In 1960, fewer than 40 law firms in this country had 50 or more lawyers. In the latest listing of the 250 largest U.S. firms, even after two years of declines in total employment, number 250 on the list still employed 160 attorneys. Many of these firms began practice in a single city or small region before their growth took them to a national level. Often such law firms followed their corporate clients, which for decades have lived by the philosophy that bigger was better.
Certainly large national law firms offer their clients many resources and economies of scale that smaller firms can’t. The existence of a fit and compatibility among clients and practices is the starting point for deciding whether national growth is the right choice. Lawyers wanting national growth should know the exact details about the firm’s strengths, its client focus, how profitable the firm is, and what opportunities exist to get more work through national growth.
With this knowledge in place, ultimately there are five criteria that determine whether a regional firm’s effort to go national and grow larger will be successful.
The nature of your practice. Strengths in areas like natural resource law, immigration or intellectual property can take you across state boundaries. Insurance defense, personal injury and other practices that require local court appearances tend to be restricted by state boundaries even if they can grow within the state.
The stature of your clients. If your firm is fortunate to get a growing company as a client, or if you’re fortunate to get a major celebrity as a client (especially an entertainer with multiple personal legal issues or a sports star with a national presence), then you can grow either because of their activities or the media attention that is directed toward you by them.
The culture of your firm. Some lawyers don’t want to expand beyond one office. Other lawyers have balance of life issues and don’t want to extend their work day that would be required in more extensive management involvement when governing multiple locations. Still other lawyers are entrepreneurial and see growth as a holy grail and the law merely as their chosen path to develop a business. Reconciling these diverse perspectives, or at least identifying a dominant one, is essential so that attempted growth doesn’t pull the firm apart.
The depth of your business plan. Writing a business plan tends to help you focus your energies and achieve the growth you set out to realize. On the other hand, the plan should not be so rigid as to discount luck and good fortune as factors in growth.
The effectiveness of your business practices. National expansion will grow revenue and the bottom line. However, true success in national growth of law firms depends on the top line – the amount of revenue billed and collected. The firm that does not pursue a high realization rate as a consistent business practice risks becoming another Finley Kumble, which became the first national megafirm before it disintegrated in the late 1980s recession due to lack of an aggressive receivables policy. As the last several years have proved, any organization that is poorly run is not too big to fail.
Ed Poll J.D., M.B.A., CMC is the principal of LawBiz® Management, a national law firm practice management consultancy based in Venice, California. For more information, visit his Web site www.LawBiz.com or email him at EdPoll@LawBiz.com.