What steps can small law firm leaders take now to ensure that 2022 is a year in which their firm succeeds with clients and thrives?
Happy 2022! Like many of you, with the advent of the new year I feel a sense of guarded optimism, but also some hesitancy due to the continued uncertainty of life around us. There is, of course, good news and bad news. While the bad news is obvious, the good news is encouraging: Many law firms have performed much better over the course of the past two years than anyone would have anticipated in the Spring 2020 as the global pandemic crisis came upon us.
As we look into 2022 and what the year may hold, it can be easy to get lost in the fog of the seemingly constant change and upheaval we’ve experienced for most of the past two years. I would encourage everyone, however, to see past the near-term and instead approach the coming year with a sense of plan and purpose. I understand that this may seem incongruent. You may ask, “How can I make a plan when so many things are changing seemingly daily?” It’s a fair question. The answer is, we must plan for what we know will be challenges and execute and adapt that plan as we roll with those changes we couldn’t see coming. Or, to put it another way: Strategic planning is even more necessary to weather the truly uncertain times.
So, how do we do this?
Well, we start by identifying what we know are going to be challenges in the coming year — indeed, these may be the items that are almost always challenging. For the leaders of most small law firms, we can quickly identify two such areas: Business development and the burden of administrative work.
This past fall, the Thomson Reuters Institute released its annual State of U.S. Small Law Firms report, which focused on the challenges facing the leaders of today’s small law firms and what they are doing to overcome them. This year’s report found some unsurprising consistencies with previous years, but with a decided twist. The top challenges faced by small law firm leaders focused on i) the burden of time spent on administrative tasks; and ii) the problems associated with acquiring new client business.
The twin challenges
Business development is a perennial problem that is not subsiding. If anything, the market is becoming more competitive among law firms, alternative legal service providers (ALSPs) and other competitors, such as do-it-yourself legal services. (Often, these DIY providers make pro se representation easier for specific more ordinary individual legal matters.)
Today, 75% of small firm lawyers report that finding new client business is either a moderate or significant challenge for their practice. Without new clients, law firms cannot survive, and lawyers nearly universally recognize this. Yet, business development remains an area in which many lawyers continue to struggle and, unfortunately, place little effort to improve. This is a topic we’ll address more throughout the year, as it deserves particular focus.
And now for the twist: for the first time this year, spending too much time on administrative tasks has taken over the top spot in terms of the number of lawyers reporting it as a moderate or significant challenge. This year, 77% of small firm lawyers say this is a problem for their firm.
Indeed, the administrative burden of running a law firm took over the top spot not because business development got easier — instead, running a firm is getting harder. A few short years ago, the average small firm lawyer reported spending about 60% of their time practicing law, the truly billable part of their job. And if you work the math on a lawyer working 60-hour weeks, 52 weeks a year, then that’s around 1,870 hours that a lawyer was spending on the practice of law.
In 2021, however, that percentage has dropped down to 56%. While 4 percentage points might seem like a small loss, based on that same work week numbers, that translates to roughly 130 fewer hours practicing law with these lost hours instead shifted to non-billable work. Take 130-times your billable rate and you’ll quickly get a sense as to why this situation is a steep financial challenge.
Recognizing the problems
Beyond the necessary administrative burden that business development creates, we see rising complications for those who run small law firms from the increasing complexity of technology — and these problems include collecting fees and managing a hybrid workforce (along with, of course, the attendant needs to shift to already existing legal technology to the cloud in order to make hybrid work happen as intended).
I’m sure each of you can think of numerous examples of how your firm’s day-to-day operations have changed, even in the past year. And clearly, you’re not alone.
While recognizing the challenges that exist is a critical first step, it’s just that — the first step. To prepare for the future, we need to move from awareness to action. And that presents a new problem. A majority of small law firm leaders recognize the problems posed by administrative burdens and business development, however, fewer than one-third have implemented any sort of a plan to address these problems.
And this is where I argue that we can make room for a plan, even in the face of today’s seemingly constant change. The problems that many small law firms face related to their business development aren’t new. (In fact, I’ve written about them for some time.) Likewise, a large administrative burden is nothing new for small law firms to face. Yet, what’s lacking isn’t the opportunity to address these problems, it’s the commitment to solve them through an intentional and planful process.
Throughout the course of this coming year, we will look at examples of other problems confronted by small law firms and how they were successfully met. We will also dive more deeply into the two key challenges discussed here, to more fully dissect the problems and the solutions that work.
This new year presents us with an opportunity to try new ways to solve old problems. Coming up with meaningful actions to address them will take time, energy, and money, all invested with the goal of a more prosperous and profitable future. It won’t be easy, but it will most definitely be worth it!
For more information, you can revisit some of my previous posts for tips on how to develop and execute a strategic plan.