I read with interest a post by Bob Ambrogi in Above the Law in which he begins (more installments to come) to analyze the data of a new survey of solo/small law firm management. The survey covered 301 firms, 40 percent of which were solos.
As Bob reports, one of the most striking findings of the survey (which covered firms of less than 30 attorneys) is how they spend their time. Small firm attorneys spend just 61 percent of their time practicing law. Solos spend barely more than half their time, 55 percent, practicing law. The larger the firm, the more time they devote to practicing law. Lawyers at firms of 11-29 attorneys spend 69 percent of their time practicing law.
While striking, this makes sense to me – the more lawyers, the more people there are to share management tasks.
For the lawyers surveyed, when they are not practicing law, the rest of their time is taken up by meeting or speaking with clients (12 percent of their time overall), managing the firm (11 percent), administrative tasks (10 percent), and growing the firm and marketing activities (6 percent). There is a reverse correlation between firm size and time spent with clients: the smaller the firm, the more time a lawyer spends with clients. Solos spend 16 percent of their time with clients, while those in 11-29 lawyer firms spend 8 percent.
Roughly two-thirds of solos have annual revenues under $200,000, with 28 percent under $100,000. Three percent of solos have revenues of $600,000 to $1 million, and none bring in more than that. No firm in the 11-29 lawyer range has less than $1 million in revenue. A third have revenue of $1 million to $5 million, a third have revenue over $5 million, and a third do not say.
The top three challenges their firms face? No surprise here.
Acquiring new client business (27 percent).
Clients demanding more for less or rate pressure from clients (21 percent).
Spending too much time on administrative tasks (15 percent).
Lawyers rank as their fifth greatest challenge the increasing complexity of technology (12 percent). This is particularly true among firms of 7-10 lawyers, where 20 percent rank it as their greatest challenge, and among solos, where 16 percent do. This makes sense to me since I hear it all the time from audiences when John and speak on any technology subject. We chronically hear people say that they are hoping to last just a few more years, feeling driven out, in large part, by technology that they feel is beyond them.
Of the top three significant challenges listed above, only a minority of firms are taking action to address them. With regard to acquiring new business, 37 percent of firms say they have taken steps to address this challenge; with regard to pressure from clients, 28 percent say they have taken action; and with regard to administrative tasks, 19 percent say they have taken action. Now that doesn't make much sense, does it?
What are small firms' greatest sources of competition? According to the survey, 67 percent of lawyers say it is other law firms of similar size to theirs, and 49 percent say it is significantly larger law firms that compete for the same clients. The next two highest-ranked sources of competition are consumers who represent themselves pro se (13 percent) and do-it-yourself legal websites or services (11 percent).
Fifty-two percent of small firms have adopted new technology within the last two years.
Thirty-six percent have changed their marketing strategy within the last two years.
Fourteen percent have changed their billing practices within the last two years.
Sixty-two percent of firms have no succession plan in place. 83 percent of solos have no succession plan. This is also consistent with what we hear from audiences and it always astounds me.
Read Bob's post to see how lawyers measure success, but I found it interesting that 36 percent say their firms are very successful and 49 percent say they are successful. Only 4 percent say they are not successful and 11 percent say they are neither successful nor unsuccessful. More solos describe themselves as unsuccessful (8 percent), while more lawyers in firms of 11-29 describe themselves as very successful (44 percent).
That means eighty-five percent of small-firm lawyers consider themselves successful or very successful. That really did take me aback because of the woeful stories I have heard at conferences, especially solo/small firm conferences. And the revenues reported by the respondents don't square – at all - with what the IRS has reported as annual solo lawyer income. Still puzzling that one out.
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