There will be many losers in the coming consolidation, and the squeeze on mid-market and high-street firms from above and below is only increasing, especially as the politics of austerity has hit publicly-funded work and added to the pressures we have previously identified from deregulation, technology, and globalisation and low-cost competition.
However, there will also be winners – and the key message has to be that this can include your firm. For partners looking to take advantage of opportunities presenting themselves as rivals struggle, the starting point must be to secure the firm’s finances and ensure that their firm does not number among the casualties in the coming consolidation. This means an unrelenting focus on cash flow and the balance sheet.
Necessary but Not Sufficient
Although these are necessary conditions for thriving in a consolidating market, they are far from sufficient. In our analysis of the 20 attributes of winners, finance was just one theme (albeit a very important one). The other attributes could be grouped into the following categories:
- Products and services
- Clients and markets
A helpful question for partners to ask themselves is: 'what are we selling, how, and to whom?'
Clients purchasing legal services are generally looking for one of two things. They may simply want a one-off transaction – cheap and efficient, with the minimum engagement required. Or they may, conversely, be seeking reassurance and a relationship with their solicitor – effectively a premium service, for which they will be prepared to pay.
David Maister, the American professional services consultant, has broken this down into a matrix of possible options using the analogy of medical services, ranging from the pharmacist (cheap and efficient) to the family doctor (providing reassurance and a relationship). The key point for lawyers is to make sure that, whichever option is chosen, it is done wholeheartedly and uncompromisingly – there is no benefit in being fairly cheap or providing fairly good service.
For most firms operating in the middle market, competing successfully with low-cost providers will be difficult and therefore the decision will often (though not always) be how to deliver the premium service to clients who will be willing to pay accordingly.
The Value of Relationships
The value of relationships to success in professional services should not be underestimated, and so there may well be a requirement for significant investment in training for the firm’s people – in order to maximise performance in the 3 R’s of legal business development (Repeat, Referral and Recommendation). Conversations are key to relationships, and we will be delivering a one-day event on ‘Overcoming Fear of the Client’ for Lawnet firms in March.
It is important to focus on the profile of selected clients, in order to target services appropriately and achieve maximum efficiency and payback from marketing investment. Firms should also be increasingly selective about the services they sell and, crucially, the services they will not sell. There is a noticeable trend towards specialisation in the market, with Personal Injury having been an example for some time, and family and employment services increasingly following suit.
Ultimately, the winners will set a solid financial foundation and leverage competitive advantages in service delivery to thrive at the expense of less savvy rivals. Make sure your firm is in the former group.