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CNA Blog — From the Experts

Published Tuesday, July 18, 2017

3 Growth Challenges Facing Small Law Firms

Leaders of small law firms are facing significant challenges that affect how they meet increasing market demands. According to the Thomson Reuters Legal Executive Institute, firms of 29 attorneys or fewer generate $108 billion of an estimated $437 billion legal market, a number that is expected to grow as businesses and consumers look for quality representation at favorable price points.

Small law firms will find that meeting these challenges can generate exciting opportunities for business growth — but only if appropriate strategies for such growth are developed. According to the Thomson Reuters "2016 State of U.S. Small Law Firms Study," respondents identify the top three most significant challenges for small law firms:

  1. Acquiring new business: This economic demand was cited by 78% of respondents, primarily due to increasing competition for market share. The top source of competition is from firms of similar size, followed by large firms.

    Interestingly, respondents identify individual consumers acting pro se and legal self-help or DIY sites as sources of competition. The report cautions against overlooking these sources, as DIY sites create savvier client pools.

    Of those firms that recognize this challenge, only 37% have implemented measures to address the issue. By working to build a brand and effectively marketing their services, law firms can implement strategies to attract new business. Apart from creating a brand, a law firm might promote the ways in which the firm is different from its competitors. These strategies can foster client loyalty and also avoid inevitable rate pressure (see No. 3).
  2. Spending too much time on administrative tasks: Where does the time go? Small law firms say that their days are occupied with administrative work, instead of practicing law. Regardless of firm or business type, 69% of respondents say these responsibilities create substantial time management concerns.

    Thomson Reuters notes that when these results are cross-checked with the small firms' measure of success, those that identify themselves as "unsuccessful" or "neither successful nor unsuccessful" are more likely to say that excessive time devoted to administrative tasks represents a significant challenge. At 31%, this number is greater than the response from firms that are "very successful" or "successful" (24%).

    A mere 19% of those firms surveyed have implemented changes to address this demand. One simple —and possibly, overlooked — way to confront this issue? Leverage technology. In fact, firms identified in the report as "very successful" were most likely to use software and tools, such as conflict checking, case/matter management, financial management/accounting, document management, document drafting, e-signatures and knowledge management.
  3. Client rate pressure: Across the board, small firms face pressure from clients to deliver more for less cost, with 62% of small law firms reporting that this demand imposes increased stress upon firm management. Firms of 7 to 10 attorneys are most likely to be affected, with 73% of these respondents agreeing that client rate pressure is a challenge.

    "More than ever before, some clients, particularly institutional clients of the type served by full service and boutique firms, are implementing billing guidelines restricting the number of hours for which they will pay for tasks like research, or eliminating those hours all together," Thomson Reuters says. Because of this, it's worth considering a move away from traditional billable hours and law firms might carefully examine the potential for handling the matter for a flat fee. An agreed-upon flat rate provides the client with predictability, placates potential tension in the attorney/client relationship and also frees up the firm's time.

Other challenges that small law firms face according to the report include technology, cost control, keeping up with legal and regulatory changes, lack of internal efficiency, information overload and succession planning.

All of these challenges present increasing complexity to the ways in which small laws firms conduct business. Attorneys sometimes overlook the importance of managing their firm as a for-profit business, as opposed to the day-to-day practice of law. Those firms seeking to achieve future success will address these challenges as opportunities to be more competitive in the legal marketplace.



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One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. Read CNA’s General Disclaimer.
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