Simplify The Law joins several other British companies that are setting up chains or franchises of sole practices and small law firms. Quality Solicitors (QS) was one of the first out of the gate — it describes itself as a collection of “the UK’s best law firms who have come together to create a national legal brand with locations nationwide.” Not precisely a franchise, QS already boasts well over 100 firms in its orbit and made a significant breakthrough earlier this year when it signed a deal to open kiosks in 150 WH Smith bookstores throughout Britain (with an eye on an eventual total of 500). These “Legal Access Points” represent a key approach of consumer-oriented franchises: go where the customer is and meet him or her on familiar ground.

Then there’s face2face solicitors (f2f), which specifically self-identifies as a franchise and, like other franchisors, offers small law firms the benefits to match, including IT infrastructure, case management, billing and collections support, time recording, IT backup and disaster recovery, and perhaps most importantly, centralized marketing and branding. f2f essentially promises to relieve franchisees of the burden of running their business so that they can focus on practising law. f2f focuses on smaller firms than STL or QS, targeting those with annual turnover of £1.5 million or less. As an example of the financial arrangements between law firm franchisors and franchisees, firms pay f2f a one-time fee of £25,000 and 8% of their annual income thereafter.

Other franchises like Lawyers2You and High Street Lawyer have already come out, and more will establish themselves in future. They are driven in part by the very difficult economy in the UK, but even more by the advent of Alternative Business Structures and the specter of massive chains like The Co-Operative getting into the consumer legal business through its banks and potentially its supermarkets. (Disclosure note here: STL has received business plan and start-up advice from Chris Bull, a partner of mine in Edge International).

There are at least two likely conclusions we can draw at this stage of the emergence of law firm franchises. The first is that this looks very much like the future of the small and solo law practice. The challenges facing small law firms these days — including downward price pressure, non-lawyer online competition, and the same range of business, technical and regulatory requirements that large firms can tackle with far more resources — will only be exacerbated by the difficult economic decade ahead. More ominously, solos in particular are older than average, are disproportionately based in smaller, stagnating or declining populations, and have few younger practitioners to whom their practices can be passed. New lawyers who might otherwise welcome the chance to hang out a shingle are discouraged by heavy debt loads, a lack of business experience, and the well-known risks of running a small enterprise.

Franchises are in a position to counter many of those concerns. They promise to take away the hassles of billing and marketing and file management. They provide the security of a branded name and logo and the advertising budgets to go with them. In some cases, they even provide training and a degree of knowledge management that all franchisees can take advantage of. Those are the kinds of lifelines that existing practices need and the kind of safety nets that could attract new practitioners by reducing their startup risks. Franchisors figure, probably correctly, that the same lure of reliable, secure, well-known brands can draw not just clients but also lawyers into their orbits.

There are potential downsides, to be sure. One of the reasons that marketing is so important to a law firm is that it forces the lawyer to give some real thought to identifying his or her personal and professional attributes and scanning the marketplace to determine the clients he or she should be targeting; it’s not something to be outsourced lightly. Taking the financial side of a law practice out of a lawyer’s sight can lead to taking it out of the lawyer’s mind; there are great risks to a small business whose owner is too distant and disconnected from cash flow and other daily financial realities. And any lawyer who practises franchise law will tell you that relationships historically between franchisors and franchisees have been, shall we say, a little fraught. But the pros of this sort of arrangement appear to give the cons a good run for their money.

The second observation is that this trend is by no means limited to the UK. The challenges facing solos and small firms in Britain are scarcely different from those bearing down on similar practices in the US, Canada and elsewhere. Solos value their independence, but they also recognize that the flip side of independence is isolation, and they know the harsh reality that if you start to sink, no one’s going to extend a hand to catch you. The benefits of franchising look intriguing no matter which side of the pond you’re standing on. (I recall, back in the mid-1990s, an attempted national law firm franchise called First American Law that wasn’t able to gain traction outside its native Florida; but it might simply have been ahead of its time in both market and, more importantly, technology and connectivity terms.)

Significantly, to my way of thinking, franchises also represent a way to bring in outside non-lawyer support to small firms in North America without running afoul of the rules on non-lawyer ownership of law firms. ABSs are now legal in the UK (although thanks to hangups with certification at the Solicitors Regulation Authority, only one conveyancing firm has so far received ABS approval). ABSs might eventually expand globally enough that US authorities will need to respond; alternatively, the Jacoby & Meyers lawsuit could be the powder keg that blows it all apart. But assuming that non-lawyer ownership restrictions remain in place in the US for the foreseeable future, franchises could be an alternative to outright non-lawyer control that still manages to give small firms an infusion of well-financed professional business support.

I still believe that solos and small firms have a bright future — brighter, in many ways, than most of the national and international giants whose business models are too archaic to survive a new century and too rigid to allow adaptation to new market demands. Small law firms, far more than big ones, can be financially and systematically structured with the kind of client focus that will be required for survival in the years to come. When I speak to law students — as I did again just last week — I advise them to plan their future legal careers as if they’ll be solos, because the skills they’ll acquire in that process will serve them regardess of their eventual work lives, and because it really is pretty great being your own boss.

But increasingly, the future for solos and small firms need not exclusively be the free-wheeling, fully independent entrepreneur of yesterday and today. In the long run, large consumer chains will be allowed to sell at least basic legal services in all major jurisdictions, and the challenges facing solos and small firms at that point will be similar to what your local variety store faced when Wal-Mart moved into town.

A number of small firms — not all, by any means, but more than a mere handful — will become part of a branded chain or franchise with centralized marketing, management and administration. These solos will find themselves in a franchised suburban or shopping center law office, or operating a purely virtual firm from home under a centralized brand. In the new legal marketplace, there will be worse places to wind up.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Doing what everyone else is doing will get you everyone else’s results. This is patently obvious, and lawyers are more than smart enough to recognize it. So the continued insistence by many lawyers that new and better results must be obtained by employing the same old approaches will have to remain one of life’s great mysteries.

Happily, there’s a sufficient (and growing) number of lawyers and law firms breaking that habit to enhance my own confidence that some members of the legal profession really are starting to get it, from the smallest solo practice to the largest global firms.

