Shrinking Law Firm Market and Client Share — Significant Business-Related Legal Work Now Being Done by Competitors to Traditional Law Firms… Competitors That Are Growing Faster Than Traditional Law Firms©

The exact percentage of business-related legal work now being done by competitors to traditional law firms is hard to estimate with precision, but a significant amount of the approximately $250 billion U.S. market for outside business-related legal services that in past years was serviced by traditional law firms is now being done by various alternatives.

Some of this legal work is commodity-level, but it also consists of routine/repetitive legal work and also parts of the litigation process in various practice areas, including business, employment, intellectual property, and many others. These types of work were — for years — the consistent, bread-and-butter work for many traditional law firms.

A significant percentage of this work is being awarded to alternative legal service providers (ALSPs) such as Mindcrest, Clutch Group, and Integreon (legal process outsourcers); other types of service providers, such as Axiom, Elevate, Cognition, and Novus Law; and/or technology-centric ALSPs such as LegalZoom, Rocket Lawyer, and MyCorporation. Other work is being taken in-house or awarded to small, niche, and/or boutique firms.

Given the growth rate of these entities to date, and the increased rate and amounts of legal start-up funding, the current percentage of ALSPs’ market share could easily reach 30 percent to 40 percent — or approximately $50 billion to $100 billion — and by most accounts continues to grow rapidly.

Other than outside seed money and investments, what is driving the growth and ability of ALSPs to capture segments of both the market and client share previously served by traditional law firms? What accounts for how they are stealing away the legal work traditionally awarded to outside law firms and lawyers? Below is a chart comparing the generalized, overall business practices of ALSPs versus traditional law firms.

