Top Challenges Lawyers Face In Running Their Business

The field of law is traditionally consistent with its practices and procedures; This doesn’t come as much of a surprise given that a substantial portion of practicing law is based on historical precedent. Unfortunately, this way of thinking, while useful in practicing law, isn’t practical when running a competitive business.

In 2018, Thomson Reuters conducted a survey, “2018 State of U.S. Small Law Firms”. In this survey, it was found that while the challenges law firms face in business are numerous, there isn’t much effort being directed at resolving these challenges. The survey, conducted over a span of three years, found that the issues reported by the law firms didn’t display much variance, which indicates a lack of efforts to implement change.

As small law firm owners, having an awareness of the issues that can potentially slow down business or prohibit growth is important and can pave the way to productive resolutions. Below, we’ve compiled a list of the top challenges lawyers face in running their business, as reported by the 2018 State of U.S. Small Law Firms report and through other outlets.

2019 State of U.S. Small Law Firms Report

Challenge # 1: “Challenges acquiring new client business”

Reported by 30% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

For a law firm to be successful and remain competitive within their field, new client acquisition is important. Maintaining healthy client acquisition efforts is important because it increases a law firm’s growth potential and helps ensure there are new clients to take the place of ones that leave or no longer require legal services.

We've got some helpful marketing tips and tricks here that can help your firm with client acquisition.

Challenge # 2: “Clients demanding more for less or rate pressure from clients”

Reported by 17% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

Many law firms are reporting problems staying competitive with their pricing structures; This is partially due to the internet making it easier to shop and price compare, and also resulting from the increase in DIY legal sites such as LegalZoom. More than ever before, law firms are finding themselves having to undercut their competitors or risk losing business. While this challenge can be especially frustrating for smaller law firms, placing efforts on reducing overhead costs and maximizing billing time can assist in efforts to maintain competitive pricing structures for clients.

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Challenge # 3: “Spending too much time on admin tasks, not enough practicing law”

Reported by 15% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

As with most small businesses, those in smaller law firms find themselves having to complete a wide array of non-legal practicing admin tasks on a daily basis outside of their primary job title. While there is nothing inherently wrong with this and often necessary, when too much time is being spent on non-billable and admin tasks, it prevents law firms from fulfilling financial growth potential. It’s crucial that a general focus is placed on how to maximize time spent performing all functions within the law firm and that streamlining processes are prioritized.

Challenge # 4: “Increasing complexity of technology”

Reported by 14% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

You could say that the legal industry was late in the game with its tech use. While it’s great that many law firms are making great strides in the use of legal technology, however, it has also placed them at somewhat of a disadvantage with having to catch up to the increasing tech needs and requirements of their clients. In trying to get technologically current, one problem law firms are commonly reporting is being overwhelmed with tech options and experiencing trouble in choosing the right solutions. To combat this issue, law firms should consider what the individual needs are of their firms and then explore the options available that can fill those needs.

We've got just the thing to help law firms choose the right tech options. Take a look at our complete technology guide.

Challenge # 5: “Cost control and expense growth”

Reported by 14% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

Affording and maintaining reasonable overhead costs while also funding growth is a prevalent issue reported by small law firms. The struggle is often felt when firms seek growth, yet they lack the cash flow to afford the essentials they think are needed, such as larger office space or more staff and attorneys to handle tasks and client caseloads. While this challenge is undoubtedly frustrating, by placing a focus on maximizing billable time, law firms can find the opportunity to generate more revenue for growth.

Challenge # 6: “Lack of internal efficiency”

Reported by 14% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

Small law firms are steadily reporting that the day-to-day work processes that comprise their infrastructure lack efficiency. When the operating procedures aren’t streamlined, it can reduce the profitability of a law firm and impact their capability to maintain a steady client base and competitive edge. Law firms should regularly take steps to maximize efficiency internally to promote growth and stability.

Challenge #7: “Keeping up with competition from other firms in your practice area”

Reported by14% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

Maintaining healthy competition within a law firm’s practice area has become increasingly difficult in recent times. This challenge arises from increased internet use by clients to secure legal services and heightened demand for more specialized law firms. By implementing well-crafted online marketing plans, law firms can better position themselves to compete with similar firms.  

Problem # 8: “Getting paid by clients”

Reported by 14% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

For a law firm of any size to sustain themselves, time must be billed and paid regularly. Unfortunately, many law firms report trouble in not only accurately recording billable time but also collecting payments owed by clients. Because billing and collections processes are so essential to the success of a law firm, there should be a heavy focus placed on implementing and maintaining necessary timekeeping practices and in regularly making collection efforts.

