Leaders of small law firms and solo shops are experiencing a general sense of optimism and expectations of future growth, despite an uneasy economic picture
Leaders of small law firms in the United States generally feel that their firms are successful and poised for greater future growth in key areas; however, many areas of caution remain that small law firms will need to carefully navigate.
These are among the key findings of the newly published 2022 Report on the State of US Small Law Firms from the Thomson Reuters Institute.
Even as the overall economy has turned sour for many, smaller law firms have maintained a bullish outlook on their future prospects, and likely with good reason. Evidence across the legal marketplace indicates that corporate clients are looking for ways to push work down to lower-cost legal service providers, creating new opportunities for smaller law firms to capitalize on their pricing advantages.
At the same time, however, those small law firms that serve primarily individual clients continue to face pressure from alternative providers like do-it-yourself (DIY) legal sites. Yet, small law firms report that they are not facing an increasing degree of pressure from those competitors, with whom they have learned to cope over many years of market maneuvering.
This most recent edition of the Report on the State of US Small Law Firms once again explores the current state of the legal market through the eyes of leaders of small legal practices, offering several insightful glimpses into their thinking. While leaders of small law firm continue to characterize their practices as generally successful, for example, some cracks potentially may be emerging. Increasing costs pressures for some small law firms and a heavier administrative burden continue to place ever greater pressure on firm leaders. Moreover, broader economic challenges could put further pressures on this group of firms.
Still, for those small law firm leaders who take a mindful and strategic approach to the problems many of them foresee in the future, as well as those they admit they’re already dealing with, the current upheaval in the broader economy and the legal market specifically could provide fertile ground to turn difficulties into opportunities.
Among the report’s key findings:
- The outlook for small law firms is increasingly positive;
- Small firms by-and-large consider themselves to be successful;
- The competitive landscape is shifting, and this provides both new opportunities and rising threats; and
- Small firms are demonstrating the ability and wherewithal to make changes and potentially take advantage of those opportunities.
The report also highlights the positive outcomes that can result from a determined focus on addressing a key challenge, offering the example of how small law firms dealt with one recent problem. In 2020, getting paid by clients was one of the top concerns among small law firms with nearly two-thirds (64%) of firms reporting it as a significant or moderate challenge. However, more than 40% of small firms reported that they have a plan to address the problem and they had already implemented changes to address the issue through such strategies as increasing retainers, improving payment collections, and accepting electronic payments such as ACH payments and debit or credit cards. Fast forward two years and the percentage of firms that view getting paid by clients as a significant or moderate challenge has fallen to 54%. And those firms that rated it as a significant challenge has been cut by more than half to just 9% compared to 19% in 2020.
Small law firms that follow this example as they look to address the challenges reported in this year’s edition of the Report on the State of US Small Law Firms are certainly not guaranteed a similar result, but the evidence suggests that they are far more likely to enjoy a positive outcome and capitalize on their bullish vision for the future.
You can download a copy of the “2022 Report on the State of US Small Law Firms” by completing the form below: