Big Law Poised to Win Again in 2021. What About Small Law Firms?
Equity partners at big law firms had a windfall in 2020. The Thomson Reuters Peer Monitor Index rose to a near-record high in Q4. Profits for equity partners increased by double digits. While demand slowed significantly early in the year, big law firms made up for it through increased rates and cuts to overhead, and by the end of the year, demand was back to near pre-pandemic levels. All signs point to another solid year of profits ahead. Of course, not to be lost amid all of that cheerfulness, it should be noted that big law associates bore the brunt of the economic fallout from the pandemic with massive layoffs for the first time since the Great Recession.
Meanwhile, small law firms are facing a much murkier future. Increased competition, managing technological challenges (including working from home and cybersecurity), and providing value for cash-strapped clients is a full plate. Many industries remain in economic tatters, including those served by small law firms. Getting clients can be difficult; getting those clients to pay on time even more so.
Challenges Facing Small Law Firms Increasing
Small law firms are an often under-researched segment of the legal industry. However, last September, the Thomson Reuters Institute released the 2020 State of U.S. Small Law Firms. The results suggested that billing and collections were a large area of concern for firms with under 10 attorneys, with competition from other firms being the biggest barrier to attracting new clients.
So, while the rich get richer, what are small law firms supposed to do? Below are some suggestions.
- Streamline intake and case management: Attorneys at small firms spend about 60% of their time practicing law. A significant portion of time is spent on intake, attracting clients, collections, and case management. Mark Haddad, General Manager of Thomson Reuters' Small Law Firm Business, has a couple of suggestions for small law firms struggling in the current environment. One way to grow revenue is through greater efficiency.
- Winning new business: According to the Thomson Reuters Institute , while attracting new business is a high priority for small law firms and an area of concern, the majority of surveyed firms did not increase their marketing budget in the last three years and had no plans to. At the very least, however, small law firms need to prioritize client experience to gain word-of-mouth business. Doing your job competently is no longer enough.
- Get going: 2020 increased the challenges facing small law firms but did not invent them. Attracting paying clients is always the goal of any small business, including law firms. With the challenges brought about by the pandemic, now is the time to improve an aspect of your law firm, whether that is intake, technological adaptations, or client experience. For example, do you ask your clients for their feedback at the conclusion of their case? If not, 2021 is the time to do so.
With a crowded marketplace that will only see increased competition in the coming year, small law firms will need to adapt to a changing industry. While it's good to see big law managed to mostly survive the pandemic, small law firms still face difficulty ahead. Here's to having a successful 2021.
- Litigation Funding Grew Less Than Expected in 2020, New Report Says (FindLaw's Strategist)
- Report Says Lawyers Will Discover a New Normal in 2021 (FindLaw's Strategist)
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