Navigating current law firm challenges and changes in the marketplace
Economic shifts and workforce developments can create law firm challenges and changes. What to look for and how to prepare:
Demand for counter-cyclical legal services
According to data from Thomson Reuters, client demand for legal services in counter-cyclical practice areas like labor and employment has begun to rise. Of note, midsize and smaller firms have seen a bigger increase in demand for these services:
“Demand for counter-cyclical practices — defined as litigation, labor & employment, and bankruptcy — is accelerating…Within the Am Law 100, demand for these counter-cyclical services is only up 1.3%, while at Midsize firms it has increased by 4%.”
While the data doesn’t specifically include independent and small firms, this trend supports the idea that clients may be seeking cost savings and/or more personalized service by choosing smaller providers. That’s good news for independent law firms in a time of economic uncertainty.
Creative approaches to reducing expenses
Firms of all sizes have begun to trim expenses in the face of economic softening. One approach includes investing in AI and other tech tools to save time and resources on repetitive tasks
As RSM suggests:
“Utilizing artificial intelligence (AI) to drive efficiencies is a hot topic among law firms, and it can be an effective strategy when implemented and governed correctly so that accuracy and client confidentiality remain a priority. Use cases with the highest feasibility and business value for law firms include e-discovery, contract analysis, regulatory tracking, trademark and patent research, and legal spend analysis. Accelerating common tasks can help provide more value for billable hours and allow firms to remain competitive with ALSPs.”
Ignoring technology is no longer an option for law firms. According to statistics reported by Gitnux:
“The global legal tech market generated 27.6 billion U.S. dollars in 2021, indicating its importance in the legal industry. As technology becomes more and more prevalent, legal tech is becoming increasingly important for legal firms and organizations to remain competitive and successful.”
Reducing overhead expenses, including real estate leases, offers another strong option for law firms. As TheRealDeal reports:
“Legal firms facing renewals are taking 13 percent less space than they were previously, the Commercial Observer reported…By 2028, square footage per attorney is expected to fall by 5.7 percent to 472 square feet.”
Traditional office space may become less attractive for many firms looking to retain staff with hybrid work schedules. Smaller office footprints, law firm subleases and coworking space may become bigger trends to watch in the industry.
Collaboration and innovation
TheRealDeal pointed to the need for law firm colleagues to collaborate, which is true for small and midsize firms as well as in big law.
In addition, as this Juris Digital writer notes, clients increasingly seek more specialized and nuanced service. While big law firms might boast a large menu of practice areas in house, small law firms have the flexibility to partner with other independent lawyers to fill those client needs as they arise.
This Juris Digital article notes:
“Clients today require the integrated capabilities of highly specialized practices and sector expertise. This expectation, driven by the intricate and interconnected nature of global markets, means that law firms need to be able to navigate these complexities and deliver nuanced advice that acknowledges the broader context.
Strategies for onboarding or developing specialist knowledge can include focused hiring, upskilling current employees, or even forming strategic partnerships with other firms or consultants. By doing so, smaller firms can carve out a niche for themselves and meet the growing demand for specialist knowledge.”
Small firms and independent lawyers can innovate through nimble partnerships and collaborations to react more quickly to client and market needs. Big law, on the other hand, maintains a much higher overhead with long attorney rosters and associated salaries.
For small law firms, networking and relationship-building will become paramount as they look for ways to forge these innovative partnerships to go after nuanced cases.
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