Back in the spring, for example, I announced a contest seeking five examples of 21st-century solo practice, which would be rewarded with a free one-year scholarship to Solo Practice University, courtesy of Susan Cartier Liebel and the rest of her team at SPU. I’m now very happy to announce the winning entries!

Our winners range from virtual family law practices focused on low-income clients to a special-education niche firm and an online environmental law practice. Our winners are June Gold of Connecticut, Jack Lebowitz of New York State, Diane Littlejohn of North Carolina and Neal Rice of Pennsylvania (the fifth winner will be announced at a later date). My best wishes and congratulations to these scholarship winners, and my thanks again to Susan and SPU for helping launch five more innovative law practices!

I also spent the spring and summer helping promote the College of Law Practice Management‘s InnovAction Awards, which recognize law firms and legal organizations that are committed to doing things differently and better in this marketplace. Today, I can announce that out of a near-record number of entries, we have three InnovAction Award winners from three different countries:

1. Law Without Walls, a multi-school initiative to rethink legal education, spearheaded by the University of Miami Faculty of Law
2. Lawyers on Demand, a brand-new legal service delivery model pioneered by London-based law firm Berwin Leighton Paisner
3. The Internationally Trained Lawyers Program, a bridging program for qualified foreign lawyers at the University of Toronto Faculty of Law

Yes, you read that right — two winning entries from law schools, confirming that the legal academy is part of the changing legal landscape as well.

I’d be seriously remiss, though, if I didn’t also recognize the excellent entries from law firms and legal organizations worldwide, especially from large law firms, that didn’t take home an award but that definitely merit your attention. They are:

From the UK, where so much innovation is emerging these days, comes Get Solicitors, which Legal Futures describes as “an alternative to national, branded networks by giving solicitors the tools to market and build their own brands. … Managing partner Brian McKibbin said the focus is online marketing, along with relationship building to help firms become lynch pins in their local business communities. There is also practice management advice. ‘We don’t think the way forward is a homogenous legal brand,’ he said. The future for law firms is going to be in looking and feeling like a law firm, rather than like Co-operative Legal Services or RBS Legal.’”

From the US comes an even more attractive proposition: my friends at Solo Practice University have announced a creative new program called “Building Bridges to Professional Independence,” under which law schools partner with SPU to provide scholarships to some of their upper-year students and discounted tuition rates for other students and alumni. This weekend at the Future Ed conference co-sponsored by New York Law School and Harvard Law School, the first Bridges partner, New York Law School, will come on board. I know that SPU is speaking with other law schools about coming on board as well, but kudos to New York Law School for starting it off. (And while I’m thinking of it, don’t forget about Law21′s SPU scholarship contest.)

This is the way, it seems to me, that solos and small-firm lawyers will survive the deluge and thrive afterwards. GetSolicitors and similar services provide a practice management and marketplace foundation for small-firm lawyers, putting them in position to focus on their work. The Bridges program, moreover, is exactly what we need in this profession — a way for new lawyers to get the best of both worlds, a solid law school education and a practical introduction to what being a lawyer actually involves. While a few larger firms have set up excellent professional development programs, most seem to assume that their new lawyers will “pick it up” along the way to various degree. Solos don’t have that luxury, and that’s why it’s natural that this sector is taking the right steps forward.

Is the future of BigLaw smaller? Quite possibly — but the future of law generally is going to belong to whoever is first and best out of the gate these next few years, as the assumptions upon which we’ve depended start to fall away.

Jordan Furlong speaks to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Almost every lawyers’ association in North America, I noted, has a section devoted to “Solo, Small-Firm and General Practice” lawyers. My problem with that category is that it still lumps together two groups — solo and small firm lawyers, and general practice lawyers — that should now be considered separately. Today’s (and especially tomorrow’s) sole practitioner has to pursue a niched, specialized practice — one that offers a focused set of skills and expertise with which to compete in an extremely fractured and specialized marketplace. If anything, I argued, today’s “general practitioners” are in fact the national and global giants — the full-service firms who assure the marketplace that “we do everything.” The traditional roles have been reversed.

This reversal is part of what I think we can justifiably call a “paradigm shift” for the solo bar — a change in its underlying assumptions and realities. Sole practitioners (for the purposes of this post, I’ll risk a charge of hypocrisy and bundle “very small firms” under the same term) have been accustomed to viewing themselves in a certain light, a view that the rest of the bar has shared and encouraged: the jack-of-all-trades, the storefront attorney, the low-cost but personal-touch underdog. This view of solos directly contrasts them with bigger law firms: we are more flexible, more affordable, and more personal. The flip side of that contrast, of course, is that solos are viewed as less specialized, less sophisticated and less able to take on big tasks.

Many solos have long been content with this trade-off.  Not only that, many have welcomed the current upheaval in the market that has caused bigger firms so much heartburn. We’re now poised, they say, to take in those price-conscious, relationship-hungry clients who’ve left the giants — this is our time.

To which I reply: not so fast. Solos are not exempt from the revolution. Everyone else in this market — big firms, mid-size firms, corporate clients, consumer clients, law schools, legal publishers and many others — is being transformed by the crucible of these times. Solos will prove to be no different. Taking advantage of this new market will require solos to change as well, which will mean abandoning some long-held habits and identities.

Here’s what I see as four characteristics of the successful 21st-century sole practitioner.

1. Specialized. I mentioned this at the outset, but it bears repeating. “General practice,” in real terms, has traditionally encompassed a range of product and service offerings that today have become economically unfeasible for lawyers. Real estate transactions, straightforward wills, contract drafting, incorporation and other basic business law services, and so forth — these are the stock in trade of the online, automated, or para-professional providers now accelerating into the market. This type of work has never paid handsomely, but in future, it will rarely pay enough to justify a lawyer’s efforts. Running a general practice has usually meant being good at a broad yet shallow range of services; but the shallow waters are precisely those into which the new competitors have advanced.

