Should Law Firms Think Like Start Ups?

The legal market is worth around £30bn a year and is growing in value.

This growth could easily outstrip the growth of the economy at large. It is a significant export opportunity for UK businesses and is still a market where businesses can make significant profit.

The downside is that it has become a complicated, dynamic and competitive market. It is becoming harder to find a way through and compete successfully.

The market has a whole pack of competitors:

Solicitors’ Firms – These businesses still form the majority of the market.

Solicitor Owned Alternative Business Structures – Solicitors firms who have taken on a structure which allows non lawyer ownership. This is mainly used to allow non lawyer managers to own a share of the business but it also permits equity investors and the addition of non legal services into the business mix.

Multi National Law Firms – Large businesses that span the globe and look to sell legal services around it. They see opportunities arising from globalisation of business and want to serve multi national clients.

Specialist Niche Firms – Accomplished and experienced legal specialists are spinning out of large law firms to set up niche boutiques. Unlike previous generations of small firms these businesses target quality clients for high margin work.

Umbrella Law Firms – Solicitors chambers type arrangements which provide back office support to self employed lawyers.

Legal Service Providers – Licensed Conveyancing Businesses and Employment Law Consultancies who are not Solicitors but provide legal type services with less of a regulatory cost and burden.

Accountant Owned Law Firms – The Big 4 Accountants are showing renewed interest in selling legal services. They are new and powerful competitors for commercial legal work.

Corporate Alternative Business Structures – Large and mid sized corporates are seeing opportunities in legal services. They are buying law firms and creating platforms to add further legal businesses. They are well funded and relatively aggressive.

Business Process Alternative Business Structures – Large business process organisations are moving into the legal market. At present they are acting as outsourcers but how long before they establish their own legal businesses?

Barristers’ Chambers – Traditional providers of advocacy but more entrepreneurial chambers are looking for opportunities to broaden their offerings.

Virtual Legal Service Providers – Businesses like Legal Zoom and Rocket Lawyer offer legal services on line. Other businesses offer intelligent document assembly.

To compete in this market, whatever type of organisation you are demands you are good at two things; Product Development and Business Development.

You have to have products that people want to buy and which are more attractive than the alternatives offered by your competitors. You then have to sell those products. Established legal business find both of these things difficult.

Similar challenges are faced by start ups. They have to find a product to sell and a way to sell it and make a profit. If they fail to do either they perish. Perhaps law firms need to think and act more like start ups.

Philip Jepson is chairman of Jepson Holt and director of Totuus Consulting. The firms are co-sponsor with Duff & Phelps of Legal Services 2015, a summit for law firms, their leaders, funders and advisers taking place at Lancashire Cricket Club on November 27.