In a recent article in Law Practice Today, the author spoke of how the law firm business model is being impacted by the 7 emerging trends occurring around us. The seven trends are:
1) A wealth of information both in quantity and quality for the law firm and their clients
2) Pricing power shifts from law firms to clients
3) How virtual legal services are adding competition for law firms
4) Law firm management is improving with professionals
5) The increased leverage of non-lawyers for decision making
6) Succession of new younger partners with an emphasis on work/life balance
7) Growth in alternative ownership models, channels, payments, and use of existing services.
So how will these trends impact the law firm? For one, clients are much savvier and have access to a lot of information about you and your competition. Law firms now have to look close at how they operate to cut waste and decrease costs. Law firms are also focusing more on a specialty and becoming more profitable in that area of practice. Clients are shopping around and don't necessarily think a one-stop shop is important. It's more about the best value and a deep understanding and experience in the area of law that meets their need.
Law firms are staying true to their niche and leveraging specialty vendors for things like e-discovery, trial and litigation support. It's one way to get the best of the best without the overhead.
Also, the days of committees and subcommittees are on their way out. The need to be nimble and responsive to clients is more important than ever. Law firms are streamlining the decision process where more authority is given to attorney leaders.
For pricing new matters/cases, firms are using both a flat fee for components of work that is predictable with an hourly rate for those parts of a matter/case that are more risky. We will see an increase in this type of pricing model over the next few years.
Clients are not willing to pay for a young attorney to learn while on their dime. Law firms are relying more on contract attorneys or outsourcing production companies to do work that was once done by new junior attorneys.
Profitability is no small challenge for law firms. The need to do deep dives on revenue sources is growing and a must have in order to understand where the revenue is coming from to include referrals, partner networks, but also by the type of work that is being performed.
Another trend are professionals working in law firms who also are held accountable for making their functional area within the law firm profitable, or streamlined, such as the accountant, the IT team, purchasing department, and the non-lawyer legal staff members. This means that these non-lawyer employees are providing key information to partners and are influencers in the decision making process.
Times are a changing. And law firms are beginning to look and run more like businesses in order to stay competitive and to be profitable.