The solution for solos is to go deeper and develop specialties. Yes, as you give up a wide swath of your current broad practice, you will lose clients — but as you drill down and build up valuable expertise in a specific area of law for which there’s market demand, you’ll add clients, many of which will pay better for your scarcer skills and knowledge. And thanks to the internet, your geographic market has widened enough to allow you to maintain your reach while narrowing your offerings. Solo specialties are not unprecedented: criminal defence and family law practices are longstanding examples (although “vocation” is also a good way to describe these challenging but socially crucial practices). Most solos outside these areas of practice, though, have been general business and consumer lawyers. Now they need to focus.

2. Sophisticated. This is partly a function of specialization, as described above, but it’s also a function of business infrastructure. Solos cannot afford to give anything away to their rivals in bigger firms — yet they’ve usually been quick to concede organizational sophistication: we don’t have the marketing budget, we don’t have the IT capability, we don’t have the administrative capacity to do what bigger firms do. This simply isn’t a viable concession to make anymore — solos need to be running businesses as powerful and efficient as any big firm in their neighbourhood. Mid-size and larger firms that have taken infrastructure seriously and invested in it (especially on the client-facing side) have changed marketplace expectations of what a law practice should be able to do. You’ll have to keep up.

Fortunately, now you can. The available suites of law practice management software have never been better, more varied, or more affordable than they are today. In addition, cloud-based law practice management providers have emerged and have become completely reliable in a remarkably short period of time, removing the need to host any of this software or data on your own office systems. Virtual assistants can carry out administrative tasks as or more cost-effectively than an on-site person, often at customizable hours. Good websites and blogs allow solos to build up market profiles many multiples greater than their physical footprint could manage alone. Advanced client intake/contact and workflow systems can be implemented once and left humming for years to come. Your business can now be as sophisticated as you need it to be without overwhelming you with time and financial costs.

3. Collaborative. The “lone wolf” image of the sole practitioner was hard-won and is something many solos continue to treasure. But as I’m sure you’ve heard, this is no time for lone wolves, not in this economy or in this society. Solos simply must be networked, connected and collaborative in order to survive. Partly this is a matter of taking advantage of both old and new networks, from specialty bar groups to LinkedIn, and of contributing to communities like the blawgosphere. But it’s really about learning to collaborate with other solos, and even with larger firms, on projects that more and more frequently will involve multiple types of lawyers to achieve the client’s objectives.

The biggest knock against small law practices is that clients are reluctant to entrust them with anything more than small jobs — that for work of any real size or scale, clients consistently seek out the bigger firms with their greater manpower and their brand assurance that size guarantees reliability. This may prove to be many large firms’ strongest and most resilient selling point: don’t worry, because we have the critical mass to get anything done. That may be a battle that solos can’t win — but it’s not territory that you want to give up altogether, because the financial and intellectual rewards of big projects can be immense. So find ways to collaborate with other practitioners — perhaps as part of the free-agent lawyer wave, perhaps by launching your own specialist solo network that works together on projects — finding ways to punch above your traditional weight class.

4. Innovative. In many ways, I think this is the most important feature of the successful 21st-century solo. Sole practitioners have long prided themselves on flexibility, nimbleness and efficiency as market advantages, but bigger firms are now picking up some of these features by necessity. Solos can continue to have an entrenched advantage in innovation, however, because the bigger you are, the harder it is to enter new markets and try new things. Here’s how Clayton Christensen puts it in The Innovator’s Dilemma:

[C]reating new markets is significantly less risky and more rewarding than entering established markets against entrenched competition. But as companies become larger and more successful, it becomes even more difficult to enter emerging markets early enough. Because growing companies need to add increasingly large chunks of new revenue each year just to maintain their desired level of growth, it becomes less and less possible that small markets can be viable as vehicles through which to find these chunks of revenue.

Newly emerging markets offer tremendous potential, but big companies simply can’t afford to expend the resources necessary to exploit them early enough. That’s not a problem for smaller companies, which is one of the reasons why so many of today’s disruptive technologies and new markets were harnessed by start-ups. (Christensen himself recommends that big companies set up separate small divisions to pursue such opportunities.) Small law firms are in the same position: they can afford to innovate, to take chances and to try new markets and approaches in ways that big firms can’t. I submit that this will prove to be solos’ most formidable marketplace advantage, and they should press it.

What that means is that you can’t continue to practise solo law the way you always have before. You need to break out of the habits, limitations and rules that you always assumed constituted the underlying framework of sole practice. Maybe they did, once; they don’t have to anymore. Seek out clients from sectors you always thought were beyond your reach: what would it take to bring them in and keep them? Run your business in ways few other solos or small-firm lawyers would try:

• create and operate a Facebook page for your specialty area,
• define your target market generationally,
• explore the feasibility of a law firm franchise,
• identify potential clients on the other side of the globe,
• create software that prompts and answers common client questions and post it on your website,
• figure out how to guarantee a fixed fee for all your work (and make it profitable),
• develop online elements of your practice,

and many others beyond what I’ve just tossed off in a few lines. Create markets where they didn’t exist before, deliver services in ways that haven’t been done before, define and run your business in ways that haven’t occurred to other lawyers before. The ability to conceive of, and then act to exploit, new opportunities will be the hallmark of the successful 21st-century solo.

To that end, I’m going to punctuate this post with something pretty different in itself. In conjunction with Solo Practice University’s second anniversary on March 20, 2011, I’m giving away five scholarships to Solo Practice University (valued at US$695 each; CLE is not included), courtesy of Susan and her team. These scholarships will be given to five current or soon-to-be solos or small-firm lawyers who are now engaging, or are ready to engage, in 21st-century sole practice. Drop me a line at jordan@law21.ca and tell me about the practice you now operate or that you plan to develop — describe the ways in which it is or will be specialized, sophisticated, collaborative and/or innovative.

I’ll be accepting entries from March 15 to April 30, 2011. Throughout the course of May, I’ll select the top 10 entries and my colleagues at Edge International and Stem Legal will help me determine the five winners. I’ll then post the winners, and descriptions of their practices, in a post here at Law21 on Wednesday, June 1. Get ready to innovate!

