Ready, set, grow: Priming your law firm for expansion
In the Great Recession of 2008, many law firms rushed to offer personal bankruptcy services. It seemed like the practice area was primed for explosive growth, so even attorneys who never took bankruptcy in law school tried to get in on the action. How many of those law firms still provide personal bankruptcy services today? Certainly not as many, and probably only those who entered that practice area thoughtfully and with a plan for the future. Those who got caught up in the excitement of the stampede probably didn’t reap the rewards they were seeking.
Exploring new practice areas is an important component of extending the longevity of your law firm, but only if you do so with foresight, reasonable expectations, and at least something of a plan. Here are five things you should think about if you’ve been mulling over the idea of going after a new type of work:
Is your firm prepared for growth?
Let’s say that you begin offering flat-fee family law services, and it’s a runaway success. Does your firm have the personnel needed to deliver on the influx of new work? On the other hand, let’s say you make a splash about offering DWI defense, but six months later find yourself with fewer of those matters than you had hoped. Does your marketing budget have room for the investment needed to give your new practice area a boost?
The point here is that new work doesn’t come for free. You have to lay the groundwork in order to turn it into a lasting and productive stream of revenue.
Have you properly assessed the market?
Some practice areas are hot, but only for a short time. Others never see a spike in demand, but offer the potential for steady, long-term growth. For example, if you live in a community with many elderly people, estate planning will be a fruitful sector, but probably only until the current generation phases out.
Both short-term and long-term practice area expansion can work as long as you are prepared for it to cool down when it eventually does. If you’re thinking about adding a new practice area to your portfolio, make sure you decide for yourself if you’re only trying to strike while the iron is hot, or if you’re trying to make preparations for the long haul.
What legislation changes might create opportunities?
At a local and regional level, even small changes in legislation or policy can create new work for forward-thinking attorneys. Cannabis is the most current and topical example; many states have adopted a one-foot-in-one-foot-out approach to its use, sale, and distribution, and some lawyers have a windfall of work because of that.
If you want to expand the services your law firm offers, don’t only think about what’s hot today. Try to look six months or a year into the future and see if you can think of a practice area that might heat up. (Labor and employment law because of COVID concerns? Immigration because of shifting political priorities?) That way, you won’t be playing catch-up to firms that are already ensconced in that space.
Is expanding practice areas necessary?
Sometimes, attorneys think they need to enter new practice areas but don’t stop to consider whether targeting new client demographics or markets in existing practice areas would make more sense. Even though the Spanish-speaking population of the United States is growing in both number and purchasing power, a surprisingly small number of law firms make any effort – any effort at all – to cater to the Hispanic market. That’s a very real miss, and a very real business opportunity for a law firm that wants to develop a new source of work. Before you spend the time, effort, and money in opening a new practice area, make sure you fully consider what you’re already offering and whether you’ve maximized the potential there.
What does success look like?
If you do launch into a new practice area, how will you decide whether that venture is a success, a failure, or something in between? It seems clear-cut at first, but there are many ways to decide whether expanding practice areas was worth it. Do you need a certain dollar amount in new revenue for it to have been a good move? Or is it by the number of new clients or matters? Furthermore, do you have to hit whatever benchmark you choose in a year, or is 18 months just fine? The beauty of this is that you can define for yourself what the ultimate goal is.
As a final thought, bear in mind that there’s no one right way to expand into a new practice area, but there are many wrong ways. The key is to do it with careful consideration and a sense of what you’re willing to invest for what you hope to gain in return.