Small Law Firms

Why Startups Fail Is Also Why Solo And Small Law Firms Fail

Though solos and smalls haven’t always had to grapple with the problem of market need, that’s changing with new technology.

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Why do many solo and small-firm practices fail? A recent study by CBI Insights on the top 20 reasons that startups fail sheds some light on that question. Although the CBI study focused on businesses rather than small law firms, the reasons for failure are generally the same across the board.

Lack of market need topped the list of reasons for startup failures, accounting for 42 percent of the businesses included in the studies. Though solos and smalls haven’t always had to grapple with the problem of market need (after all, if you’re jailed for drunk driving, you’re going to need legal representation), that’s changing with new technology. Whereas once, a company seeking to incorporate or a consumer with a need for a will had no choice but to hire a lawyer, today, many consumers are able to address these simpler matters through LegalZoom and other low-cost or free online tools.  As a result, many law firms that once did nothing more than prepare documents for clients are finding that there’s less of a need for the services that they provide.

Strong competition was found to contribute to 19 percent of startup failures — generally, in situations where a small startup offered a service that went head to head with an established provider.  Many lawyers also struggle with competition, particularly those firms that start a practice in a competitive practice area like personal injury or criminal defense without any way to distinguish themselves from large providers that dominate the market.  Competition will always exist, but solos and smalls can still prevail over larger Goliaths by creating their own playing field and finding unserved niches where there’s no competition.

Startups also fail for purely financial reasons like cashflow problems or issues with pricing. These factors plague solos and smalls as well — though most lawyers who underprice their services don’t necessarily fail, but wind up working long hours for inadequate pay.

Not surprisingly, passion — or lack thereof — plays a role in the failure of startups and also solo and small law firms. Starting a law firm requires significant effort, and running a firm isn’t a piece of cake either with demanding clients, hostile judges, and rude opposing counsel to deal with on a daily basis. If you don’t love your work so much that it makes you want to dance a jig, then mustering up the energy for the drudgery and stress that running a firm entails will be next to impossible.

You can view all 20 reasons for startup failures in the full article here .

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Carolyn ElefantCarolyn Elefant has been blogging about solo and small firm practice at MyShingle.comsince 2002 and operated her firm, the Law Offices of Carolyn Elefant PLLC, even longer than that. She’s also authored a bunch of books on topics like starting a law practice, social media, and 21st century lawyer representation agreements (affiliate links). If you’re really that interested in learning more about Carolyn, just Google her. The Internet never lies, right? You can contact Carolyn by email at [email protected]or follow her on Twitter at @carolynelefant.

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