If 2020 taught us anything it is that law firms are, amongst other things, resilient, versatile and adaptable. Market data suggests that the average loss in income for law firms in 2020 was between 10 – 15%. That’s a lot of income for a law firm to lose.
However, law firms have shown their resilience. They have reduced costs, adopted and adapted to using technology and their people working from home. Furthermore, they have continued to find ways to service their clients whilst having to continually balance costs and resources against a backdrop of a constantly changing landscape.
Now we are in 2021, so what’s next? How can firms looks to grow, to replace lost income, to get their plans back on track and build stronger teams and expertise to support their clients?
Many firms will look to continue to reduce costs, some will want to bring in new experts, others will be thinking about possible mergers, acquisitions or possibly even selling up.
Actually, all of these possibilities should be on every law firm’s agenda in 2021 as they present real opportunities for law firms of all sizes. Here’s just a few reasons why:
The legal services market has for some time now seen a drive to ‘go niche or go big’ with many firms in the small to mid-sized space feeling they need to push one way or the other to ensure survival or prosperity.
There are currently many unknowns with the impacts of Covid set to last for some time, a deep recession, and the impacts of Brexit yet to unfold, but already starting to be felt.
Some of the reasons that a law firm may wish to merge include:
- Macro and micro-economic factors making ‘safety in numbers’ increasingly appealing.
- Becoming part of a much larger organisation provides resilience.
- A merger presents a plethora of opportunities from streamlining processes, reducing costs and increasing depth, breadth and reach of a law firm to improved client service, stronger team of legal experts and increased profile.
Never before has there been such a dynamic market for recruitment in professional services. One factor that was seen in each of the two most recent recessions was the propensity for people to move for two common reasons:
- The financial stability of the firm they are with (and moving to); and
- How people felt about the way in which their firm responded to financial realities, in particular, if the partners shared the pain or piled it all onto employees by way of redundancies and pay cuts.
These factors remain as true but the added overlaid social aspect of how firms responded to the threat of Covid is making the social positioning of organisations more important today than ever before.
If your firm has liquidity, ambition and a clear conscience, you may well be able to attract surprisingly strong people who feel more culturally aligned with your business than their current one.
Why recruit a whole team?
Firms of all shapes and sizes are essentially collections of teams trading under the same banner and regime. Culture and values are driven top down, most often in the image of the managing partner or board but the engine of every firm is comprised of numerous cylinders, each with its own microclimate.
This often means that the team is formed in the image of the team leader rather than the firm as a whole so if that individual suits your firms’ culture and values well, there is a fair chance much of the team will too.
The resultant benefits of recruiting some of this team along with the leader is not only increasing the likelihood of a larger client following, it also means a performing team is more likely to be up to speed sooner so your organisation hits its goals sooner too.
How much energy do you have to manage your firm back to its pre-Covid financial wellbeing?Would you rather retire two years sooner and let someone else worry about the staff, SRA and general management issues while you continue to earn as a consultant during a handover period where you ideally have some upside in an earn out?
The burdens of owner-managed law practices have grown hugely in recent years and there is no sign of this abating. At the same time, business conditions are deteriorating for the majority of the market.
Overlay these increasing stresses and strains with a Covid economy that is blighting the mental health of even the most resilient of us, and there is an increasingly attractive argument for selling up sooner than later.
It is often said that more fortunes are made in times of trouble than at any other time.
This is because we are a risk-averse species and those of us brave enough to act while others sit on their hands often get ahead of the game and steal a march on the market as a whole.
Recent surveys indicate far more firms will be standing still than moving forward which means there is less competition for the nuggets and the early movers can bring greater benefits.
Many firms have retirement clauses which drive people, equity partners in particular, into other firms to continue their work long before people have ceased being productive and profitable.
This apparently self-harming caveat is designed to prevent stagnation in the production line as new partners come through the ranks and can be effective.
However, a downside of these retirement clauses is that people often use them to drive the timetable and may find themselves continuing to carry the weight and responsibility of an equity partner well past when they may otherwise wish.
There are many firms that would welcome such people with open arms to bring their expertise, grey hair (and contacts) to assist and mentor others in a building job.
If you wish to have more say over your time, how many hours you work or even want to monetise your retirement, there are plenty of options beyond seeing out your time until the clause forces your hand.
At Ortus, we know the legal sector intimately. For the past 17 years, we have been helping law firms to merge, sell and buy other practices as well as supporting their growth through targeted acquisition of partners and teams. We have also invested significant time working with individuals to effect the right change at the right time for them, their clients and often, their families.
Get in touch for an initial no obligation chat.
email@example.com or 0330 100 5420