The numbers aren’t in just yet. And they may not have the exact details. But law firms know how the year ended. And they sure want to know where other firms stand — growing, shrinking, or just holding their own.
Here’s how law firms assess how they ended up at the close of 2020, based on our brand new survey of law firms, starting with the select group absolutely crushing the market:
The Law Firms Crushing the Market
The crushers don’t look back. They look ahead at their clients and the market — and steal a few laterals as they go. These firms have strong business development and client service cultures, which now serve as an anchor in a chaotic market. The crushers had fewer adjustments to make than other firms to adapt to the next normal. These firms follow and anticipate clients’ needs — so in many ways they are well-positioned for drastic, unexpected changes. Especially when clients keep spending on outside counsel.
The crushers are the smallest segment of the market coming in at about 11% of all law firms. (The previous sentence isn’t true if the ones Heading for the Exits are at 2%) This group includes an equal mix of large, small, and medium size firms. These firms were investing heavily in client-facing programs pre-pandemic including BD training, client teams, client feedback, client service standards, and client service training for large swaths of attorneys. They are also some of the most aggressive in adding laterals.
Law Firms Growing, Mostly
At 55%, the majority of law firms indicate they are growing. Not crushing it — but growing. This is low to mid-single-digit growth, but growth none-the-less. The first measure for these firms is whether they are gaining or losing market share. Any law firm exceeding the growth rate for outside counsel spending is gaining share — slower than this growth rate, and a firm is losing share.
It’s a little tricky to measure for 2020 as spending shrank in the first half of the year by about 6%, and then roared back enough to end the year flat. I recommend using 2.4% growth rate to reflect the change in client spending habits.
BTI research shows market share gains and losses take about 18 months to translate into client loss. If you are losing share — put client retention and growth at the top of the agenda. Even if you are gaining share, your firm will benefit by making these a top priority.
Holding Steady
32% of law firms report revenue is steady — with minimal gains or losses. While there is comfort in holding steady, it makes it harder to gain share. These firms, as well as most other firms, will be fighting off increasing RFPs and clients’ penchant to build the right law firm teams. The good news: these firms can start using the tactics to build up clients and keep other firms out. The successful business development tactics from the beginning of the pandemic apply today — even more so.
Heading for the Exits
Only 2% of law firms report business is soft, clients are leaving and morale is low. These firms are just as worried about keeping their rainmakers as they are about keeping their clients. Most would welcome an exit — whether personally or merging with another firm.
Law firms are more upbeat than you would have expected back in April 2020, with the client-centric firms especially enjoying the fruits of their investments. A large group of firms are upbeat and more are pivoting to a client-centric approach to the market. This means adding formal programs, making investments, and actively learning where clients are headed.
My 30 years of experience and living through 3 bonafide crises shows client-centricity is the best protection against the black swans and other unexpected events. You will be the first to know about changes, new needs, and most importantly you will know exactly how to help your clients — giving you the only edge others can’t beat.
Wishing each of you a healthy, happy, and prosperous new year.
MBR
The MAD Clientist
Space is filling up fast for our annual webinar The BTI Market Outlook and Client Service Review 2021 on January 14, 2021, at noon Eastern. Learn more here.
(Based on our survey of 430 law firms leaders conducted between December 15, 2020, and January 3, 2021.)