Market change requires change in lawyer thinking

Law firms are paying more attention to, and investing more money in, business development, but many lawyers still aren’t sure why all this is happening and why they should do things differently. The answer: The legal service market has undergone a basic and permanent economic shift from a demand market to a supply market.

Unless you’ve only been practicing since 2008, for most of your career, demand for legal service grew every year. In that demand market, having a quality product and making yourself available mattered, and in many instances was sufficient. So, lawyers focused on billable hours to fulfil the demand.

The demand market is gone, forever. Legal service demand is flat or shrinking, yet the lawyer supply grows each year. More lawyers are chasing less work.

Last week, The American Lawyer published yet another article about soft demand, quoting the most reliable sources we have: BigLaw’s bankers at Citigroup and Wells Fargo, whose comments I hope will put the final nail in the wait-for-the-phone-to-ring coffin. “Echoing reports issued earlier this month by Citigroup Inc. and Thomson Reuters’ Peer Monitor, Wells Fargo’s data show that the most profitable tier has now joined the rest of the market in seeing demand soften.”

That’s right, even the biggest, elite, previously bulletproof firms are experiencing the effect of a maturity curve that peaked in 2007 and has now settled into what in every other previous category in business history has been a permanent, if slow, decline (or if you’re optimistic, flattening) in demand.

Wells Fargo’s Jeffrey Grossman continues: “In past years, the high-profit firms—which the bank identifies as firms posting $2 million in profit per equity partner or higher—have mostly bucked the wider trend of falling hours that has plagued their less-profitable peers. That’s no longer the case. Average annualized hours per lawyer among the Am Law elite dropped this year below 2013 levels.”

Can we agree that the free ride is over, that lawyers must now pursue business in a serious way, under the brutally competitive conditions their clients have faced for a long time? Can we get rid of whatever remaining denial has enabled us to treat business development like a nice-to-do, “I’ll get to it when I have extra time” elective?

Lawyers must now think like business owners. Instead of reacting, plan. The market, not your firm, demands that you plan, and act consistently. Begin now. Ask yourself some basic questions that acknowledge a changed future: In what markets must I establish a strong presence? What services will be important? Where will future demand come from? What factors determine marketplace success?

Author

I welcome Mike to Dialogue community where we aim to serve the interests of practising lawyers and their clients by helping firms remake themselves.

Mike O’Horo is a co-founder of RainmakerVT, a very special service through which lawyers learn by doing in a virtual world.

Mike may be contacted by email at mikeohoro@rainmakervt.com.

Follow him on Twitter: @rainmakervt.