Jordan Furlong speaks to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Face2Face is compared to and contrasted with another British operation, Quality Solicitors, which has been around for longer. Quality Solicitors is a network of about 200 independent law firms across the UK, ranging in size from solos to firms with more than 40 partners. Face2Face characterizes QS’s business model as one that rebrands existing firms, whereas its own model is “targeting start-ups, breakaways and firms looking to be ‘reconstructed,’ especially if there is a need to consider succession/exit.” In practice, the two models probably won’t come across much differently to clients; in both cases, they’ll see a small law firm with a franchised brand and the promises that come with it.

The UK, of course, is also home to the still-mythical “Tesco Law,” the widely mooted example of what the ABS provisions of the Legal Services Act would enable: legal services sold by supermarkets. This too would be a franchise operation, albeit with the franchised firms operating inside the mega-stores rather than in downtown or suburban storefronts. Canada has something similar with the “President’s Choice” line of banking and insurance services offered through Loblaw’s or the Great Canadian Superstore supermarket chains. (I enjoy telling US audiences that the Tesco Law equivalent in Canada would be “Loblaw’s Law”).

President’s Choice aside, however, the idea of franchise law firms hasn’t taken off in North America. I still remember the launch, back in the mid-1990s, of First American Law (not to be confused with First American Title Insurance or the First American Law Center), which planned to build a fleet of small branded firms across the US and Canada. Perhaps because it was ahead of its time, FAL didn’t take. The idea hasn’t gone away, though: Richard Granat recently floated the idea that LegalZoom might get into the same kind of business, supporting small firms with a brand and a back-office processing center.

The common thread in all these companies and concepts is this: a series of small firms, from solos up to about five lawyers but conceivably larger, operating independently but under a single brand name and supported by centralized web-based back-office support and marketing functions, serving consumers and some small businesses in heavy-traffic areas of law like family, real estate, wills, and business law. Because the work is what lawyers like to call “commoditized,” the brand becomes extremely important. Among the promises that QS firms make to their clients, for instance, are “no hidden costs,” “direct lawyer contact,” “same day response” and “the first consultation free.”

That’s one vision of the future. At the opposite end of the spectrum lie the global giants, and they’re taking a much different approach. Most of these firms dread the “commodity work” label and strive to serve a high-end market of major corporate clients with complex, challenging, high-stakes work that engages lawyers intellectually and rewards them stunningly. And while smaller firms are turning to a faceless brand to give them an edge, the larger firms are counting on faces, very specific ones, as their salvation.

The Wall Street Journal‘s recent report on lateral hiring trends was one of a growing number of accounts of law firms raiding rival firms for superstar partners with large books of business. These laterals don’t come cheap: many new arrivals expect compensation up to ten times heftier than what some of their new colleagues are earning. The compensation gap is to be expected, of course: just as LeBron James is paid a lot of money because he’s expected to fill a lot of seats, laterals are expected to earn their keep and more. But it’s still interesting to hear DLA Piper chairman Frank Burch explain the rationale behind lateral hires: “We are focused on making big, strategic hires, who can allow us to achieve greater stature and visibility in the business community.” That’s not a productivity argument; that’s a marketing argument, a profile-augmentation rationale.

None of this is new, of course: smaller firms that sell what everyone else is selling need to find a market differentiator (hence the interest in brands), while large firms want to sell services of a type or quality that no one else is selling and make that the differentiator. The question, at this stage, is which of these approaches makes more sense in the marketplace of the near future? It seems to me that going forward, the branded commodity approach actually has more upside.

I was speaking at a retreat for an AmLaw 100 firm last summer, and one of the lawyers asked me about what the future held for both “commodity” work and “bet-the-company” work. My response was that virtually every law firm mid-size and higher insists that it wants to pursue the latter kind of work, that that’s what it wants to be known for in the market. The problem, I said, is that there’s actually relatively little work of that kind available — companies don’t bet themselves every day — and thousands of law firms are all chasing it. Compare that to the “commodity” work: there’s tons of it out there and hardly anyone wants to provide it (indeed, judging from the number of self-represented consumer clients, there’s a massive shortage of supply). Which of these two areas looks more promising from a business development perspective?

The high end of the legal market is over-served and the low end is under-served, and there’s two reasons for that. One is that many lawyers don’t find the low-end work “challenging” enough (to which I say, find me a high-paid M&A superstar who can last a week in family court without breaking down). The other, of course, is that the low-end doesn’t pay enough. But I’ve written before about how it doesn’t matter how much the client pays, it matters how much profit you make after the costs you incur are subtracted from the price you charge.

National branded legal franchises look like an excellent way to accomplish the goal of providing more with less to this market. Let us do the things you hate, the franchisors tell lawyers, like marketing and branding and administration and whatnot. You do the things you love, like practise law and serve clients. Our efficiencies reduce your costs, so you can price competitively yet still keep more of what you charge (with a slice to us, of course). As more and more legal tasks pass through Richard Susskind’s five declining stages of work, from bespoke to commodity, the “low-end” “commoditized” share of the market is going to grow. Firms that took a more enlightened approach to this sector should reap the rewards.

And the big firms, the global giants? They have plenty of marketing and branding firepower, without question, and they’re awfully good at what they do. But they’re also susceptible to the weakness inherent in the traditional law firm model: your assets walk out the door every night, and you need to pray they come back the next morning or else you don’t have a business. The Lawyer reported this month on a survey of nearly 2,000 partner moves in London from 2005-2010 that found almost half of those hires left their new firm within five years, and up to a third left after three. Do you think those acquisitions were good investments of those firms’ time, money and effort?

As legal work drifts towards commoditization, lawyers drift towards fungibility. All five partners in your branded storefront franchise walked out today? You can probably find five other lawyers with very similar skill sets to replace them — and in this economy, you can probably do so fairly quickly. But brand names and logos — they don’t leave. Now suppose that all five partners in your large firm’s biotechnology practice group walk out the door; you have a much bigger problem. A wise manager once said that if he discovers he has an irreplaceable employee, his mission become making that employee replaceable. Large firms that boast about the irreplaceability of their top earners perhaps don’t realize the double-edged nature of that particular sword.

