Nimbleness, Purpose Key To Small Law Firm Success (Part 2)
As the legal industry changes, small law firms have to adapt to survive and thrive.
Ed. note: This article is the second article in a two-part series regarding Thomson Reuters’ small law firms study.
As the legal industry changes, small law firms have to adapt to survive and thrive. A new study from Thomson Reuters, “How Small Firms Succeed Under the Pressure of Today’s Challenges… or Fail,” shows that firms of between one and 29 lawyers are broadly aware of the challenges they face.
But as seen in the first part of this series, there is a troubling gap between identifying those challenges and tackling them. Winning new client business was the most frequently-cited challenge among 300 small law firms responding to the Thomson Reuters survey. Yet only 37 percent of firms recognizing that challenge had actually done something concrete about it. That disparity was present in just about all cases, with 62 percent of respondents saying either their model doesn’t need change, that they aren’t feeling sufficient economic pain to motivate change, or clients aren’t demanding change. Another 23 percent complain they don’t have the time or resources to make necessary changes.
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What’s more, even when changes are deemed necessary and plans formulated to make them, they often whither on the vine. “Even when those plans are blueprinted and put in place, the execution and fulfillment of those plans is very, very spotty,” Brian Knudsen, Vice President of Thomson Reuters Small Law Firms, says. “Many times the implementation of those plans is less than robust and the individual attorneys in those firms end up going back to what they had been doing.”
Luckily, in tackling their biggest challenges—drumming up new business, responding to rate pressure and dealing with administrative tasks—small firms have a key advantage over their larger peers: size. “Small law firms are naturally nimbler in their approach to their practice strategies and business strategies,” Knudsen says. “They definitely have an edge there.”
What unites the 85 percent of small firms deeming themselves “very successful” or “successful”? According to Knudsen and the Thomson Reuters study, it’s all about approaching things with a “purposeful nature.”
“Successful firms have agreed on a common purpose,” Knudsen says. “Whatever that is, everybody in the firm has agreed upon it and identified with that common strategy, and then they become very purposeful about living that strategy, optimizing their workflow and investing in technology to differentiate themselves from their competitors.”
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Setting bottom-line goals helps to maximize efficiency, which positively impacts all three major challenges faced by smaller law firms. “Firms that have decided to pursue a very specific business strategy around a very specific practice and deploy tactics to deliver maximum value to clients definitely have an edge,” Knudsen says. “They’ve optimized their client focus and their workflow and deliver great efficiency and value to those clients.” That keeps those clients happy, draws in new ones, helps alleviate administrative headaches and quiets client concerns about costs.
“Firms that have a great brand and great reputation, particularly around a given practice area, are going to be the ones that can command premium rates and avoid the downward rate pressure that firms not doing that face.”
Technology can be a key tool, not only for limiting time spent on administration, but also for maximizing a firm’s workflow, freeing up time to spend on higher-value tasks for clients and recruiting new ones. Knudsen says an increasing number of firms are turning to technology to handle core business strategies. “To the extent that they can leverage that core business practice and expand it into a broader practice management toolset, that can help them drive efficiency, facilitate communication internally and with their clients, and optimize that client experience.” Conflicts checking, case management and document management and drafting are among the key tools increasingly embraced by successful small firms.
Such changes can help firms with what they identified as the most important factor to their success: enhancing their reputation. That, in turn, helps win more business, the second-most important factor cited by very successful firms. But the key, Knudsen says, is having a clear purpose and sticking to it.
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“We can’t underestimate the significant change—and reinforcement of that change—that is required over time,” he emphasizes. Attorneys who recognize this are likely to enjoy the most success, whether measured by client satisfaction, repeat business or profits. “This is not entirely art. Some of this is science and is very repeatable, and can be optimized to maximize client value,” Knudsen says.
Knudsen recognizes it’s not an easy thing to do. “It is a very challenging exercise for attorneys to look in the mirror and say, ‘Some of the things I have done for years could actually be done through technology or pushing it to a lower-cost person at my firm, while I just do the higher-value things that optimize the practice.’ That drives tremendous value to the client engagement and repeat or referral business, and ends up with a good client outcome as well. Those are the firms that are being successful—but that is a very challenging step for firms to take.”
View Thomson Reuters, State of U.S. Small Law Firms Study report for insights into building a successful small law firm.