Solo And Small Firms: 2018 In Review And What’s Next

As 2018 draws to a close, here’s a quick look back on some of the year’s trends and events and how they impacted solo and small law firms.

Goodbye to Avvo

The year opened with the acquisition of Avvo by online marketing giant Internet Brands, which also owns the once-venerable Martingale-Hubbell legal directory and Nolo. To be sure, regulatory uncertainty over Avvo Answers — which several regulators moronically deemed impermissible fee-splitting — hastened Avvo’s exit by killing off an option that would have allowed Avvo to diversify its offerings instead of relying entirely on payments from law firms to boost their profiles.  Had Avvo remained a one-trick pony dependent on marketing revenue alone, it would only have been a matter of time that Avvo would have gone under as consumers increasingly turn to social media to find information and recommendations about law firms. Facebook advertising grew by 25 percent in 2018, and Avvo simply didn’t have a particularly strong  presence on social media.  Because Internet Brands supports online advertising across verticals, it has the budget to move more aggressively into new ad markets and to weather a downturn in one of its other verticals.

For that reason, it’s not surprising that Internet Brands shut down Avvo Answers a few months after the acquisition.  But losing the ability to operate Avvo Answers wasn’t the only reason that Avvo didn’t stick around and try to go public, which I suspect was the original game plan. In the dozen years since Avvo’s inception, the online review space — one of Avvo’s unique selling points — has also become more competitive even for legal since both Yelp and Google allow users to post and search for lawyer testimonials. In particular, Google has become more aggressive about growing local search through Google My Business — and among other things, rewards local businesses for gathering reviews with higher search placement.  In contrast to Avvo, Google My Business Is Free and lawyers are already getting on board. In short, it was only a matter of time before Google and social media would divert consumer traffic away from Avvo which at its core, was really one giant niche site.

Thus, in today’s market, even Avvo’s original purpose — lawyer ratings — wouldn’t have saved it.  And Avvo’s ratings system itself also carried some risk. What didn’t make the news post-acquisition is that Avvo’s lawyer ranking system had been under investigation as a deceptive advertising practice by the New York AG’s Office and as a result, Avvo can no longer claim that rankings are unbiased, and must caution consumers to independently verify lawyers’ disciplinary ratings.

What does Avvo’s acquisition mean for solos and smalls?  First, the acquisition serves as a reminder that no business, no matter how seemingly impervious, is immune to competition during this volatile space between regulation and innovation in the legal space.  The lesson? Avoid locking into long-term contracts or commitments with legal service providers because any company can change hands in a heartbeat — and its policies and prices can change too.

Second, Avvo’s acquisition is what a missed opportunity looks like.  As I’ve always believed, Avvo came on the scene at a time when the one of the services it offered — a professional web presence for lawyers — was desperately needed because the bar associations refused to do it.  How different the Avvo story that might have played out if bar associations had cooperated and encouraged members to get on board with Avvo, or worked with Avvo to develop online services that might have helped bar associations’ reboot their own referral systems. It’s too late for bars to do that now — the ship has sailed and consumers are content to use Google and Facebook to find lawyers. But had the bars cooperated with or supported Avvo a decade ago (as many have done with Fastcase), they could have helped build the go-to site for finding lawyers that would have at least held its own with Google. Bar associations can now kiss their referral services goodbye — they are good as irrelevant in the age of Google.

Cloud-Based Practice Management Systems Hit Double Digits

2018 marked the tenth birthday for both RocketMatter and Clio, the two pioneer companies that brought the cloud to law practice management. In the 10 years since these two companies launched, at least a dozen other cloud-based practice management systems — from all-purpose platforms like My Case, Practice Panther, and Smokeball to practice-specific platforms like CasePeer for personal injury lawyers and Partus for family law have emerged on the scene. These days, the question for most solo and small-firm lawyers isn’t whether to use a practice management platform, but which one.

Law practice management platforms are also expanding their offerings to stay sticky to customers.  MyCase offers integrated websites and Clio recently acquired Lexicata to gain control over the client acquisition process.  But in trying to be everything to everyone, are practice management companies also straying from their roots which is to help lawyers better serve clients?  I wrote about low use of portals in the medical profession — and the Clio Legal Trends Report for 2018 confirms that conclusion: at best 31 percent of law firm clients use portals, primarily for bill payment. Is the problem lack of education? Clunky or complicated interface? Maybe it’s time for practice management companies to revisit ways to make client portals more inviting.

For now, competition helps to keep law practice management costs in check. But for many companies, costs are creeping upward. Increasingly, law practice management systems serve as the backbone of many practices, but is there a cost beyond which some firms will not pay? Something to watch in 2019….

Two Faces of Innovation

Perhaps it was the European GDPR taking effect this year, and creating numerous issues for small businesses and law firms or the acceleration of cannabis legalization, but it seems as if changes in substantive law have taken place more quickly than ever and only continue to accelerate. In the legal profession, however, much of our focus has been on innovation of process (how AI can automate a law practice) rather than innovation of substance — a topic that the venerable Professor Bill Henderson and I covered in twin posts.  Over at MyShingle, I’ve tried to fill the information gap with a series of new practice area profiles and moving into next year, it will remain important that all lawyers, including solo and small-firm lawyers, stay up to speed on emerging issues to competently represent clients.

Ethics Disrupts

In the wake of an access to justice crisis, some regulators are revisiting the issue of non-lawyer ownership.  Illinois is evaluating whether rules on referrals need to be re-examined, while California has convened a task force (with non-lawyer members) to consider changes to non-lawyer ownership rules. It’s hard to say whether non-lawyer ownership will expand access to justice or reduce the cost of legal services, but it’s worth exploring. Many lawyers fear non-lawyer ownership but from my perspective, there are enormous opportunities for forward-thinking lawyers to create hybrid services that include a lawyer on the team along with other experts. I’m not convinced that non-lawyer firm ownership will make legal services less expensive — for example, a hybrid divorce with a therapist and money manager on the team won’t necessarily be cheaper — but it will be more effective. For other services, like writing wills or filling out forms, non-legal service providers may wind up interposing a middleman to handle services that in theory should be simple enough for consumers to do on their own (e.g., like corporate formations which can be done with a few clicks at a Secretary of State website, but consumers still pay a middleman like LegalZoom to fill out forms). Solos and smalls should keep an eye on these changes not to guard their turf but to expand services and capitalize on opportunities.

What’s Next, Solos and Smalls?

This year, I celebrated 16 years of blogging about solo and small-firm practice and empowering and celebrating solos and smalls. In some ways, I feel as if I’ve come full circle: back then, solo practice was the legal profession’s ugly duckling relation — and although starting a firm had its heyday when the economy dropped, these days, law schools are more focused on alternative careers like legal ops or compliance or legal tech for students who can’t find jobs rather than helping them start sustainable solo and small-firm practices.

Yet for many — particularly women — solo and small-firm practice remains a way to gain autonomy and respect and career opportunity lacking at Biglaw. Nearly every mom solo and small-firm owner who I profiled this year at MyShingle said as much. Likewise, solo and small-firm practice catapulted a dozen African-American women lawyers to judgeships in Harris County, Texas. And somewhere out there remain clients with cases too complicated for existing algorithms or too unpopular for Biglaw who need an independent lawyer as champion.  The legal profession is changing no doubt, as are the tools for delivering legal services. But there’s still an important place for solos and smalls that will never disappear.

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Carolyn 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.