Everyone has an opinion about how to run a business. But not everyone knows how to grow one.
Instead of relying on what may have worked in the past, small firms are investing in a new approach. The 2024 ½Û×ÓÊÓƵ Bellwether survey of 250+ leaders and associates at small- and medium-sized legal practices revealed many firms have plans to grow their business, and they’re using technology to help them get there.
Almost two-thirds (63%) of firms plan to grow through organic means over the next five years, up from 40% in 2023 (a 57% increase in a mere 12 months).
To fuel their growth plans, firms have placed investment in technology at the top of their priority list, outranking hiring more lawyers or marketing and business development activities.
Almost half (56%) of firms have either spent or are planning to spend more on technology in the next 12-18 months. 35% plan to increase their spend on technology in the next 12 to 18 months, while 21% already have. Only 26% said they had no plans to increase investment.
Hiring more lawyers was also high on the 2024 agenda, with 40% planning to do so soon, and 16% having hired new lawyers already. Other key areas of investment include growing their marketing (49%) and business development functions (43%).
In 2024, the percentage of small law firms reporting growth sat at 48%, with a further 40% reporting stability. This is roughly on par with recent years, with the exception being 2021's post-lockdown boom which saw two-thirds (66%) of firms declaring growth.
Firms with between 11-20 fee earners are the most likely to experience growth, with the average sitting at 67%. Solo practitioners were harder done by, with one in five (20%) saying their firm's performance has declined in the last three to four years.
Read the Bellwether 2024 report here
Encouraging your lawyers to make use of time-saving technology might seem counter-productive for an industry still wedded to the billable hour. A separate ½Û×ÓÊÓƵ survey conducted earlier this year found that 76% of small law firms are still reliant on the billable hour pricing model. Although, alternative models are also widely used, most notably fixed fee by matter (57%), fixed fee by phase (37%) and flat fees (36%).
Yet independent firms are under mounting pressure to respond to clients in real-time (83%), be more transparent about how they're spending their time (44%), improve their flexibility (31%), and provide more value-added services (29%).
All of these challenges could be addressed by the use of technology tools. The right platforms can reduce the amount of time spent drafting documents, finding answers to legal queries, sourcing relevant precedents or citations, streamlining business development or administrative tasks and a myriad more.
If an associate is expected to bill approximately 1,200 hours a year, this breaks down to around five hours per day (excluding holidays). Yet the average working day for an associate sits at just over 10 hours, according to Legal Cheek.
It's also commonplace for lawyers to understate the time spent on a task when they are nearing the higher end of an estimated range, in order to protect client relationships, according to the American Psychological Association.
Time-saved using technology could allow your team to bill more, work less, bring in new business and strengthen client relationships.
Anthony Earl, the chair of the Law Society’s Small Firms Network Committee, says technology helps small firms reduce the time taken by qualified staff to do administrative and regulatory tasks.
"This means your staff can concentrate on actually practicing law and improving the client experience."
However, the biggest difficulty firms have is sourcing the right technology.
"Small firms cannot afford to get it wrong and start again," he says, advising firms to ensure they have maximised their existing technology before investing in new systems.
Stephen Roper, a small business advisor and professor at Warwick Business School, believes technology, when deployed effectively, can drive more revenue opportunities and cost-savings for small firms.
"Digital technologies, when implemented well, can yield significant productivity benefits, most notably by making non-billable activities more efficient."
Just under a third of lawyers (32%) said their firms will invest in more technology due to artificial intelligence (AI), and 29% said their firms will be more profitable as a result of using it.
Legal technology and innovation expert, Rachita Maker, who is the Global Head of Legal Ops, Tech and Consulting at legal giant DWF, believes generative AI will be a very reliable assistant for lawyers from all backgrounds over the next few years, as do many other experts in this field.
"Generative AI can be used for legal research, such as preparing notes for arguments. It can also be used for regulatory compliance, highlighting regulatory changes and the potential impact it could have on an organisation's policies and processes."
While DWF is one of the world's largest firms, this shift is impacting firms of all sizes. In fact, the majority of smaller firms are eager to take advantage of the time-saving benefits of AI.
A generative AI survey conducted earlier this year by ½Û×ÓÊÓƵ identified that drafting legal documents (90%), researching legal matters (88%) and writing emails or other forms of communication (78%) were the top AI priorities for small law firms.
The time-saving benefits of this technology are significant. Three-quarters (74%) of a group of legal professionals using Lexis+ AI in the US estimated they would save up to 7 hours a week for legal research, and four-fifths (84%) anticipated saving up to 6 hours a week for legal drafting.
The biggest tech opportunity for law firms is leveraging their client and billing data, says Ben Giaretta, Partner and Head of Dispute Resolution at medium-sized firm Fox Williams.
"Firms that purchase technology in a way that makes the best use of their data will fly in the next decade. Firms that fail to do this may end up buying costly systems to no advantage – and they will probably end up being left behind by competitors."
Unsurprisingly, word of mouth is the most successful way to attract new work, 69% say they generate new work this way.
There is a huge gulf between word of mouth and the next most used tactic, cross-selling opportunities from colleagues, at 35%. Cold calling is the least successful tactic for respondents, with only 3% having had success. 69% say they've generated new business through word of mouth
One Founding Partner of a small firm says that referrals are his main source of business generation, but it requires a lot of effort.
"You need to build a big network and regularly feed it with new client results," he says.
While referrals have been the most effective drivers of new business to date, many are hopeful that other channels could bring in new leads. Almost half of firms (49%) are increasing their marketing spend. This pales in comparison to the 79% we saw in 2023 , although approximately double what we saw in 2022 and 2021. A further 43% said they're increasing their investment in business development.
Jon Walters, a founding partner at the specialist law firm, Northridge, which represents some of the biggest names in the sports industry, says he's most excited by the marketing opportunities that automation and AI technology bring to the table.
"The legal sector has always preferred an ad-hoc, relationship-based approach to marketing and business development," he says.
"But technology can now track, enable and deliver highly-personalised and automated client marketing campaigns, saving firms huge amounts of time and effort."
Frequently using marketing channels is also useful for raising your profile, says Zoë Bloom, co-founder and partner at AFP Bloom, particularly for niche areas of the law with fewer repeat clients.
"Digital channels enable a constant drip feed that reminds people you exist," she says. "I like the lacquered table example – one coat of lacquer makes little difference, but put a coat on every day for a year and you will have a beautiful table."
Download the full report here
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