10 Reasons Why Smaller Law Firms Have Never Had It So Good?

There are many reasons you could argue how it is tough to be a smaller or SME firm – competition, recruitment, increasing costs to mention a few. That being said there are some positives in how technology, flexibility and innovation are perhaps levelling the playing field with their bigger competitors.

Introduction

Smaller law firms have always faced challenges in competing with larger and more established firms, especially in terms of resources, reputation and reach. Financing set up and cashflow has often been a challenge. However, in recent years, the legal landscape has changed dramatically, thanks to the emergence of new technologies, business models and client expectations.

In this article we will explore 10 reasons why smaller law firms have perhaps never had it so good from some aspects of a technology and operational perspective, and how they can leverage these advantages to grow their practice and serve their clients better.

The Power of Microsoft 365 and Cloud Software

One of the biggest game-changers for smaller law firms is the availability of cloud-based software solutions, such as Microsoft 365, that offer a range of productivity, collaboration and security tools at an affordable price. With Microsoft 365, smaller law firms can access the same applications and features as larger firms, such as Word, Excel, PowerPoint, Outlook, OneDrive, SharePoint, Power Apps, Power BI,  Teams, and more, without having to invest in expensive hardware, software licenses or IT support. Cloud software also enables smaller law firms to work from anywhere, anytime, and on any device, which is crucial in today's dynamic and mobile work environment.

Technology firepower is no longer linked to size of wallet and ability to invest. MS365 is perhaps the great leveller which will allow talent to shine whatever the size of firm.

The Power of Gen AI and Copilot

Another technological innovation that is transforming the way smaller law firms work is the emergence of Generative AI (Gen AI) and machine learning, especially in the form of tools like Copilot. Copilot is a powerful AI assistant that helps lawyers with various tasks, such as drafting documents, conducting research, checking compliance and generating insights. Copilot can also learn from the user's preferences, feedback, and data, and provide personalized and relevant suggestions and solutions. With Copilot, smaller law firms can save time, money, and effort, and focus on the more creative and strategic aspects of their work. No longer do they need to invest in big ticket AI

Smaller firms gain more admin and drafting support without having to employ huge numbers of lawyers who they may not be able to finance or keep busy.

The Quality of Resources from the Large Legal Publishers

Smaller law firms also benefit from the high-quality and comprehensive resources that are offered by the large legal publishers, such as LexisNexis, Thomson Reuters and Wolters Kluwer. These publishers provide access to a vast array of legal information, such as cases, statutes, regulations, journals, books, news, and analysis, that are essential for any legal practice. Smaller law firms can also use these resources to enhance their credibility, reputation and expertise, and to stay updated on the latest developments and trends in their field.

Again, this brings with it a step change from the past when only large law firms had the ability to invest in knowledge and training plus the very best precedents and industry knowledge are available to all.

The Acceptance of the Need Not to Have Large Offices and the Rise in Hybrid Working

Another factor that is levelling the playing field for smaller law firms is the changing attitude towards the need for large offices and the adoption of hybrid working models. Following the COVID-19 pandemic, many law firms and clients have realized that physical presence and location are not as important as they used to be, and that remote and flexible working can be more efficient, convenient and cost-effective. Smaller law firms can take advantage of this shift and offer their services online, without having to incur the overheads and expenses of maintaining a large office space. Hybrid working also allows smaller law firms to attract and retain talent from a wider pool, and to offer more work-life balance and satisfaction to their employees.

The cost of set up is reduced and a firm set up in the right way can scale without the legacy and cost of a large real estate footprint.

The Ability to Get Resource on Demand and Not to Have a Huge Headcount

Due to an array of “on demand” providers hitting the market in recent years smaller law firms also have the advantage of being able to access resource on demand and not to have a huge headcount, which gives them more agility, flexibility and scalability. Smaller law firms can use platforms  outsource or delegate some of their tasks, such as research, writing, editing, or accounting, to freelancers or contractors who can provide quality work at a lower cost and faster turnaround. Smaller law firms can also use these platforms to find and hire experts or consultants who can assist them with specific projects or cases, without having to commit to a long-term or permanent relationship. They can extend flexible cloud systems to allow remote users to work effectively.  This way, smaller law firms can optimize their resources and adapt to the changing needs and demands of their clients and the market.

The ability to be agile and to scale according to need cannot be underestimated. It is now possible to live the dream.