The oldest axiom in the legal business is that clients buy the lawyer, not the firm. This is true and always will be true, insofar as the lawyer brings something unique to the table: extraordinary skills, outstanding personality, or perhaps most importantly, the ability to craft and perfect a trusted relationship. But absent those conditions — and those conditions, I expect, will become increasingly rare — and with bespoke legal work diminishing, clients’ buying criteria are going to expand to emphasize factors like price, accessibility and reliability. When you’re sliding towards those criteria, you’re walking into territory where national brands have developed a very strong home-field advantage.

Are you selling clients your lawyers or your firm? Think carefully about the ramifications of your answer, now and down the road, because clients are starting to ask themselves the same question.

Jordan Furlong speaks to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

That neatly encapsulates what I think is a real and dangerous trend at a lot of the bigger law firms: week by week, rate increase by rate increase, they’re pricing themselves out of the market. The profit imperative is so strong at these firms, and the level of economic sophistication often so low, that rate increases are ordered up regardless of whether the clients want them, can afford them, or are screaming bloody murder about them. To the extent a firm thinks about its clients when raising rates, it often wagers that they have relatively limited options — they need to get the work done and they want it done by lawyers they trust — and that they aren’t prepared to make a radical and onerous move like switching firms (especially since almost all big firms operate the same and bill the same anyway). That gamble has paid off handsomely over the years, and so the firms have had little incentive to change their approach.

What’s happening now, however, is that the clients and their lawyers are teaming up and doing an end run around the firms. There’s been a barrage of reports over the past few months about lawyers abandoning big firms to set up smaller boutique practices, taking clients with them, and thriving in the result. It’s a four-step process: client tells lawyer it can’t afford her rates anymore. Lawyer tells client she doesn’t control her rates and doesn’t want to lose the client. Light bulbs appear simultaneously over their heads. And a few months later, a new small firm is born, with at least one A-list client on its roster.

I’ve seen and heard variations of this account many times in the last several months. Sometimes the motivation is financial, the chance to keep good clients and retain more profit. Sometimes, especially for women who set up their own shops, it’s to escape the inflexible culture of large firms that insist lawyers devote their prime family-starting years to business. And sometimes it’s the natural desire of talented and ambitious lawyers to start a new chapter in their lives — the difference being that this new chapter can now start with an old client. All the lawyers I’ve spoken with and heard about who’ve taken this plunge couldn’t be happier — and they couldn’t be busier, either, not only with the old clients they brought along but with new clients drawn to the prospect of great lawyers at affordable prices.

This American Lawyer article describes the genesis and market advantages of these new boutiques:

It’s all about value. The recession has increased clients’ price sensitivity, creating an opening for smaller firms with lower, more flexible costs. Boutiques cater to cost-conscious clients by lowering overhead expenses, slashing rates and offering alternative fee arrangements, while providing the same legal services that their founders offered at their old firms. …

Mark Suzumoto, name partner at Van Etten Suzumoto, says his rate has dropped 30 percent to 40 percent since leaving McGuireWoods. Durie has lowered her rate 20 percent. At bankruptcy boutique Harrington Dragich, James Harrington says he gives clients a “meaningful discount” on what he charged at Foley. …”The biggest positive of our firm is that we’re delivering the same expertise at a lower cost,” says Harrington.

These lawyers can reduce their rates not just because they’ve been freed from the large firm’s profit yoke, but because they’re also throwing off much of the overhead costs — expensive leases, summer student programs, extensive administration, and general infrastructure — that large firms have accumulated over time. The benefits this infrastructure delivers to the big firm can be argued, but the benefits it delivers to clients are usually negligible at best. As far as the client’s concerned, the primary and sometimes only benefit of hiring the firm is that it gets to work with a lawyer it likes and trusts. So if the client can get that lawyer at a lower cost and with less hassle, it will. It’s also no coincidence that in many of these new firms, lawyers are selling their services on a flexible- or flat-fee basis. That’s the new reality of the lawyer-client relationship, and these boutiques are among the first to get it.

I’m not sure if large firms in this situation realize how much danger they’re courting. Two of the profession’s oldest truisms are that clients hire lawyers rather than firms, and that a firm’s only real assets walk out the door every night with the intention to return the next day. Firms that raise their fees to the point that both clients and lawyers leave seem to be forgetting or ignoring these rules. Or, maybe more likely, they know these rules and they recognize the risks, but their cultural machinery is simply too rigid and complex to allow them to respond effectively. So many aspects of the traditional law firm model are breaking down, from annual rate increases to unilateral pricing to pyramidic associate leverage to open-ended hourly billing, that it’s hard to know what to address first.

But a joint exodus of good lawyers and good clients — not to another firm, but to a brand new settlement altogether — can’t be interpreted as anything but a disturbing sign. A firm can survive a couple of these kinds of losses, but much more than that, and the internal crisis of confidence can spiral out of control very quickly. If your firm hasn’t yet noticed the link between higher rates and lower billings, take a good look right now.

I used this analogy — high-wattage lamps that cast vast amounts of light in a wide circle, contrasted with smaller, sharper, focused sources that put only the light you need exactly where you need it — in a recent discussion about the future size of law firms. My theory is that most things being equal, the future belongs to smaller firms and solos, because the large-firm model ultimately suffers from an over-reliance on volume and an inability to finely focus resources.

Many big firms are like very large lamps with incredibly high-wattage bulbs that radiate huge amounts of heat and light — but in doing so, waste a lot of energy because they light up parts of the room that don’t need it and that aren’t going to produce a return on illumination investment, so to speak. Smaller firms, which do only a few things and do them in a very specific way, are like flexible halogen lights that aren’t for everyone and everything — but are ideal for certain contexts and needs. Mass broadcast power through reach and volume was the key to success in the 20th century, from media to manufacturing to marketing, and large law firms flourished in this environment. Their largeness was a competitive feature: volume as strategy, size as an end in itself.

