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Changing Market Demands: How can Law Firms Adapt?

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Most of us signed up to a career in law with the understanding that we were entering a very lucrative profession. For many of us, that choice was made in the days when the profession was very exclusive: The only people who knew anything about legal matters were lawyers, and there was a vast information gap between lawyers and their clients.

Because of this, the profession and how it operated was dictated by the lawyers themselves, who didn’t need to answer to the market. Lawyers chose how to set up their practices and what fees to charge their clients. At that time, the profession was strictly regulated – arguably to retain exclusivity – and the only competition came from other lawyers.

Over time, the costs associated with legal work increased to the point that the law was completely inaccessible to most people and businesses.

But, creeping up on us, was the Information Age: Increasingly, clients have free access to huge volumes of information. They are able to learn more, analyse more, compare more, more quickly. So nowadays, clients needn’t wait for ‘the experts’ to pronounce on legal matters. They can educate themselves on much of what was previously kept from their reach and understanding.

At the same time, other trends were developing: The relaxation of regulation of the legal profession globally; the increase in competition thanks to much-needed competition laws and the entry of non-law firm legal service providers; and the use of technology to streamline many types of legal work.

So now we have clients who, from all this information and the effect of these trends, are much more knowledgeable, more discerning and less beholden to ‘the experts’. So the locus of power over the buying and selling of legal services has shifted from lawyers to their clients.

Today’s clients want value (legal work at rates that they perceive to be reasonable), transparency around pricing, and justifiability of fees.

As the cost of just about everything continues to increase, how do we give clients the legal work that they want, at costs that they perceive as reasonable, and still retain decent margins to make our work worthwhile? I can think of three techniques that can help. But they need to be approached with a business (and not legal) hat on:

  • Get independent financial specialists to deconstruct and analyse your revenues. From picking-apart revenues, important insights can be gained around client briefing behaviour which can inform firm strategy;
  • Conduct continuous research on what current and prospective clients want from their lawyers. We need to have a much more client-centred approach to strategy, marketing and operations;
  • Conduct continuous – or at the very least, annual – reviews of the firm’s business model and cost structure. A business model that worked 10 years ago, may be inefficient today. An overhead charged to clients 5 years ago may no longer be justifiable.

All this can and should be seen as a continuous project, with ongoing tweaks made with a view to optimisation. It sounds like a lot of work, but the risk of not doing it is too high. The rate of change today is so fast that taking one’s eye off the ball for as little as two years can render a firm irrelevant, unable to compete and unable to sustain profits.

Conversely, by keeping a constant eye we can remain relevant, competitive and profit-generating, despite tough market conditions.

The choice is ours, to make wisely…

YVONNE WAKEFIELD

CAVEAT FOUNDER & CEO

*This article is a summary of Yvonne’s address on the topic to an audience of lawyers at The Legal Show in May 2019.