg Nash

K Street surged in the early months of 2015, and the uptick in business ushered in by the new Republican Congress was felt well beyond Washington’s biggest lobby shops.

Many smaller lobby and law firms saw relative gains, according to new analysis generated by Bloomberg Government and provided to The Hill.

Smaller firms have long decried the standard practice of evaluating Washington’s top shops by earnings alone, arguing it puts them at a disadvantage by appearing to not keep up with their much larger counterparts.
 
When looking at the figures posted by K Street for the first three months of the year, analysts instead ranked industry players on year-over-year increases in total and average per-client revenue, fees per lobbyist and client retention rates.
 
“If you take a hard look at all three of those,” said Randy Russell, the founder of The Russell Group, which ranked high on the list, “that's what you look for in a business and what it takes to be successful.”
 
Although The Russell Group posted first quarter revenue of $990,000, the firm made $198,000 per lobbyist during that period and kept 70 percent of its client base over a three-year period, considered by researchers to be relatively long term. More than 90 percent of its clients retained the firm for at least 12 months.

Thorn Run Partners, which has grown from a two-person shop into a 20-person firm, also showed massive growth over last year. Additionally, 62 percent of its clients have stayed with the firm for at least three years.

“Our firm is largely made up of refugees from bigger firms, and what we love about our boutique mentality is that we're not locked into a cost structure that requires that we look at every challenge as a nail just because we've got a really expensive hammer,” said Andy Rosenberg, a partner at the firm and former employee at Ogilvy Government Relations and Patton Boggs, now Squire Patton Boggs.

Many K Street firms did well in the first three months of 2015, especially when compared to the same period in 2014, because of an increase in the optimism of congressional activity and regular order after Republicans took over the Senate.

One firm that did particularly well, Alpine Group, netted an 18-percentage-point overall revenue increase over 2014, a 3-percentage-point boost in average fees per client and a 79 percent three-year client retention rate. It also made $226,571 in revenue per registered lobbyist — the highest on K Street, according to the study.

Capitol Hill Strategies, run by veteran lobbyist Chuck Brain, says his business received a boost in the beginning of the year because clients know they can turn to his shop for help cutting deals.

“If anything is going to get done, moderate Democrats need to be involved, so [clients] turn to us,” he said.

And nearly 80 percent of clients stayed with the firm over a three-year period, according to the report.

The data also separates pure advocacy operations from both law and lobby firms — finding the bigger policy and legal shops to have an overall lower three-year client-retention rate and less revenue per lobbyist.

Some lobbyists pointed out the rates could be due to increasing project-based work utilized by law firm clients.

Further, combination lobby-law firm revenue structures are often more complex for its lobbyists, with many participating in activities not captured under the law that mandates the disclosure of lobbying fees, the Lobbying Disclosure Act (LDA).

“Of that cohort that is doing LDA-reported work, a significant part ... is also doing non-LDA work,” said Dan Bryant, the chair of the public policy and government affairs practice at Covington & Burling, specifically mentioning foreign representation, handling regulatory issues for clients, issuing strategic advisory services and all work completed outside the U.S.

Covington & Burling, a global law firm, topped the rankings in both revenue per lobbyist and the growth in earnings on an overall level and a per-client basis. It also earned the 11th highest overall lobbying fees on K Street during the first three months of the year, The Hill reported when figures came out last month.

Bryant said the combination of having a deep bench of experts in Washington and offices around the world is becoming even more necessary for the globalization of both business and U.S. politics and regulatory policy — being simply global isn’t enough.

“It isn't a question of offices — you have to have people in offices outside the United States — but you also have to have people in your U.S. offices who are familiar with the policy challenges that companies face in emerging markets and developing countries,” he said.

Although Bryant says a larger share of the firm’s revenue growth doesn’t come from lobbying figures, Covington is able to cultivate its advocacy business through its legal work.

Clients are “confident we can solve their problems because we did that as their law firm. It becomes a smaller step for them to take, for them to ask us to take on policy work and lobbying work for them,” he said.

Cornerstone Government Affairs, a lobby shop based on Capitol Hill that also made the Bloomberg Government list, has used the same approach on the state level. As it has opened up more offices nationwide, clients have been giving them additional work.

Using across-the-board metrics to measure the health and performance of K Street is a challenge, as reasons for growth and declines differ for many firms, and the market is highly volatile.

However, firms that spoke with The Hill noted that, the single metric that mattered most was client retention and satisfaction.

"We are proudest of our clients, many of whom have been with us for years. We think it says a lot about the trust we've built with them,” said Steve Clark, a partner at the CGCN Group, in an email.

CGCN Group — an all-Republican boutique firm — received the highest marks for long-term client retainers, keeping 83 percent of its clients for three years or more.

“At the end of the day, the critical issue here isn't what ranking you get, it's client satisfaction and trust,” said Donald Pongrace, the head of public law and policy at K Street’s largest firm, Akin Gump. “If clients trust you with their problems, you don't need to worry about your ratings or chasing the next piece of business.”


 
The following charts were provided to The Hill by Bloomberg Government:
 
Listed in alphabetical order, the top 10 lobbying firms of the first quarter of 2015 are:
 
Firm
Percentage change in total revenue
Percentage change in average revenue per client
1-year
retention
rate
3-year
retention
rate
Revenue per registered lobbyist
Alpine Group Inc.
18.3%
3.1%
88%
79%
$226,571
Bockorny Group Inc.
5.9%
3.4%
83%
74%
$134,464
Capitol Hill Strategies LLC
16.9%
1.3%
92%
79%
$190,000
CGCN Group
28.7%
6.2%
91%
83%
$197,556
Cornerstone Government Affairs LLC
22.2%
15.1%
88%
60%
$133,071
Crossroads Strategies LLC
30.1%
1.6%
84%
79%
$180,444
Ernst & Young LLP
6.3%
16.9%
85%
70%
$129,615
Franklin Square Group Inc.
4.7%
4.7%
90%
67%
$178,000
The Russell Group Inc.
9.4%
3.6%
94%
70%
$198,000
Thorn Run Partners LLC
48.6%
4.0%
91%
62%
$134,615
 

Listed in alphabetical order, the top lobby-law firms of the first quarter of 2015 are:
 
Firm
Percentage change in total revenue
Percentage change in average revenue per client
1-year retention
rate
3-year retention
rate
Revenue per registered lobbyist
Akin Gump Strauss Hauer & Feld LLP
12.1%
3.6%
81%
61%
$117,707
Bracewell and Giuliani LLP
8.8%
1.8%
95%
77%
$112,667
Covington & Burling LLP
21.0%
29.8%
78%
57%
$121,172
K&L Gates LLP
1.4%
4.8%
80%
54%
$108,136
Miller & Chevalier Chartered
22.1%
6.9%
96%
71%
$103,800
Wiley Rein LLP
4.2%
17.2%
78%
53%
$119,833