Top 10 Common Mistakes Lawyers and Law Firms Make Re: New Business Development©

1) Less Than a Truly Strategic Focus – Unlike accounting firms, most law firms do not use financial analysis and other available information to strategically analyze and predefine key markets. Nor do they provide lawyers with a list of and/or criteria for desirable or ideal clients. The message to each lawyer is usually something like "get out there and develop more business from your contacts" or a variation of that message. As a result, an activity focus is the current norm, where the majority of lawyers think of and define marketing/business development as taking the time to engage in speaking, going to lunch, attending conferences-seminars, writing, blogging, etc., which does little to bring in the most desired/ideal clients, but does get their name "out there" to some degree. So, mistaking activity for productivity is altogether too common.
2) Glass Half-Empty Approach – The pressure on outside lawyers and law firms to develop new legal work has never been more intense. The current market is a feeding frenzy of sorts between and among outside law firms and lawyers for new work/clients. Multiple studies show that every single law firm client (whether a major corporation or even an individual) works with or knows personally between five and fifteen other lawyers, many of whom could (if needed) do much of their legal work. Numerous studies also show that Fortune 10 to 1,000 clients are saturated in their use of outside counsel, yet many outside lawyers/firms are unaware of the embarrassing (to their firm’s reputation) and overlapping communications a number of their lawyers/partners engage in by "hitting on" the same prospective client repeatedly (and too often without clearing conflicts first). Lack of coordination costs time and money, it also negatively impacts a lawyer’s and/or law firm’s reputation.
3) Law School Does Not Teach the "Science of the Business Development Process for Lawyers" – As highly educated people, most lawyers make the mistake of making too many assumptions/presumptions regarding a variety of business and client development related things. Studies show that the more highly educated a person is, the more they think they know about almost everything, when, in fact, they may not know as much as they think about many important matters outside of their practice/area of specialty. This is true regarding business development, which many lawyers perceive as a simple and commonsense notion, even though there is a proven body of science on the linear and predictable business development process and what works. For example, many lawyers do not realize that just like the practice of law is a proven step-by-step and relatively predictable process, so too is business development for lawyers and law firms. So, a major hurdle to effective and efficient new business development within any single law firm lies in lawyers’ minds, their thinking, and how they define and approach business development. For example, ask any one lawyer or partner in a firm some basic questions such as "How do you define business development?" or "How do you define marketing for lawyers?" or "How do you define client development?" and then ask all the other lawyers/partners, and you will get just that many different definitions. Some firms are providing more precise definitions within their firms for each of the key disciplines of business development: marketing, client development, client service and cross-service; doing so saves considerable (and very expensive) attorney time, effort and other resources.
4) Misallocation of Time & Resources – Many lawyers devote the majority of their time and effort toward getting new client leads and trying to close new clients. But, even though numerous studies show that the majority of work in the next few years will come in one way or another from their existing relationships, most lawyers do not take the steps needed to fully and/or proactively develop this strategic avenue. In addition, surveys show that the majority of lawyers do not devote/dedicate enough time to business development planning or efforts on an annual or weekly basis. The total amount of time law firm partners devote to business development – on average – is 250 hours per year, or around 3-5 hours per week; yet the majority of that time is invested in writing, speaking and/or attending events/conferences, which does little to bring in actual new matters/cases/clients/business. In addition, while the greatest percentage of most law firm's marketing budgets are spent on sponsorships and seminars, few law firms have algorithms in place to measure the return on these investments.
5) Inertia/Lack of Motivation – Recent industrywide surveys found that one of the largest hurdles to law firm growth is lack of attorney interest and/or participation in new business/client development efforts. Getting things done and/or taking the time to implement business and client development efforts is a major issue within most law firms - given the intense time demands on most lawyers. The main reason is that because most law firms have been built on the backs of traditional rainmakers, most firms have not and do not have time to provide enough guidance/resources to other lawyers (who are interested in becoming better at business development) regarding what is expected of them, how best to use their limited available time, or how to strategically define their client, contact and/or hit list, nor do most law firms have the necessary internal resources or methods to proactively coach, keep track of efforts and follow up. In addition, many firms get caught up in the marketing "idea of the moment," such as the recent emphasis on content marketing, and are then frustrated with a lack of interest and/or participation.
6) Unrealistic Expectations – This mistake manifests itself within law firms in multiple ways. First, many law firm partners expect that their firm’s marketing/business development staff members are supposed to bring the legal work to them. Lawyers commonly believe, "Our in-house business development people should be getting new business for me/us." This expectation is both unrealistic and unethical unless the business development staff person is a lawyer (and even then is somewhat unrealistic depending upon that person's overall responsibilities). In addition, many lawyers regularly operate on the assumption/hope that if they simply write, speak, go to lunch and/or attend conferences, business will result from their doing so. Also, few lawyers realize that the “sales cycle” for new, outside legal work is quite a long time, and the norm is that it takes multiple, meaningful and appropriate contacts spread out over time to develop new work.
7) Failing to Embrace and Make the Most of Each Lawyer's Personal Style - Numerous studies show that most lawyers' natural predispositions and behavioral and personality traits are at odds with those needed to be an effective business developer or rainmaker. Some law firms have embraced this reality by testing each lawyer’s personal style and tracking it upon lateral intake, and by reminding lawyers of the different styles as within the firm and with different types of clients. Importantly, they also provide specific business/client development guidance and suggestions to each lawyer based on their personal style and preferences - steering them toward the business development efforts and/or activities they want to/like to and/or are good at doing and will find productive.
8) Lack of a Follow-Up System/Habit/Routine – The most common (and too often the only) follow-up effort made by lawyers is as follows: after having lunch, the lawyer will draft and send an email within 24-48 hours to the person with whom they dined. Or, after attending a conference or event, they will do the same to those they met. Unfortunately, that is the extent of most lawyers' follow-up activities. Few lawyers send their opt-in list to everyone they know/meet or mark their schedule to consider other, future follow-up efforts that may be appropriate. Most lawyers get busy, become absorbed in the daily grind, mistakenly assume "he/she will contact me if/when they need a lawyer" and wait for the phone to ring.
9) Throw a Coach at the Problem – In recent years, some law firms have recognized some or all of the above issues and decided to retain an outside business development coach (or coaches) for their lawyers. The problem is that each coach offers a different program, and some of these programs may not be tailored or appropriate for lawyers and law firms and/or may be filled with "sales" jargon that does not resonate with lawyers. In addition, every coach uses a different pipeline, approach and emphasizes different activities. What’s more, in most law firms there are too few internal resources devoted to business development to effectively coordinate these efforts in-house. As a consequence, there are few ties to actual new business success from these coaching programs. A handful of law firms now have sophisticated sales support staff in-house who are able to create and track an organized and effective client development process and pipeline.
10) Too Few Systems, Processes and Procedures – The rapid rate of law firm mergers and consolidations has partially been driven by the need for law firms to invest significantly in technology, systems, key processes and people. Strategic investment is critical for any law firm’s survival. The law firms that have not made strategic investments on a regular basis will not remain competitive, and that is one reason why there are so many law firm mergers and acquisitions. There are numerous technologies that fuel and support effective business development for individual lawyers and law firms, yet for a myriad of reasons, they are not used optimally within most law firms.

About the Author: Julie Savarino holds an MBA, a JD, and is a licensed attorney. Over her 30+ year career, she has built a reputation as a leading international, award-winning business and client development coach and strategist for lawyers, law firms, and other professional services providers and firms.  She has successfully served in-house in client and business development positions for the law firms of Dickinson Wright and Butzel Long and for the accounting firm Grant Thornton. Contact Julie at +1 (734) 668-7008, Julie@BusDevInc.com, @JulieSavarino.

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