This is the next post in my series on what one needs to do to build a multi-million dollar legal practice. My last article discussed how successful attorneys tend to make better choices than their less-successful competitors. It also stressed than any lawyer can make those same choices and, in turn, choose to be successful. It’s important to remember that successful practitioners got where they are by making the right choices and not because they were necessarily any smarter than other lawyers. In this post I’m going to get into what I consider to be the most important part of this series. That is the need for attorneys to “go big or go home.” In other words, those in the legal profession need to start considering how they are going to grow their practice to a very, very, very, very (very) high level before they get shoved out of the market. Let’s get to it.
Consolidation in the legal industry is in full gear. I discussed the consolidation of law firms, and its impact on the profession, in my article on the bursting attorney bubble. I’m not going to rehash that post here (even though it was incredibly well written). The point to take away, however, is that some firms are starting to embrace a model in which legal services are delivered more quickly, efficiently, and at lower costs. These firms, in turn, are going to grow quite large. This will allow them to “undercut” many solo and small law firms in terms of price and availability. A great example of this is The Law Store, which provides legal services from various Wal Mart locations. This operation, which I am impressed with, offers services such as an uncontested divorce for as low as $549 (per their website). This is much less than what many attorneys would provide such a service for. Just like companies such as H& R Block put many small accountants out of business, law firms which embrace a modern service delivery model are going to grow to massive size and put many small law firms out of business. Today’s solo and small firms must choose to “go big” in order to compete with such operations.
Right about now you may be thinking that low cost and uncontested services (such as uncontested divorces, record expungements, the drafting of simple wills, etc.) aren’t going to be a threat to current solo and small firm practitioners. That’s where you’re wrong. The issue is that these businesses, as they continue to grow in size, will gobble up shares of the market which are much larger than anyone has likely had before. In other words, your low cost/routine type matter will be handled overwhelmingly by a very small number of firms that are massive in size (again, think H&R Block). Suppose Joe, the solo attorney, splits his practice between criminal and family law. Joe earns about $120,000 a year, after expenses. As part of his practice he does 1-2 uncontested divorces and 1-2 record expungements a month. Now imagine that he loses all of those matters. If Joe was charging $750 for each of those activities then he just lost upwards of $36,000 per year, or more than twenty-five percent of his income. He’ll then try to make up this loss by marketing more for other family and criminal cases. If Joe operates like an average attorney then he’ll do this by greatly increasing his advertising budget (which will compress his profit margins). This will create a downward spiral which will result in Joe working alot harder for alot less money. This sucks for Joe. For many solos, who are already earning less than $120,000, the loss of such cases may be the straw that breaks the camel’s back and puts them out of business.
Now for the good part. That part is the fact that you can avoid the downward spiral I just discussed. The way to do so is to grow your law firm, aggressively, using the strategies I discussed previously in this series. There’s no reason why you can’t leverage technology, and the surplus of attorney labor which currently exists, to ratchet it up several notches (and then you can keep on “ratcheting” from there). Failing to level up your practice, however, is going to leave you susceptible to the same market forces which accountants have faced from companies such as H&R Block and that small “mom and pops” restaurants have faced from larger chains. For years, attorneys were insulated from such forces by licensing requirements. The surplus of legal service providers has changed all that.
So, to put it simply, you have a choice. Go big, meaning your going to strive to grow you’re firm to the largest size it can be (making yourself a multi-millionaire in the process) or go home. Personally, I would choose the former, especially since being rich doesn’t sound like a bad punishment for going big.
We’re entering an era when the solo and small firm will go away to a certain extent. The age of extremely large multi-million dollar firms, which serve the masses, has arrived. Are you ready to be a part of it? Please chime in through the comment form below.