In the 21st century, a different model will take hold. The future is fragmented, channeled, specific, focused, niched: a needle instead of a sledgehammer, a laser instead of a lamp. The elements of small practice — flexibility, dexterity, specialization, and personalized service — are ideally suited to the deeply diverse, long-tail legal marketplace that’s now emerging. A recent Economist article about the forthcoming U.S. census makes clear just how much is changing. The 2010 census is expected to reveal an unprecedented degree of diversity in the American population, a development of the utmost importance to marketers:

Cesar Conde, president of Univision Networks, a Spanish-language media company, says [the census] will be a “wake-up to marketers”. Once the results are in, firms are likely to invest more in marketing to minorities, to develop more products to appeal specifically to them, to advertise in languages other than English and to hire more racially diverse models. Peter Francese, a demographer at Ogilvy & Mather, an advertising agency, thinks the 2010 census will permanently change marketing. When companies analyse the census data, they will see that cities, and even some neighbourhoods, are so diverse now that broad advertising campaigns are no longer suitable. Mass-market advertising, he says, will become “extinct”. Marketers will instead have to focus on reaching specific households.

While the mass market continues to shrink and dry up, technology is simultaneously making the tiniest niche more accessible. Consider what Google CEO Eric Schmidt said about the future of his company: the goal is to give the user exactly one right answer to a query, not a list of possible right answers, essentially transforming Google from a search engine to a “find engine.” This technology already exists in the form of Wolfram Alpha, an “answer engine” that “computes and provides answers and relevant visualizations from a core knowledge base of curated, structured data.” These innovations should be widely available not much more than ten years from now, and at that point, how much good is size and volume going to do you, in terms of attracting customers and answering needs? People looking for legal help will find the one right answer or the one best answer, and all the size and marketing wattage in the world won’t help you be a better solution.

Starting now, law firms will have to justify their size. This is not only because the economic rationale for some law firm lawyers will cease to exist — traditional associates with too little work to pay their salaries, partners who fail to demonstrate their contribution in value terms, and the general decline of the leveraged pyramid model — but also because the advantages of size qua size are disappearing. Largeness does still have its virtues, starting with the fact that many big institutional clients need a law firm with multiple offices and a hefty workforce to mobilize on short notice. Big firms also offer “lawyer insurance” to clients: if my lawyer is away, five others can take my urgent call. And brand still counts for a lot, and will presumably count for even more in the age of the “answer engine,” when there’ll be a real advantage to circumventing the search process altogether.

But many of these virtues are gradually being counteracted by technological and cultural developments. Solos can collaborate with each other, through social networks and websites, as easily as a big-firm lawyer can walk down the hall and talk to a colleague — and can serve as backups for each other too. Small-firm lawyers can afford all the technological bells and whistles that big firms have long enjoyed, especially with the rise of SaaS and open-source technology. Small-firm lawyers can write blogs for next to nothing that, with the help of advanced SEO and link-building techniques, could outdo million-dollar big-firm marketing budgets in terms of getting the attention of the clients they want. With all these forces at play, a law firm that’s larger than it needs to be is going to run into problems.

Any biologist will tell you that the bigger an organism, the more energy and resources it needs to expend to keep going. Unless there’s a powerful competitive advantage to being big, smallness will begin to assert itself. Today, there are tiny desktop lamps that cast stronger light than the biggest, most florid 1970s table lamp, and even tinier lasers that put them both to shame in terms of power and accuracy. If you’re looking for a reliable model for law firms of the future, I’d recommend betting on the laser.

1. Why the billable hour’s not dead — just irrelevant.
2. Why process and systematization will change how legal work is done.
3. Why “access to justice” no longer has to mean “access to a lawyer’” Will we see the demise of “Unauthorized Practice of Law” restrictions?
4. How and why client collaboration will affect your practice.
5. Are we finally ready for preventive lawyering, becoming full-time holistic legal health professionals?
6. How will the introduction of Brazil, Russia, India, Indonesia and China (BRIIC) into the global legal marketplace affect you and your practice?
7. Why solos and small firms are the long-term future of the practice of law.
8. Why law schools won’t change, but legal education will.

All the details of the Guest Lecture can be found at the SPU website. If you’re not currently enrolled at Solo Practice University but would like to access this event, log in to Facebook (or create an account) and become a fan. Hope you can make it next Tuesday!

Update: A recording of the teleseminar is now available by becoming a fan of SPU’s Facebook page here.

Maybe the best way to define “hyperlocal” is to cite new media commentator Max Kalehoff’s question in his blog post: “What is hyperlocal? Can someone please tell me?” We all know what “local” means, he says: content and advertising focused on a specific location or area, rather than on a state, provincial or national level.  City, town, and community newspapers, TV stations, and radio stations all fit the definition of “local,” as do the organizations and subscribers who support them. So what does “hyperlocal” media mean, and how does it differ in a meaningful way from these local media that are dropping like flies all around us? A good answer comes in a comment from Mark Josephson, CEO of hyperlocal news provider Outside.in:

Historically, “local” was defined by city, town or zip. It was very “top down” and assumed that everyone who lived in a certain city, town or zip was interested in the same thing. Now, hyperlocal has come to mean “smaller than city, town or zip” and usually refers to neighborhoods or small town blogs. I think hyperlocal is defined by the individual, built from the ground up; that is, local media, news or information that is personalized by you and YOUR location. Hyperlocal is unique to everyone: what are the places, locations and neighborhoods that are important to you.

Hence, whereas a local paper might cover a town and a community paper might cover one section of a city, a hyperlocal paper covers a particular neighbourhood, block or even lengthy stretch of rural road. It reports on crimes committed in these neighbourhoods, school closures, pothole repairs, building permits, house sales, restaurant openings, and a host of other details that are meaningless to anyone a few blocks away but are immensely important for locals to know. Adrian Holovaty, founder of hyperlocal site Everyblock, prefers “microlocal” as a clearer and more accurate term, because “[m]icro implies intense focus, incredibly small scale and rich depth.” And he notes elsewhere that his company takes a very liberal definition of what constitutes “news.” If it matters to the people in the neighbourhood or block, then it qualifies as “news,” regardless of how narrowly a large legacy media provider might define the term.