The Vast Array of SaaS Vendors - with Opex as Opposed to Capital Expenditure

Another benefit that smaller law firms enjoy is the vast array of software as a service (SaaS) vendors that offer various solutions and services that can enhance their efficiency, effectiveness and profitability. SaaS vendors provide cloud-based software that can handle various functions and processes, such as case management, document management, billing, accounting, marketing, CRM, and more. No longer is there a need to invest in huge capital profits upfront. Smaller law firms can use this software to automate, streamline, and simplify their workflows, and to improve their performance and client satisfaction. SaaS vendors also offer flexible and affordable pricing models, such as subscription or pay-per-use, that allow smaller law firms to pay only for what they use, and to avoid the upfront and ongoing costs of owning and maintaining software.

Ironically many firms too are finding that some of the new breed of all in one PMS and Case systems are really suiting their needs with only one vendor to deal with and no integrations.

One negative to be aware of though is ensuring the long term cost certainty in any deal with any SaaS vendor – without this many are finding themselves exposed to unexpected price increases. M&A and changes in ownership can also bring complications.

The Rise in Fractional Support

Another reason why smaller law firms have never had it so good is the rise in fractional support, which means they don't have to hire full-time employees for every function. Fractional support refers to the practice of hiring experts or professionals on a part-time or project-based basis, rather than committing to long-term contracts or salaries. This way, smaller law firms can access the skills and expertise they need, when they need them, without having to bear the fixed costs and risks of hiring permanent staff. Fractional support can cover various areas, such as legal research, marketing, IT, HR, compliance, and more. Hyperscale Group provide the same services in terms of strategy, digital, procurement and innovation.  By using fractional support, smaller law firms can reduce their overheads, improve their flexibility, and focus on their core competencies.

High quality experts are no longer just the preserve of larger firms – smaller firms now can have the “Board they can’t afford” as financial models and market offerings now allow this.

Global is the New Local

An additional benefit that smaller law firms enjoy is the global reach and connectivity from their desktop. Thanks to the advances in technology and communication, smaller law firms can easily connect with clients, partners, and colleagues across the world, without having to travel or relocate. No longer is it necessary to plant flags all around the world or to invest vast sums in overseas travel. They can also tap into new markets and opportunities, and expand their client base and network, by leveraging online platforms, social media, and digital marketing. Smaller law firms can also benefit from the diversity and innovation that comes from working with people from different backgrounds, cultures, and perspectives, and to enhance their reputation and credibility in the global arena.

Even when additional resource is needed smaller firms can leverage other global platforms and transaction sites to deliver in a similar way to  their global counterparts.

The New Age of Reduced Travel and Collaboration Tools

Another benefit that smaller law firms enjoy is the reduced need to travel even locally given Teams and Zoom. To  do London work is it always necessary to be travelling to London? Numerous online collaboration and video conferencing tools enable smaller law firms to communicate and collaborate with their clients, partners, and colleagues, without having to physically meet them and invest in expensive hardware like in the past. Teams and Zoom obviously offer features such as chat, screen sharing, file sharing, recording, and transcription, that can facilitate and enhance the quality and effectiveness of online meetings and presentations. By using Teams and Zoom, smaller law firms can save time, money, and resources that would otherwise be spent on travel, accommodation and transportation, and to reduce their environmental impact and carbon footprint. These approaches also allow firms to access talent from other areas to help with recruitment issues.

Enlightened Client Attitudes and the Shift to Value

I don’t think we will ever move away from large firms being hired due to having deep expertise in a range of areas. There will always be a need for scale and depth of resource. That being said many in house clients seem to be following “value” much more – where trusted individuals move and/or set up on their own or join virtual firms and clients seem to be very happy using them. In the past there was perhaps a question about whether a new firm had the depth of resource or infrastructure but much less now. In house clients seem to recognise that smaller, agile firms have a key role to play in the legal ecosystem as do Alternative Legal Services Providers and tech vendors. A small agile firm can thrive in this new world. They also have the same systems and security as many of their larger counterparts.

Conclusion

Large firms will always have a key role and there will always be transactions that only the largest firms with deep experience can handle.

The legal market is undergoing a significant transformation though, driven by changing client expectations and demands. Clients are looking for value, flexibility, and efficiency, and are willing to explore different models of legal service delivery. Smaller, agile firms can take advantage of this opportunity and offer high-quality, personalized and cost-effective solutions to their clients. With this they bring change and innovation from which the rest of the industry can learn too.

The technology now available to them levels the playing field like never before and a firm can be set up for a fraction of the cost than in the past but with similar capabilities to many of their larger counterparts.

If we want a future legal industry which is innovative, digital, efficient and diverse I suspect we will not be disappointed – we will look back and realise the way in which technology and new delivery models has supported this change.  

Hyperscale Group are an Independent Digital, Innovation, Operational Advisory and Implementation Business with over 25 years plus deep market experience. We work for In-House Legal teams and Professional Services Firms all around the world and support them developing and implementing their strategies. We help our clients to make the right things happen.

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