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Rampant Failure of Small Law Firms


Many small law firms fail due to several different reasons. It doesn’t matter whether you are a Dallas business lawyer or a personal injury lawyer based in Hawaii, if you lack basic financial management skills, lack perseverance, or fail to invest in proper marketing, among others, chances are your firm has a high probability of failing at some point in time. Let’s examine a few factors that can contribute to the failure of a small law firm.

Little to No Differentiation

There is often very little differentiation between many small law firms today. The vast majority of them offer the same services and they look and feel the same in their very essence. Over the years, it has become evident that businesses that succeed are usually those that find a way to differentiate themselves somehow. Having an online presence isn’t enough to separate your firm from the competition, differentiation allows you as a small firm to expand your customer base and to provide your clients with extra value that will strengthen your brand position. Here are some ways to differentiate your law firm:

  • Provide The Best Client Experience: Providing excellent client experience is the best way to differentiate your firm from the competition. It is no secret that legal matters can be stressful for the client. Showering your clients with kind gestures like thank you notes, and checking in on them every now and again can improve their satisfaction rates and customer experience, resulting in more positive referrals for your firm, customer loyalty and other benefits.
  • Offer Distinctive & Quality Services: Make your law firm different from the rest with quality services that challenge the status quo. The legal industry is currently undergoing a transformation in various ways and your law practice should not be left out. Focus on creating value for your clients by implementing technology-driven approaches that will simplify things for them. So for instance, if you help your clients create an LLC in New York, then you might also want to offer the value-added service of helping them draft their operating agreement at no additional charge.
  • Networking: Networking is the core and crucial part of any business. It involves contacting people regularly to acquire and maintain clients, expanding to meet their needs.
  • Feedback: Actively gathering feedback through reviews and testimonials can help you to identify the problem areas in your business and how to correct them. Positive reviews and testimonials are great for demonstrating your firm’s integrity and exceptional service; improving your reputation and helping you acquire more clients.

Location Matters

Many Small Firms make the mistake of acquiring their premises wherever it is affordable, failing to consider their clients, a successful law firm will be close to its clients, making accessibility easier for them. For instance, you can be a Westchester County business attorney and hope to attract a lot of clients located in Albany New York, which is a 125-mile distance. The location of a law firm can affect many aspects of how it operates, for instance, setting up a firm in a rundown area will have potential clients fleeing from you out of fear of being scammed.

Financial Management

The lack of financial management is one of the most common reasons behind the failure of small law firms, failing to monitor cash flow and failing to monitor the firm’s financial position can result in a small firm becoming bankrupt. Desperation causes small firms to underprice their services to acquire clients. The following steps will help to make your law firm financially healthy:

  • Invest in networking and marketing techniques that will assist in getting the right clients to your door, while ensuring that no single client represents more than 25% of your revenue.
  • Review your financials or get a professional to manage overhead, to cancel out unnecessary expenditures.
  • Maintaining strong client relationships will help you to retain your current clients and gain free referrals to potential clients.
  • Be highly selective when taking in clients, do not invest in clients that can’t afford your services.
  • Keep a budget and save for emergencies. A contingency budget will help get your firm out of a tight spot.

Lack Of Marketing

Small and large law firms face different marketing challenges due to the budgets for smaller law firms being less than those of their counterparts. To be successful, a firm needs to focus its resources on its target market to spread resources and services evenly, this approach of focusing your efforts on a single geographic market will enable you to establish yourself as a clear authority in your field.

Failing to market your small firm will render it invisible. Effective marketing entails several things, including investing in lawyer SEO services to ensure that prospects can find your website, which helps your firm to gain visibility and to stay afloat in this overly competitive environment.

Failure To Meet Client’s Needs

Any law firm big or small cannot exist without its clients. Understand your client’s needs and accommodate them as much as possible as failing to prioritize clients is the quickest way for a firm to go out of business. We live in an age where the client holds the power to destroy or empower a law firm in their hands. Technology empowers clients by enabling them to share their experiences widely with others, which can work to your firm’s advantage if you learn to prioritize your clients.

Lack Of Perseverance 

Running a law firm is not an easy task, to run a successful law firm you need to understand that setbacks come with the package. Learn from your mistakes and challenges, persevere and show passion. With a little diligence and hard work, your small law firm can escape the fate of failure.

Improper Pricing

Small law firms fall into the pattern of underpricing their services and taking any fee that is offered to them, forgetting in a sense that a small law firm is still a business, no matter its size. You can’t afford to work for free or take on low paying cases as doing so will lead your firm to bankruptcy. Set proper pricing structures in place; if the market doesn’t support your fees, it is time to differentiate to one that will afford your services.

There are plenty of ways a small law firm can fail; this doesn’t mean that success is impossible. With the right planning, good marketing, effective communication, and a little perseverance, your small firm can become wildly successful.

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About the Author

David Nguyen, PC. serves both individuals and employers in matters related to Immigration, Business Law, and Estate Planning.