Being a to be a midsize law firm can be challenging. Solos, small law firms, and large law firms all likely share a similar set of universal challenges with their peers. Entire books, conferences, and consulting businesses have been created to help them solve these challenges.
Unfortunately, when you are a midsize law firm—your experiences may be shared with small firms, large firms, or both, requiring you to pay attention to the entire market.
The recently released 2019 State of U.S. Small Law Firms Report by Thomson Reuters, discusses the challenges that firms with 1 to 29 attorneys face, but by focusing in on the responses of those ‘larger’ firms in that strata (those with 11-29 lawyers) the report reveals dynamics that should resonate with most midsize law firms, especially those with a consumer practice.
Indeed, themes present in the 2019 Report on the State of the Legal Market: A View from the Midsize Firms are: promoting internal efficiency; addressing client service expectations; collecting on work performed; and, adapting to a new competitive environment.
Acquiring New Business
Over half of the midsize firms represented in the Small Law Firms Report identified acquiring new client business as their top challenge—with 32 percent of respondents stating it is a significant challenge.
Unfortunately, few firms are acting to address this challenge. The competitiveness of acquiring new business makes retaining repeat clients a key component for a firm’s success. However, clients are placing rate pressure and other demands on the firm, which, among other factors, is presenting client-retention challenges to half of the firms identified.
So, these firms are feeling pressure from multiple directions. As if competing with peers isn’t difficult enough, midsize firms also are facing more competition from larger firms as those firms work to supplement a lack of demand from their traditional client base.
Managing the Firm
Managing staff was a common challenge indicated, with 58 percent of respondents admitting they have personnel difficulties. Perhaps a function of their capacity, midsize firms were more likely to address the challenges they face than their smaller counterparts.
Technology provided the solution to their challenges most often, but firms also changed strategies, staffing ratios, and refined their practice workflows. Notably, none of the midsize respondents made changes for the purpose of improving or increasing efficiency. Rather, they cited a need to respond to the overall legal climate and improve quality of service as the major motivators for change. This was somewhat surprising: efficiency was cited by more than half the firms as a moderate challenge and a key driver of a firm’s profitability, which was the primary measure of ‘success’ among those same firms.
It suggests that firms are being forced to be more efficient and at the same time benefiting from that forced behaviour.
Top Goals and Investment Areas
It is valuable to see what is being focused on within other firms, especially because two-thirds of midsize firms identified keeping up with competition as a challenge. A large majority of midsize firms have stated a goal of improving their marketing and business development, and only 69 percent of those firms have taken steps to address those goals.
Other top goals include: growing select practice areas; improving internal efficiency; growing while maintaining quality; and, developing succession strategies. These goals speak to managing partner awareness that a law firm needs to operate like their corporate counterparts—and the realisation that the business of law is separate from the practice of law.
Half of the midsize law firms are planning to increase their spending in business development and marketing; technology and infrastructure; and, lawyer headcount. Investments in real estate, professional development, and staff support are expected to remain the same in most firms.
No matter how you define your firm: whether you are the smallest law firm in a big city or the biggest law firm in the countryside, it is important to find your peers and monitor your industry.
The top firms will craft a strategy for success by evaluating where they are now, setting actionable goals, and charting a course to achieve those goals.