According to a report in the Law Society Gazette this week, over 50 law firms are currently being supervised by the Solicitors Regulation Authority. This news follows the high profile collapses of Birmingham firm Blakemores and Yorkshire firm Atteys earlier this year. Such is the scale of the problem that the Law Society has launched dedicated online pages on their own website providing support and advice to struggling law firms. They have named the microsite “Surviving the Storm” and make no bones about attributing the reasons for law firm failure to the “controversial government reforms to legal aid and the costs regime,[meaning] many law firms are now faced with financial pressures and uncertain futures”
The figures from the SRA do not indicate the size of the firms that they are currently supervising and many more may be quietly panicking on the sidelines that their own futures are at risk. Both Atteys and Blakemores had a high proportion of personal injury cases and private client work. It is likely that amongst the firms currently being babysat are a number of small law firms. Small law firms make up the bulk of the legal profession in England and Wales and their exposure to declining volumes of low value work make them susceptible to possible failure.
Government reforms and referral fee bans contribute but are not the only factor causing difficulties to small law firms. Many small law firms face challenges in providing the business development skills necessary to move businesses forward. This includes staff development, marketing, strategic planning and financial modelling to predict future earnings. What can small law firms do to counter these problems?
Reward staff to retain clients– clients, if they are loyal at all, are loyal to individual solicitors and not to firms. When talented solicitors leave, clients tend to follow, causing gaps in turnover that are difficult to replace. Providing an equity stake or a rewarding incentive system helps firms to retain talented fee earners and their clients. Taking this concept to the next level, firms should look to see if they can recruit lawyers from elsewhere who come with a strong following that helps to underpin income.
Encourage support staff to support you fully – secretaries, paralegals, receptionists are integral to most small law firms. For many existing and prospective clients they are the public face of your firm. Potential clients can be won or lost by the attitude of your front and back office staff. Incentivising them to grow your business will not just keep them in a job, but can help make you more profitable. One of the saving graces of the Legal Service Act is the ability to share ownership of your law firm with non-lawyers so consider if there is anyone you may want to encourage or reward.
Tell the world why they need you – many small law firms with any form of marketing budget tend to use it to promote the firm in its entirety. Many clients only use a law firm for the occasional need. Understanding your potential community better and their needs helps to direct marketing budgets towards the areas that are likely to generate growth.
Create a strategic plan – by knowing what you want to achieve and planning for it you can increase your chances of survival. Strategic plans need to be adopted by every member of the business for them to be effective. Strategic planning has to include an element of financial modelling. It is inherently difficult for law firm owners to predict what their future income will be as most small law firms have no guaranteed recurring fee income. Protecting future work, whether by contracting with larger organisations, marketing consortia, collaborating with other solicitors or creating alternative fee structures can all assist in financial and strategic planning.
These are just some of the many ideas that small law firms need to implement to stay in the game and avoid being the next casualty of the changing legal services landscape.
Gary Yantin is the founder and Managing Director of HighStreetLawyer.com, the law firm consortium focused on helping small law firms to succeed through collaboration and collectivisation. For more details on their current projects contact email@example.com