Given the historical nature of the practice of law, it should be no surprise that law is known for consistency in its practices and procedures. Although consistency is a huge benefit in the area of law, the same cannot always be said for running a small business.
The problem is that a law firm is a combination of both.
Let’s take a look at some of the challenges that law firms face today in running a small business.
Acquiring new client business
Of the small law firms surveyed in 2019, 30 percent reported that it was difficult to acquire new clients for their business. For law firms to be successful and competitive, it’s imperative that they attract new clients into their firm. Having a healthy client acquisition allows law firms to continue to grow by providing them with new clients to replace those whose cases are finished.
Client rate pressure
Another challenge law firms face is their clients wanting more services for less money. One reason this is happening is because of the vast resources available on the internet for legal advice that enable people to “shop around” before they buy. This has led law firms to undercut each other in order to keep and attract new clients.
Balancing administrative tasks with practicing law
As with all small businesses, small law firms face issues with having to balance their actual job (practicing law) with other tasks around their business. Of the small law firms surveyed, 15 percent stated they’re spending too much time on administrative tasks. While these tasks may be low impact and non-billable, they’re still essential for the job.
The challenge is to find a balance between getting those non-billable tasks done while continuing to build your law practice.
Keeping up with technology
We live in a highly technological society; however, the legal industry has been slow to adopt technology. Now that more law firms are starting to embrace technology, some firms are at a disadvantage because they have to play catch-up to meet their clients’ demands.
One of the biggest hurdles firms face when trying to incorporate tech is the plethora of options available. Firms should take the time to consider what technology they actually need for their business’s long-term growth.
Controlling costs and expenses
Affording overhead costs while trying to grow a business has long been the bane of small business owners. Across small law firms, 14 percent surveyed stated that they struggle with managing their costs while trying to grow their business.
Lacking efficiency internally
Many small law firms report that their efficiency is down due to day-to-day working processes. This lack of efficiency can easily stem from operating processes that aren’t properly streamlined, which can reduce profitability and hurt their ability to be competitive. Of the firms surveyed, 14 percent said a lack of efficiency was a major challenge.
Collecting payment from clients
Regardless of the size of the law firm in question, time must be billed and paid on a regular basis for any growth to occur. Law firms frequently report issues both with recording billable time accurately and receiving payments from their clients. Therefore, law firms should place a heavy focus on timekeeping and collections.