Legal Market Recession
To ensure that your law firm not only stays afloat, but thrives in tough economic times, you need to have a solid plan. Here are some of the ways you can prepare for a recession in the future. Some businesses thrive during a recession. They have established practices in areas that are booming in times of economic despair. The classic example is bankruptcy, but there are others. Foreclosures surge during recessions. Some labour law practices are occupied, as well as some litigation practices. Doom can mean a boom for some lawyers who are lucky enough to be in the right firm at the right time. License our cutting-edge legal content to strengthen your thought leadership and brand. All successful marketing campaigns require consistency over time. SEO, in particular, is a time-consuming game – it can take anywhere from six months to a year to get results.
So the best time to prepare is before a recession hits. In the United States, there have been seventeen periods defined as recessions in the last 100 years. Unfortunately, a recession in the U.S. often affects the rest of the world – sorry for that. But what happens when the next recession arrives? Are these companies ready for what may lie ahead? I have been through three recessions in my career, in 1990, 2001 and 2007. Another recession will eventually happen because they always do. Will you survive? Latest U.S. jobs report shows increased growth in the legal sector in May I wrote earlier in this area about the tragedy of Law Firm Commons, an issue that arises when the benefits of overhead are appreciated by a single partner or practice group, but the cost of those overhead is spread evenly across the partnership. Let`s take the example of a company of 100 partners where all overhead costs are evenly distributed.
Now imagine that you`re one of those partners wondering if you should hire a new paralegal, but you`re not sure you have enough work to keep the new employee full-time. If paralegals turn out to be unprofitable, with shared overhead, you only have to pay 1% of their potential loss, as your other partners will pay for the rest. If your partners subsidize 99% of a loss in exchange for a little relief or the opportunity to go out on a Friday morning, that`s a smoked deal for you, right? But your other partners have the same incentives as you to increase their overhead for personal gain. This type of system can leave a company with 100 partners, 1,000 paralegals and 0 profits. The number of legal services includes lawyers, paralegals and other lawyers. BLS data on the legal sector dating back to 1990 are available. I mentioned that many companies will decide to stop all marketing to “save money.” For you, this represents an opportunity to enter the market. This is the best time to increase (or continue) your marketing to gain visibility when competitors leave the market. With fewer competitors competing for top-notch advertising and search space, you may be able to get premium rankings and make it easier to find customers.
In addition, a drop in the number of players could lead to better advertising deals and rankings on Google. For those who worked in Biglaw, there was nothing “great” about the Great Recession. Thousands of employees were laid off, new employees were laid off, and law students withdrew their offers. After all, it took Biglaw years to recover, and it was anything but a painless business. And let`s not forget the recession caused by the coronavirus crisis of 2020, when large law firms managed their spending by employing cost-cutting measures such as wage cuts, layoffs, employee layoffs, and clandestine layoffs of employees. It wasn`t a walk in the park either. That makes sense. Many of your competitors will stop all marketing spending. Your result will be a drop in the number of clients as your law firm loses visibility. Other companies that double down on marketing will continue to grow and dominate a crowded market.
But when a recession hits, you can always refocus your areas of expertise to respond to changing times. Fortunately, in the years following this recession, law firms have found ways to protect themselves from economic tests, such as the challenges they faced during the pandemic. Jenna Greene writes about legal business and culture and takes a comprehensive look at trends in the profession, the faces behind business, and eccentric court dramas. A longtime columnist for the legal industry and high-profile litigation, she lives in Northern California. Join Greene at firstname.lastname@example.org As I said at the beginning, I have been through three recessions in my career: 1990, 2001 and 2007. I survived all of them, but it was never easy. It took me a few recessions to accept their inevitability. I`m learning slowly. Last year, he said, “the valuable skills companies were looking for were legal talent that could bill hours for a plethora of work. That`s why hiring has increased and bonuses and salaries have skyrocketed.
“There has been a slowdown in hiring of capital markets and mergers and acquisitions law firms,” said Katherine Loanzon, managing director of legal recruitment agency Kinney Recruiting. During the recessions I`ve been through, I`ve seen great companies thrive. Within these companies, some practice areas have exploded, while others have gone bankrupt. The company`s revenue could have been maintained or even improved, but the company laid off associates and partners. What for? This is because large law firms tend not to integrate practice areas or train lawyers laterally. A once productive partner who experiences a sharp drop in sales due to the economy suddenly finds himself outside the company as a former partner. According to experts, one of the advantages for law firms is that they tend to withstand recessions well compared to other industries. Gary Mitchell, founder and CEO of OnTrac Coach, says that during a recession, many law firms make massive and immediate layoffs, freeze expenses, cut salaries and cut partner compensation.
“However, this is not in their interest. Because when companies come out of these downturns or recessions, as they always do, they often struggle to rehire talent. It`s very short-sighted. “Companies will be looking for lawyers to generate more work to keep themselves busy and keeping others busy,” Harrington said, suggesting that lawyers spend 30 to 60 minutes a day on marketing and business development. “Now is the time to act, not when it becomes an urgent necessity.” If you run a law firm, the money will likely disappear when these opportunities arise. You`ll have wasted it by then and you`re trying to help your business survive the recession. Saving money only delays the inevitable and costs you money in the long run. Aylor says it`s important to specialize in more than one area for this reason. “If you have a specialized business that is more prone to overall business losses, you should diversify your training and experience now so you can make a quick shift in the event of a recession.” Digital marketing is getting more complex every year, highlighting the need for a tailored approach for your individual law firm. The most successful law firms use multichannel marketing tactics – you can find them on social media, work on SEO, and run paid ads all the time. The first thing many companies do when there are signs of trouble in the economy is to reduce or eliminate their marketing budgets.
It`s understandable that a business owner thinks this is a great area for cutting costs, but any marketer would tell you it`s a mistake. Your law firm hasn`t worked yet. Lawyers will offer their services at a lower cost, online advertising markets will be flooded with advertising for legal services, and lawyers from other fields will suddenly make themselves available to your potential clients. It`s going to get ugly for a while, and it`s going to take longer than anyone would like. Isabel DuPree, director of VOYlegal in Atlanta, doesn`t foresee “mass layoffs,” but added that employees who don`t try to stand out and do well could be the ones who suffer. The way to avoid this type of problem is to allocate overhead as best you can, based on the significant resources a partner actually uses. If a partner works 50% with a partner, the partner must cover 50% of that partner`s overhead. It will never be a perfect system, and many budget items such as office supplies are expected to remain equally divided. It is not worth keeping up with paper clips and individual pens. Similarly, most administrative costs need to be spread evenly, as the business cannot operate without HR, finance and IS departments, even if the individual workload varies. But if you blame your partners for large outliers of spending, there will be more money left to hold everyone back when this recession hits. In times of recession, people lose income and inevitably struggle to pay their bills.
By providing payment plans, you can more easily retain your customers, says Sarah Ruttan Bates, director of legal operations and training at Lexicon.