5 Signs Your Law Firm May Go Belly Up

As BigLaw firm Dewey & LeBoeuf goes belly-up, attorneys at other law firms may be looking for signs of trouble where they work.

One former Dewey employee claims the firm failed to provide proper notice before issuing mass layoffs, according to a class action lawsuit. But you may not need formal notice to realize your firm is about to collapse.

Another 10 or so BigLaw firms could fold like Dewey between now and the end of 2013, a columnist for ABA Journal recently opined. Here are five signs your firm may be next:

1. No confidence in leadership.

Are your firm's managers seen as competent and trustworthy? Do they put the firm's interests ahead of their own? If not, that could be a sign your law firm is in trouble, the ABA Journal columnist suggests.

2. Your firm's strategy is vague.

Can you concisely explain your firm's strategy? Being a "leader" and maintaining "high standards" are lofty goals, but they're also vague. A generic strategy won't set your firm apart, and may suggest a problem with its business model.

3. Clients belong to specific lawyers, not the firm.

This makes it easier for attorneys to pack up and take their clients with them -- but it also shows your law firm's "institutional value" may be lacking.

4. There's only a few weeks of liquid cash on hand.

Debts often lead to a law firm's downfall. So if cash money is not immediately available, that may be a sign that it's time for you to cash out.

5. Indefensible compensation disparities.

There was a huge compensation disparity at Dewey, with a ratio as high as 20 to 1, according to the ABA Journal columnist. That may be fair, depending on the circumstances -- but if it's unjust, that's yet another sign your troubled law firm may soon bite the dust.

Related Resources:

• Associates Hop Firms Seeking Partner Track (FindLaw)
• How to Draft an Airtight Layoff Letter (FindLaw's In House)
• How to Spot a Layoff: 5 Warning Signs (FindLaw's Greedy Associates)
• More New Lawyers Going to Small Firms Than BigLaw: ABA Survey (FindLaw's Greedy Associates)