The biggest news story of 2020 has been, of course, the pandemic. But that hasn’t been the most significant trend impacting law firms. COVID-19 sped up quite a few processes already unfolding in the world of professional services and in the economy at large, including the growing gap between small businesses and major corporations. Along with this has come a widening divide among the law firms that serve them. As we warned in May, smaller firms have taken a disproportionate economic hit this year. As individuals and small businesses have struggled, the law firms representing them have fared worse than those that provide counsel to big companies with greater ability to weather the storm. Within the legal services industry, revenues for the top 50 firms have continued to grow more rapidly than their Am Law 200 peers, and many solos and small firms have suffered much worse from the economic downturn.
Below are five significant ways this trend will impact law firms and attorneys:
- The Am Law 100 will become increasingly isolated from the rest of the legal community.
- As firms continue to scale up, more mergers and acquisitions will mean higher compensation for the best-performing partners.
- Boutique firms will be able to peel off BigLaw partners who don’t want to be smaller fish in a bigger pond.
- The difference between successful and underperforming practice areas will grow, thereby placing a premium on the ability of leaders to position their firms strategically.
- There will be greater opportunities for lawyers in their forties and fifties to acquire or otherwise take over practices from older attorneys, making succession planning even more important than it is now.
So, what will happen to the firms and lawyers on the wrong side of this trend? The unfortunate reality is that smaller firms, especially solos, will face more and more price competition, and ten percent to perhaps as much as a third of lawyers will struggle to make more than $75k to $100k.