“We’re coming out of a very deep recession that’s had a huge impact on small law firms,” says Flor McCarthy, author of a new book on the difficult task of making a financial success of a legal practice.
“Ninety-two per cent of the legal profession in Ireland is made up of firms with five solicitors or fewer, but those firms are the hardest hit by the recession. The other 8 per cent, the large firms, have gone from strength to strength and have soaked up more of the work,” he says.
“Yet the ordinary man or woman on the street who needs help turns to small and medium practices and not ‘Big Law’. If those practices do not have a sustainable business model, those people won’t get the help they need, especially in rural Ireland where the challenges are greater.”
McCarthy, author of The Solicitor's Guide to Marketing and Growing a Business: How to Turn your Legal Practice into a Financial Success, is a partner at McCarthy & Co Solicitors, a small firm of four solicitors based in Clonakilty, Co Cork. His mother started the firm many years ago, and McCarthy joined in 2000.
“The practice grew dramatically from 2000 to 2008. I felt that I was an absolute business genius, but it turned out I was riding on the back of a massive property bubble that burst,” he says. “Suddenly that party just stopped.”
Property
McCarthy says almost everything the firm did was directly or indirectly tied to property.
Probate work, which often requires the sale of a property to administer an estate, could not be finalised. Family law cases were stalled when people with homes in negative equity could not refinance.
He started researching business and marketing out of necessity in 2008, and the book is a rundown of the things he learned and used to transform his own practice.
“The book really sets out a vision for the future of small law firms because they’re faced with major change,” he says, including the impending Legal Services Regulation Bill, the long-delayed overhaul of the legal sector.
“Property is booming again, particularly in Dublin. It might seem like everything is going back to normal. To rely on that would be crazy based on what we’ve experienced before. You don’t want your business to be dependent on something you have no control over,” McCarthy says.
Irish solicitors “tend to be generalists”, which is a problem because they all look the same to consumers.
So McCarthy advises firms to “find out what it is you can do better than anyone else” and specialise in that. Identifying your most valuable niche area will differentiate your firm from others.
McCarthy & Co was a general practice firm but after the crash refocused on personal injury and medical negligence litigation. McCarthy, who says Clonakilty was “too small for a sustainable practice” now reaches potential clients all over Ireland through his website.
80/20 principle
After solicitors find their niche, McCarthy says, they should then analyse the business using the principle of 80/20, or that 80 per cent of profits come from 20 per cent of cases.
“Identify who is in that top 20 per cent and what those cases and practice areas are. If you concentrate your efforts on those things, you will get dramatic results. On the flip side, find what’s in the bottom 20 per cent of profits and stop doing it.”
He also thinks marketing to reach potential customers is important for small firms. The Solicitor's Guide to Marketing and Growing a Business has chapters that deal with understanding markets, advertising, building a website, social media, print media and search engine optimisation.
The reality that law firms are businesses is something the Law Society acknowledges. The Society runs courses, both on-site and online, in a range of topics including networking skills, negotiation skills, performance management and social media for business.
The Society also offers guidance for members who are setting up a practice. Through the Practice Advisory Service, solicitors either setting up or running a small practice are paired with an adviser who provides guidance on strategy, marketing and optimising profitability.
"Running a successful legal practice isn't just about knowing the law – modern firms must also manage and market their business to be successful. The Law Society of Ireland assists solicitors in a range of business matters including setting up, marketing and developing their firms," said Ken Murphy, director general of the Law Society.
"There is a danger when you're so busy doing work that you don't step back and look at how to develop the practice," says Brendan Dillon, who founded Dillon Solicitors in Rathfarnham, Dublin, in 1993. The firm employs three solicitors.
“It was certainly smooth sailing up until about 2008. We would have seen a significant drop in business during the recession,” he says.
To stay afloat, the firm “spread its wings” into different areas like employment and family law, and it moved away from commodity-type services. As the nature of the work changed, hours increased and fees dropped off.
Dillon invested in marketing and new initiatives.
Downsizing
But the change meant downsizing was inevitable, and Dillon had to let two of his staff go during the recession. The upswing has meant that Dillon has hired two people recently, with a view to expanding the practice.
He says his firm has become more efficient and client-centred in recent years.
“The way we provide services has to change. We have to become more aware and deliver services the client wants. That wouldn’t be how firms looked at delivery of their services traditionally. It would have been, ‘This is how we do things,’ and clients would have to accept whatever they were given. That is an outdated model that will not survive the current environment,” Dillon says.
“Those practices that are flexible and client-focused will have no difficulty in being able to deal with the changes brought about by the Legal Services Bill.”