Hyperlocal news is extremely specialized and customized news, and while the business model for such a tightly focused media outlet is still a work in progress, it’s a concept that dovetails nicely with the growing demand for personalized information. What interests me is the potential application of “hyperlocal theory” to the legal profession. I even think the model of a lawyer with a single, intense business focus has a good shot at being the future of solo practice and a whole new way of defining what lawyers do.

Here’s one variation on the theme: the geographically hyperlocal lawyer. We’ve had “local lawyers” for generations, of course: the traditional small-town practitioner is part of our collective professional consciousness. In a community small enough to support just a few practitioners, the local lawyer (usually a general practitioner) occupies herself only with the concerns of her fellow townsfolk, and her skills and knowledge are only as broad and deep as they need to be to address those concerns. But the traditional small-town local lawyer is under the gun: many communities that size are declining, and the lawyers there are older, less likely to have juniors to whom to pass on the practice, and generally work in areas (real estate, wills, document creation) most vulnerable to new competitors from outside the profession. The small-town GP is a vanishing archetype.

The geographically hyperlocal lawyer, on the other hand, might be more an urban or suburban creature: a neighbourhood lawyer in a community large enough to have many neighbourhoods. This lawyer would restrict his practice only to the people and organizations in a strictly defined area, maybe no more than several square blocks, and he would use that fact as the cornerstone of his business development efforts. He would offer a centralized office within walking distance of the whole neighbourhood, he’d circulate a hyperlocal newsletter of community news, business information and legal tips, he’d maintain a presence at soccer games and garage sales, and he’d benefit from word-of-mouth marketing over fences and during barbecues. In short, he would be a known and trusted commodity, a community focal point. The hyperlocal neighbourhood lawyer might never become rich and could face conflict issues with some frequency, but he should still have a decent and fulfilling career.

Another way to view the “hyperlocal lawyer” is from the perspective of practice area. Think of an extreme-niche lawyer who serves a worldwide “neighbourhood,” but offers services of an intensely focused type. Imagine a lawyer who takes on not all personal injury cases, not all brain-injury cases, but only swimming-pool-related brain injury cases; not all IPOs, not all high-tech IPOs, but only IPOs in the femtocell phone industry; not all immigration cases, not all business immigration cases, but only business immigrants from blacklisted countries who seek work in sensitive government departments. The hyperlocal-practice lawyer would establish herself as the best (and maybe the only) authority in the world on a micro-focused area of law. She would write a blog and would top the Google results whenever anyone searches for information on her niche. She would take on clients in her licensed jurisdiction and provide expert assistance and advice to those outside it. The hyperlocal-practice lawyer dives as deep into a practice area as there are clients to support her.

There are obviously risks and drawbacks here, too: choosing a practice area that’s easily rendered superfluous by technological and social change, or that will be rife with conflicts concerns, or that’s so finely focused that it can’t support even an efficient solo practice. But thanks to the internet, even clients with the most obscure legal issues can find the resources they need, something that was practically impossible a generation ago. An extreme-niche lawyer who writes a good blog and pays even rudimentary attention to website SEO could get all the advertising she needs courtesy of Google. This is the Long Tail era, after all, and an age like this invites the development of a Long Tail lawyer, someone who does perhaps just one or two things, but does them exclusively and exhaustively. The hyperlocal ethic is based on intense focus, and there are opportunities for practitioners who apply that focus to their practice.

So these are two potential angles from which to view a hyperlocal lawyer: geography and practice area. But for me, the really interesting potential of hyperlocality in the legal profession is from the client perspective. Let’s go back to Mark Josephson’s definition of hyperlocality, but this time inserting legal references rather than media ones:

Hyperlocal is defined by the client, built from the ground up; that is, legal information and services that are personalized by you and YOUR situation. Hyperlocal law is unique to every client: what are the legal issues, challenges and opportunities that are important to you.

What we’re talking about here, I think, is the evolution of the client-defined lawyer: hyperlocality not of region, or of practice, but of client.

Think of  it this way: for many years, first in their brochures and then on their websites, law firms described their services in terms of “practice areas”: the litigation department, the trusts and estates department, the taxation department, and so forth. These are all jurisprudential, lawyer-centered terms — departments named after law school courses, basically. It was a “top-down” approach to selling legal services, and many firms still take this approach. Over the past decade, however, we’ve seen gradual movement towards practice and industry segments within law firms: the banking group, the oil and gas group, the wealth management group, and so on (there are even client groups within some law firms, better again). These are all legal services defined according to client needs, not legal knowledge — and indeed, most of these departments are cross-disciplinary, bringing in lawyers from several different backgrounds to serve a particular industry or type of client. This has been a welcome change, I think, from an inward to an outward focus on lawyers’ part, allowing a law firm to be described and defined by its users rather than by its members.

Extend that thought a little farther, and you come to lawyers described and defined by their clients. We already know what clients want from their lawyers: they want us to work closely with them, understand their needs, keep them alert to and updated on things that matter to them, look out for their overall well-being from a legal perspective, and be ready to respond to developments in ways that will meet their needs. Right now, clients hire lawyers who they hope will meet some or most of those criteria, some or most of the time, in between our other numerous obligations. What if a client had the opportunity to customize a lawyer who’d meet all of them, all the time — a lawyer “personalized by you and your situation”? What would that look like?

Well, of course, we already know what that would look like — there are thousands of lawyers who serve only one client and whose skills and knowledge are designed to meet that client’s needs. They work for government and in-house corporate departments. They have exactly one client, they align their skills to that client, and they focus all their efforts to maximize its interests — they’re client-defined hyperlocal lawyers.

But it’s extremely rare for private-bar practitioners to have just one client. Normally we have dozens, and sometimes we have hundreds, and the more we have, the happier we seem to be. We maintain a balance between keeping our knowledge and skills focused enough to deliver competent services in our area of practice, but general enough that we exclude as few clients as possible from our purview. There are costs to that approach, of course, and most of them are borne by the client: the inability to reach your busy lawyer when you need her, the time and cost required for your lawyer to refocus on your situation, the heightened potential for disqualifying conflicts of interest, and the lawyer’s relatively shallow appreciation of all your needs and circumstances. Really, when you stop and think about, having scores of clients is kind of an odd way to run a trust- and relationship-based professional practice, isn’t it?

