Steven Pearlstein writing in the Washington Post states that there is some truth that to survive in competitive markets, business either has to be big enough to have scale or small enough to find cover in protected niches. I have said the same thing about law firm for the last eight years.
And, I ought to know. I have been on both sides of the equation from the standpoint of consumer law. In the 80s and 90s I helped grow a large consumer bankruptcy law firm with 5 offices, with huge ad budgets, handling thousands of cases. My primary competition were other big law firms, with huge ad budgets, handling thousands of cases. The survivors in the markets in which I practices where attorneys who had small practices, little marketing budgets, and handled only a handful of cases a year. What ceased to exist where the law firms in between. The so called, "middle class law firms".
The truth of the matter is that law firms generally survive off of referral practices or marketed practices. The large practices get their share of referrals and most all of the marketed-for clients. When two or three big firms enter a market, they use up most all of the oxygen so that only the low lying practices can survive.
As indicated by Mr. Pearlstein, large law firms enjoy economies of scale that give them a big cost advantage over smaller rivals, they have easier access to capital, and the wherewithal to ride out hard times. For example, for TV advertising to work well, it takes a degree of saturation. It can cost several hundred thousand dollars a year to blanker a metropolitan area like Dallas, Texas. In Tyler, Texas, for example, three large scale firms (at least for the area) represented over 70% of the debtor's filing bankruptcy in about 6 county area.
Niche players are different. First, their cost structure is very low. It does not take a small player much to meet overhead. Second, they do not need that many cases to make a decent living, if there costs are low enough. They depend not on advertising so much as relationship building.
The medium sized law firm cannot compete because they have to maintain the cost structure of the large law firms, while at the same time bringing in the a smaller case load, like the niche player. It is a recipe for disaster.
Now this does not mean that being a big firm is fun or more rewarding. It is stressful knowing that you have to bring in 70 to 100 new cases every month in order to break even, not to mention make a living. There are a lot of mouths to feed. There are a lot of people for which the law firm must care. There are a lot of other companies, people and providers that constantly have their hands out demanding money.
That is the reason that so many big law firm attorneys decide to downshift. They pick a niche in which they can handle most things themselves, cut overhead radically, start meeting and greeting, and learning to survive nicely (and less stressfully) on a few cases a month. And, it is rewarding because although you are helping fewer people, you can offer then the attention some of them need.
The choice is yours really. The question will aways be, however, how will you cross the divide to the economy of scale before you are crushed if you decide the big practice is for you. Most will not make it. A few will, and to those few it will not necessarily be a pleasant experience.
These days I work most days in my house slippers in my home in front my notebook computer and on my Skype. Sure, I make well over a million dollars less a year than I use to, but I still take home as much as I did because the one that benefits from all of my earnings is me and my family, and not the landlords, consultants, equipment and furniture salespeople, business supply stores, payroll specialist, employees and the like.
So you decide. Big or small? Titian or Third Waver? Potentate or a people person? It is really up to you.
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