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new legal landscape, new challenges, new culture?

11 April 2013

Last week, the first year trainees were given the opportunity to present to the equity partners of Browne Jacobson about the challenges facing a law firm looking to grow within the current legal market.

New business models and investment schemes are becoming more and more popular following the implementation of the Legal Services Act, and many firms are merging to attempt to compete with the ABS companies. This has some merit in theory, especially if a larger client base can be utilised whilst streamlining administrative services and overheads. Key indicators of firm performance are not reflected purely in the turnover of a business, and indicators such as levels of profit, lock-up and debt need to be considered before a firm can be considered successful. The unfortunate collapse of Cobbetts before its acquisition by DWF highlighted how a firm with strong turnover figures could still be struggling. Mergers may offer a chance to reduce these levels of debt and also reduce the overheads which can cause problems for the business.

Some firms are taking outside investment, a publicised example being James Caan investing in Knights Solicitors. This investment potentially gives them an opportunity to upgrade their processes, increase advertising and expand. The downside to this is that pressure will be placed on the firm to create a return on the investment as soon as possible, which may lead to a significant shift in the culture. Where a firm is already committed to pure revenue generation with a ‘hard nosed’ attitude, this may be a viable option financially without a significant variation in culture.

However, these are not the only methods of expansion, and law firms may need to look further afield for business partners in this new era. After all, cross-selling is the ‘holy grail’ of legal services, yet firms often miss opportunities to maximise their potential in this area. The new opportunities offered by opening the legal market may allow intelligent partnerships to arise which improve a firm’s cross-selling potential; or add the ability to give a rounded commercial service which could include financial as well as legal services. Done properly, this could give a firm opportunity to grow without sacrificing culture, as a working partnership is often far more collaborative than a merger, and often conducted with like-minded businesses.

To encourage different approaches, the trainees were split into two ‘teams’ to present their ideas of how to maintain the culture of Browne Jacobson but also stimulate growth. Naturally the focus was on increasing revenue, and the trainees highlighted that the approach to this changing legal environment needs to be positive, not focusing on what will be lost, but what can be gained instead.

As a trainee in this period of change, it is important to consider what you can offer to your firm. You can look at the business with fresh eyes and attempt to identify areas which could possibly be improved. It is worth ensuring that you keep yourself updated and consider the wider implications of changes in the legal landscape and trying to identify subsequent opportunities that may arise. Trainees are a vital resource for any firm and can shape the future of the business; it is exciting that Browne Jacobson has chosen to challenge their trainees to offer their ideas for growth at this early stage, and hopefully trainees will continue to be involved in the future.