So think about this: a hyperlocal private bar. A legal profession in which having dozens of clients is the exception, not the rule. Most lawyers have only a few clients, and some have just one. A lawyer’s overall professional profile is shaped, yes, by his interests and his acuity in certain areas — but the details of his knowledge and expertise and the day-to-day affairs of his working life are shaped by his clients or client. The client sees in her lawyer everything she needs, no more than she needs, and nothing that she doesn’t need — just as a hyperlocal media user gets all the news that matters to her, everything about that news, and none of the news that doesn’t matter to her. These are user-defined lawyers, providing holistic, 24/7/365 legal services to their new clients: legal health checkups, problem anticipation and avoidance, advice and judgment when needed, all on a monthly retainer basis with special fees for special events. These lawyers have far fewer clients than most lawyers have today — but they do much more for them, and on a wider and deeper scale.

Designer lawyers? A profession that surrenders a degree of its self-determinacy to its clients? Whether that sounds like a dream or a nightmare is up to you. But I think it might end up describing some of the legal profession, and much of the solo and small-firm bar, a few short decades from now, and maybe sooner.

If you happen to subscribe to my Twitter feed, you’ll notice that I regularly post links to stories of interest in the legal press. If you look closely, you’ll notice that a great many of those stories relate to developments in very large law firms. That’s not because I’m fascinated by BigLaw or because I think my subscriber base is either. It’s because that’s what gets published. The legal press pays a disproportionate amount of attention to large law firms — as do we all.

The best-known legal periodical, The American Lawyer, is so tightly intertwined with large firms that the 100 biggest are referred to as the AmLaw 100. ALM’s web-based publication, law.com, is heavy with large-firm content (though in fairness, it does have a Small Business page too). The UK has two periodicals that closely follow BigLaw, LegalWeek and The Lawyer. In Canada, it’s Lexpert. In Australia, it’s ALB Legal News, and so forth.

But even purportedly general-interest legal periodicals also devote a substantial amount of space talking to and about lawyers in large operations. I’ve spent the last ten years editing a bar association magazine whose readers are mostly in firms of ten lawyers or fewer — but a look back over those issues would probably reveal a lot of coverage given to big firms.

If a periodical intentionally focuses on BigLaw, generally it’s because  large-firm lawyers traditionally make a lot of money, so they’re attractive both as subscribers and as advertising targets. But why do many other legal publications over-emphasize big firms, relatively speaking? Mostly, it’s because those firms have both the motivation and the resources to engage with the media.

Large firms have marketing directors, PR experts, website personnel, even a growing number of social media mavens, all paid to raise the profile of the firm and its lawyers. So when your average overworked legal journalist goes out to search for story ideas and contacts, he or she finds the big firms all over the place — they’ve established a powerful presence on the landscape. Not only that, but their PR professionals handle all the work of media relations, leaving their lawyers free to focus on client tasks. Small-firm lawyers and solos, by contrast, generally leave a much smaller footprint in the places where journalists search for ideas and leads, and few can afford to devote otherwise billable time to engaging even the mainstream media, let alone the legal press. The end result is that the rich, so to speak, get richer.

But I think there’s more to it even than that. If our professional media outlets spend an unusual amount of time mooning over big-firm lawyers, it’s because the profession does too. The prevailing culture of the bar, for many years, has been to attach an unusual amount of prestige to big law firms and the lawyers who practise there.

Whether we like to admit it or not, we often tend to think that a lawyer in a large firm with a well-known brand and spacious offices in a big building downtown is somehow a superior product.  There’s no rational basis for thinking that the size of a law firm has any bearing on the quality of the lawyers within it — yet that belief has infiltrated the way many lawyers think and behave. (Not the popular imagination, though. Atticus Finch didn’t work for a large firm. Neither did Perry Mason.)

Now, my point, as I hope you’ll appreciate, is nothing so hackneyed as big firms bad and small firms good. It’s a much narrower observation that small firms and solos are underrepresented in our professional media — and that this is not a good thing.

It’s not good for law students, reading Above The Law in class and thinking that the fascination with large firms and their payrolls is normal and healthy. It’s not good for new graduates who read legal magazines and newspapers and come to believe there’s something less admirable and prestigious about working in a smaller firm (or, heaven forbid, in a public-sector or law department capacity). It’s not good for the profession as a whole that the interests, priorities, cultures, and business habits of large-firm lawyers are presented as the default setting for private practice. And it’s not good for smaller practices, which count the majority of all lawyers among their ranks, that they don’t get to hear their stories told, their concerns addressed, their best practices circulated, and their career choices validated in proportion to their presence in the profession.

If there’s a solution here, it’s going to have to emerge from the ranks of these smaller-firm lawyers themselves — waiting for institutional publishers to change their editorial focus is not a good plan. Smaller practices need to find a way to amplify their voice and multiply their narratives within the profession as a whole. Maybe they need to help create their own media channel, pooling resources and enabling advertisers to find and support them. Maybe they need to harness the power of social media in ways that big firms haven’t figured out yet, to create the first truly online legal periodical through some innovative combination of blogs, RSS, Twitter and LinkedIn, and focus it on their issues. Maybe they need to figure out what the small-firm equivalent of Legal OnRamp would look like, and start recruiting their clients to join.

In any event, I’m inclined to think  our current fascination with the size of a law firm will eventually start to fade. As someone pointed out at the College of Law Practice Management’s Futures Conference last month, “big firm” and “small firm” are increasingly specious and distracting distinctions. To the extent we need to divide the bar — and it’s not always clear to me that we do — we should divide it along the lines of whether a firm serves a consumer client base or a corporate/institutional client base, because those really are very different types of businesses. That would be a lot more useful than adding up how many lawyers use the firm’s stationery, and drawing unwarranted assumptions from the result.