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During the past few economic downturns, one of the most common refrains has been the expected boom of corporate and individual bankruptcies. The downturn brought about by COVID-19 was no exception. If we were to use news headlines as our barometer, predictions of many COVID-19-related bankruptcies were spot-on. Major corporations like Brooks Brothers, Chuck E. Cheese, GNC, Hertz, J.C. Penney, Lord & Taylor, and Neiman Marcus have filed for bankruptcy in 2020.
But headlines can sometimes be deceiving.
According to the Administrative Office of the U.S. Courts, U.S. business and personal bankruptcy filings actually decreased 21.1% during the fiscal year that ended in September 2020. From October 1, 2019 through September 30, 2020, 612,561 bankruptcies were filed. In the previous 12 months, there were 776,674 filings. Business filings dipped by 2.2% to 22,391, but non-business filings plunged 21.7% to 590,170.
Instead of a wave of bankruptcies, the first six months of the economic downturn brought a significant drop in bankruptcies. The reasons will be debated for years to come, but what’s not debatable is that solo and small firm bankruptcy lawyers have probably not seen the uptick in business that they anticipated.
Bankruptcy lawyers waiting for bankruptcy work to come during an economic downturn must continue to market themselves and find ways to drive revenue. Crossing fingers and hoping the phone will ring is not an option. Here are five things bankruptcy lawyers should do during any economic downturn.
Just because bankruptcy lawyers may have not seen a huge bump in new business during the first few months of the downturn doesn’t mean that one isn’t coming. Individuals and businesses may only need the services of a bankruptcy lawyer after they have felt the negative effects of an economic downturn for many months or even a full year. Remember, bankruptcy is a last resort, but when they do need bankruptcy representation, they are likely to turn to people within their personal and professional networks for referrals, including lawyers they’ve worked with before.
That’s why during economic turmoil, bankruptcy lawyers should regularly reach out to their former and current clients and referral sources to remind them that they are available to assist with bankruptcy-related matters. This can be accomplished through several different marketing tactics such as social media, email or hard copy newsletters, as well as direct outreach in the form of phone calls, video chats, or personalized emails.
While bankruptcy lawyers should continue to engage in digital marketing to target new clients, a focus on existing relationships is critical for two reasons. First, lawyers have already built trust with these audiences, creating a quicker, easier path to being retained for a matter. Second, the cost of organic social media posts, email newsletters, and phone calls and video chats are a fraction of the cost of paid digital and traditional marketing strategies targeting new clients.
By now, the secret is out: developing a niche can do wonders for solo and small firm lawyers. While some bankruptcy lawyers might already consider their practice to be a niche, “niching down” even further can significantly boost a practice, especially during an economic downturn.
Economic downturns hit some harder than others. For example, the hospitality and brick-and-mortar retail industries took the brunt of the damage caused by COVID-19. And healthcare companies and their employees were so negatively impacted that there were reports of increased demand for healthcare restructuring lawyers.
Bankruptcy lawyers with a history of, or interest in, counseling companies or individuals in particular industries could benefit from making their specialization known through their marketing efforts. While they need not pigeon-hole themselves or turn away business from outside those industries, they should turn up the volume on their marketing directed at those industries.
Niching down in this context could help bankruptcy lawyers bring in new matters in at least two different ways. First, when lawyers hold themselves out as serving a particular industry, clients and referral sources will likely perceive those lawyers to be more knowledgeable about work within that industry than general bankruptcy practitioners. Second, fellow bankruptcy lawyers may be more likely to refer matters to lawyers who specialize in a particular niche because those referring lawyers may not view specialists as competitors.
Bankruptcy lawyers who have not seen an increase in client work during an economic downturn would be wise to devote time to participating in bar associations, affinity groups, and masterminds. These organizations provide actionable knowledge that can be used to become better lawyers and businesspeople. What’s interesting about these three types of organizations is that each type will likely provide different—but equally impactful—benefits. Together, those benefits could catapult a bankruptcy lawyer’s practice.
Bar associations will provide an opportunity to network with other lawyers (and thus potential referral sources). They will also provide opportunities to gain substantive knowledge about developments in bankruptcy law, the legal industry, and court systems and legislatures.
Affinity groups will also provide networking opportunities, but the connections members build will likely be stronger than other professional relationships given their shared experiences or backgrounds. These shared experiences and backgrounds are also why the knowledge and guidance provided by affinity groups will be more targeted and perhaps more relevant to their members.
Finally, masterminds provide bankruptcy lawyers the opportunity to meet with other lawyers or businesspeople and discuss the difficulties they are facing within their businesses. The goal of a mastermind is for its members to share guidance and feedback that can help solve each other’s problems. Focused more on the business of the law than the substance of it, masterminds will provide bankruptcy lawyers lessons on how to run their firms that their law schools never did.
Bankruptcy lawyers experiencing an unexpected lull in business should be on the lookout for lawyers and law firms with whom they already have a personal or professional relationship and with clients who might need their services. These lawyers and firms might be prime candidates to approach about an of counsel position.
While of-counsel relationships come in different shapes and sizes, they tend to operate under an agreement where the lawyer serving as of-counsel is neither a partner nor an associate, likely has a legal practice outside the law firm where they are of counsel and is compensated based on either the work they bring into the firm or the time they bill the firm’s clients.
Although some ethics issues like potential conflicts of interest must be ironed out beforehand, of counsel relationships typically offer a “win-win” for the law firms and lawyers involved. With the of counsel lawyer on board, a law firm no longer must refer out client matters that the of counsel lawyer is qualified to handle. Thus, the law firm can profit from work that it once was unable to handle. On the flipside, the of counsel lawyer can work part-time for a law firm, interact with new clients and colleagues, and get paid for doing so—all without (depending on the agreement) having to step away from their primary law firm.
At Lexis® Legal Advantage, we’re big fans of technology. From artificial intelligence to chatbots to data analytics, we believe that where appropriate, lawyers should incorporate technology into all aspects of their practices. For bankruptcy lawyers looking to boost their business development efforts during an economic downturn, there are several tech tools available to help.
A particularly potent class of tools can help bankruptcy lawyers find potential new clients by monitoring bankruptcy court filings. Assuming their jurisdictions’ ethics rules allow them to do so, lawyers representing debtors and creditors alike can use the information they glean from these tools, such as the names and contact information of debtors and their counsel, to market their services to those who appear to be in need of bankruptcy counsel. Additionally, some lawyers filing bankruptcies on behalf of clients do not practice bankruptcy law full-time. When this is the case, there may be an opportunity to partner with those lawyers as co-counsel.
It probably won’t surprise you to learn that when it comes to docket monitoring tools, we are partial to our own CourtLink® tool. Lexis CourtLink provides users direct access to the legal industry’s largest collection of dockets and documents, including full-docket coverage of federal courts and over 1,000 state courts. Users are never more than a few keystrokes away from millions of court documents, with thousands more added each week. And they can set alerts to keep tabs on cases as they progress through the litigation process.
While conventional wisdom holds that economic downturns bring with them an instant increase in bankruptcies, sometimes conventional wisdom is wrong. It is 2020 after all, which may go down in history as the year when nothing went according to plan.
Waiting for new client matters to waltz in the door on their own is a losing strategy. In fact, it is not a strategy at all. The good news is that there is plenty of proactive work for lawyers to do while they wait out the current economic cycle. Laying the groundwork with these activities will help them continue to prosper regardless of whether the work trickles or flows.