If predictions of a looming recession prove accurate, there are ways for your firm to come through it in good shape – but you need to start preparing now.
One thing to do is to cement relationships with your clients, referral sources and key vendors. Let them know how important they are to you and how much you appreciate their business. A little extra TLC will keep them loyal to you.
Another preventive step: invest in technology tools and training, so you will be able to run a lean, efficient operation if the going gets rough.
“Law firms are recession resistant, just not recession proof,” writes Dominic Carman in the Global Legal Chronicle.
Carman says a financial downturn is likely because the ongoing US economic expansion – the longest on record – is bound to slow down in the not-so-distant future. That fact, accompanied by the end of quantitative easing, which has kept interest rates low and pumped money into the economy, could mean the current bubble will soon burst.
“According to JPMorgan Chase, the probability of a US recession within one year is 28 percent, rising to 60 percent within two years, and eighty percent within three years,” Carman writes. “Of course, the EU27 may get there first as much of the rest of the world economy outside the US has already begun to slow down.”
Big Firms Have Built-In Advantages
Larger firms – especially international players – tend to withstand economic storms better than small and medium-size firms. But nobody is immune.
“Larger firms with diverse practice areas and geography are seen as better able to weather the impact of a recession,” writes Carman. “However, memories are short, even for lawyers. They forget the contraction in partner numbers, the hiring freezes, the closing of offices and the law firms that went under during the last recession.”
But what about small and mid-size practices? What can they do to ride out a financial tsunami?
8 Ways for Solos and Small Firms to Survive
Here are seven suggestions:
- Hold fees steady. Rising rates will push clients to cheaper firms and non-traditional legal service providers.
- Focus on business development. In downturns, action heats up in bankruptcy, litigation, mergers and acquisitions, regulatory law, workouts and refinancings.
- Double down on marketing and messaging. “Marketing is often the first casualty in a recession, which can be an expensive mistake,” says Carman.
- Add value to what you do. Get to know your clients and their businesses. Look for ways you can serve them beyond drafting documents and appearing in court.
- Invest in technology. “A wealth of legal tech products now enable lawyers to make better-informed decisions using data through predictive analytics and legal research.”
- Consider alternative ways to deliver your services. Alternative providers occupy a growing chunk of real estate in the legal profession: from staffing and administrative services to preparing and filing documents. And they are often out in front with automation and AI tools. Are there ways you can take advantage of their efficiencies?
- Keep client relationships strong. Seek opportunities to grow existing relationships and create new ones.
- Begin planning now. “No recession lasts. The best law firms will exit from the next recession stronger than when they entered it – but only if they plan ahead.”
The bottom line: don’t panic, stay positive and be nimble.