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Very few law firms fail because of bad lawyers. Even the best lawyers can watch their firms fail, often due to poor planning and poorer management.
While several large firms have gone down in spectacular fashions recently, many smaller firms have disappeared quietly, failing for reasons that could have been avoided. Here's an overview of the ways small firms fail -- and how you can avoid their fate.
Valuing Smarts over Business Skill
Brilliant lawyers can be terrible businesspeople. As Frank Wu, Chancellor and Dean of U.C. Hastings' law school, wrote earlier this year, "smart people overestimate the importance of being a smart person." A sharp mind isn't enough to guarantee a successful firm.
Really smart people recognize that it requires more than legal aptitude to make a firm successful -- it requires business acumen, marketing expertise, and skill at developing talent. Smart lawyers might have these skills too, but those who don't should seek out those whose technical business skills can support their brilliant legal minds.
Monomaniacal Focus on Yearly Profits
You want to be in this for the long haul. For a firm to survive, it needs to have a long term perspective. Too many firms focus on yearly profits, since these profits directly pad partner pockets. But there are huge risks that come with focusing too heavily on the short term.
A successful firm needs to plan for the future. That means putting together a long-term strategy for remaining lean and competitive as technology and legal entrepreneurs change the way legal business is done. It also means having a plan in place to help develop in-house talent, helping your promising new associate live up to that promise.
Finally, having a plan for the future means making sure you have a succession plan in place. This will help ease the transition between current leadership and the next generation. The plan should include details for setting aside time and money -- making sure the firm's focus on yearly profits doesn't obstruct its ability to profit in the future.
Failing to Stand Out
Some lawyers are so risk averse that they miss out on opportunities to grow or develop business. Others simply follow the same trends every other firm is pursing. Neither of these approaches allow firms to standout. Having a clear vision as to what makes your firm unique, both in its practice and in its culture, will help make sure that your firm occupies an important legal niche where it can thrive for the long term.