Problem # 9: “Demonstrating the firm’s value to potential clients”

Reported by 12% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

With the relative flooding of the legal market, many small law firms are struggling with how to make their business stand out amongst their competitors. Because clients don’t lack in choice these days, law firms must establish a brand identity that focuses on what makes them different and better than their competition. Clients should be able to identify why they should choose one firm over another quickly. 

Challenge #10: “Increasing pace of legal and regulatory change”

Reported by 8% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

Maintaining compliance within a law firm and for the law firm’s clients is regularly causing frustration within the legal realm. Essentially, law firms are spending an exorbitant amount of time tracking current changes for compliance, while simultaneously planning for future changes likely to occur. While this can be a complicated process in itself, law firms can reduce time by subscribing for updates from necessary regulatory agencies and regulatory update services such as Reuters.

Challenge # 11: “Managing staff”

Reported by 8% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

Proper management of lawyers and other staff is crucial to the success of any size law firm; however, problems in this area made the list of top challenges faced by lawyers. While the practice of law is essential to a law firm’s success, proper management can be considered the backbone. When management is lacking, it can lead to delays in task completion, slow down in case completion, and even lead to higher employee turnover rates within a law firm. When law firms implement a strong management plan, it offers the structure needed by staff to perform well.

Challenge # 12: “Retaining client business”

Reported by 3% of Small Law Firms (0-29) Surveyed in 2019 State of U.S. Small Law Firms Report as a Top Challenge

Bringing new clients on board is one thing, but maintaining their satisfaction is another process entirely. Many law firms report issues pertaining to juggling client needs as a struggle. Maintaining client organization and consistent communication is important, not just in preserving client growth but also in managing a thriving caseload. Using customer relationship management (CRM) software is a tool that can be utilized to increase the effectiveness of client retaining, management, and communication.

Other Reported Challenges

Challenge # 13: Finding New Staff

One of the most reported issues by small law firms is locating the right staff. Law firms often require employees and attorneys that are not only knowledgeable of the law but often a particular area of the law. Many small law firms also indicate a lack of time available to dedicate to hiring. When law firms have difficulty hiring the right attorneys and staff, it can lead to time wasted in effort and training, not to mention a slow down in case and task completion. 

Problem # 14: Pressure to Specialize

The legal industry has seen a change in client demands in recent years. As business needs expand (and often become more complicated), clients are often looking to obtain specialized legal services as needs arise, rather than seek to have all legal requirements fulfilled by one law firm. With this practice becoming more common, law firms are feeling increased pressure to specialize and narrow their focus. Through use of the internet, clients are finding it much easier to locate the legal services they need, thus increasing competition in many legal spaces. Many newer law firms are taking note of this trend and making efforts to specialize at the beginning; however, this has presented a significant problem for more established law firms who cover broader legal services and thus hampered competitive efforts being made.

Problem # 15: Time Consuming Contract Reviews

Quite often, especially in the realm of business law, a lot of time is spent with contract review. While important, reviewing contracts can quickly turn into a lengthy and time-consuming process that doesn’t yield substantial results. Traditionally, contracts have been ready manually from A to Z; However, with recent developments in natural language processing (NLP) technology, law firms have the opportunity to drastically reduce time spent in this area through automation. NLP services and software can search through the text for pertinent words or phrases.  

Problem #16: Locating the Right Project Attorneys

Finding freelance or “project” attorneys for help as needed on cases can prove challenging for many smaller law firms. Often, finding the right attorney required can be time-consuming and stressful, unless connections have previously been made or further networking is conducted. This particular challenge can massively slow down, or even stall, cases for law firms. To resolve this issue, freelance attorney sites are now available, making the process of securing the right project attorney much quicker and more efficient. 

Problem # 17: Achieving Work-Life Balance

For most lawyers and law firms, holding long work hours is the norm. While this is often necessary to grow smaller firms and take care of client files and cases, it leaves many lawyers struggling to achieve work-life balance. The solution to this ever-growing problem within the legal community will be unique to each lawyer and law firm, however, it is one whose resolution should be prioritized because it directly affects health and wellbeing.

Problem # 18: Lack of Online Marketing

As mentioned before, internet access made legal services more accessible to clients, thus making the legal industry more competitive than ever before. Given this, many law firms are still reporting ineffective online marketing efforts, which significantly reduces their competitive opportunity, By placing a hearty focus on content and blog generating, social media interaction, and SEO, law firms can gain important advantages in their field.

Looking to maximize your marketing efforts? Check out these top marketing tools and software options.

Conclusion

While the challenges lawyers are facing in running their business are justifiable, it’s crucial that they make efforts to resolve the problems to remain competitive and foster growth, Law firms should pay attention to the commonly reported issues discussed above and actively work towards solutions.