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Just like the COVID-19 pandemic has had severe detrimental effects on various industries in the world, law firms and the legal industry have also not been spared and have been affected by the pandemic in a very devastating state, throwing a lot of enormous challenges. The law firms across the world and in US have been struggling hard to keep their clients and financial stakeholders happy and contended by working mostly remotely or in parts too.
American law firms acted more wisely and started responding to the pandemic much before the world could even recognise the impact. Many firms also trimmed down on their staff and overhead costs.
However, amidst the major and adversity many law firms are striking back. Law firms are utilising innovative technological trends and systems to keep abreast of the post pandemic operations of their business.
Understanding and following the trends prevailing we at LawKPIs thought it would be apt to deduce a report for the law firms to make them realise and educate about the trends that have actually affected the law firms and came out with top 10 key take away from the Clio Annual Report.
Let’s look at them one by one –
- Finance (Gains/Loss)
- Big, Small and Mid-Sized Firms and their Challenges
- Digital Advertising
- Social Media Traffic
The WHO by the first week of March 2020 declared Covd-19 as global pandemic and thereby sent a shock wave and immediate panic among the entire world. Shortly after, we saw major close downs, border shut downs, ban on international and national traffic and a mandate social distancing.
As quoted earlier, the impact of the pandemic has had critical effects on the legal industry and law firms of all sizes have been trying their best to keep themselves sailing through these tough challenging times.
The initial months of 2020 though were seeing an upsurge in the law firms with more cases being carried forward and handled from the previous year(s), this drastically came down from March end and continued to do so until mid-2020. The main areas of practice that were hit were criminal, personal injury and traffic offence matters.
Given the difficulties of the past several months, law firms must concentrate on changing the negative growth trajectory to a healthier positive one. While this seem more easier said than done, the key areas that need to be focussed on are discussed further.
2. Finance (Gains/Loss)
For many law firms the sudden erupt of pandemic led to a lot crisis in their liquidity, receivables, payables and settlements. The biggies in the legal industry could still sustain the initial heat as compared to the small and mid-sized firms. But the latter along with the solo law firms had to bear the brunt to a great extent. Technology played an important role in driving the profits and losses of the legal industry. The firms that shifted and adopted to the new trend were the ones who survived the competition. The impact of technology tools analysis provided measurable benefits to the law firms performance while delivering better remote and in-person client experiences. Overall, the technologies also resulted in firms bringing in more casework and earning more revenue per lawyer.
3. Big, Small and Mid-Sized Firms and their Challenges
Economists, Strategists, Researchers have already shown how Covid-19 has or will be showing its implications extensively on the Business to Consumers (B 2 C) industries. Although, these industries have been most and directly affected by the pandemic we at LawKPIs tried to see how legal services and its demand were impacted by this crisis.
Overall, it has been anticipated that Covid-19 pandemic will cause a drop in total volume of legal services and client’s demand.
Law Firms that serve Small and Mid-Sized businesses felt a greater impact-
Small firms with limited cash buffers and irregular cash flow are least likely to survive economic downturns. The impact of pandemic on the client and law firms demand has been evident with industry indicators reporting significant decline in the client-case management.
The firms that served heavy number of clients needed to manage their cash and budget with calculated risk, which ranged from immediate cash management concerns to more structural changes, depending upon the severity of exposure.
The growing law firms know how to consistently bring in new business. And one of the key factors in knowing how to bring in new business is to attract new clients to the business and to understand how clients look for or search for lawyers.
Most lawyers want more clients, yet many lawyers and law firms fail to convert the clients that reach out to them, specially through phones or email. According to the recent study and the research conducted, the law firms that aren’t doing a good business are the ones who are not able to respond to the client’s inquiries or that don’t provide the type of information clients are looking for.
Given the trend due to the pandemic, clients are likely to reach out more than one firm when having a legal problem, being the first to respond will help make a better impression.
The crisis has led the law firms to rethink and rework on their strategies as to how quickly they could respond when leaving a phone or an email message? Ideally 10% of the law firms respond within first hour; 24 % respond within few hours and 45 % respond within 24 hours. And firms that do not respond within 24% hours are less likely to get a client turnback.
As has always the been the norm, client satisfaction has to be the utmost vision for any business and that goes well with law firms inclusive. The pandemic has proved to many that its not a temporary scenario and is going to have its after effects for many years to come.
2020, paved a much robust way of things being online and complete gamut being taken care of by the remote work. The trend also continued among the clients and has accelerated technology adoption to the point where online interactions have become a baseline requirement for the legal business.
As is, the online interactions between the lawyers/law firms and the clients have been now focussing on the three vital areas – video conferencing, electronic payments and electronic document management.
Many law firms also see technological advancements in legal industry beyond the context of law firm operations and court systems. As many courts have adopted new processes, the challenge now is to see how well these things can be adopted in restructuring the legal hearings and dispute resolutions.
The market for the legal industry much depends on the growth. There are two critical components beyond having expert knowledge of the law and giving advice to running a legal a successful legal business. One vital component is the effort that goes into understanding and delivering client quality client experiences. The other is organizing everything productively and making sure of everything gets done in an efficient manner. Both are essentials as far as markets and growth are concerned.
Despite these, regular discounts, difficulty in determining and predicting actual billing or revenue, uncertainty in profits and future growth, increase in client and case rate could be the challenges the legal markets could face off.
As a service-based profession, any revenue earned by a law firm almost explicitly comes from the hourly billable work a lawyer puts in on behalf of his/her clients. As such, this becomes a determining KPI for the annual reporting too. But what we also know is, not all work goes into the billable hour and the reporting. And so, the realization becomes the measuring parameter for the amount that a firm invoice as compared to the amount of the billable work performed at a law firm.
Regardless of the reason behind the loss in realization, the data suggests that a significant amount of time is wasted on work that doesn’t earn any revenue.
Collection measures the amount that a firm collects compared to the amount invoiced at a law firm.
When put altogether, utilization, realization and collection become a lawyer’s way to earning success and revenue to the law firm.
8. Legal Digital Advertising
A private lawyer, especially from a solo to small and mid-sized law firm who is yet to explore the legal marketing, will be familiar with the frustration of missing out on a big cases and considerable revenue they bring. Thanks to the online advertising, the law firms need not have to contend with such problems. Choosing to market and advertise the services has not only resolved the problems but has also put the law firms on the path to growth.
Legal digital marketing and advertising is a must if a solo or small law firm needs to survive. Law firms have been striving to adopt different strategies to reach their target audiences. Marketing and Advertising budgets vary and some firms do not even have enough funds to cater and cope with ongoing digital trends in advertising. Its also been found out that the video for the legal marketing is not as widespread as it should be in the industry. Though a majority of law firms do have some sort of their digital legal presence in the fields of marketing, advertising and social media.
9. Social Media Traffic
In continuation to the above, social media legal marketing deserves a seat as it exerts a major influence on the current legal landscape. With more people being well-versed with social media, its quite obvious for the law firms to use the social media as a prime marketing tool. This coupled with mobile marketing solutions, has moved the social media marketing to a top-notch level. The move towards social media platforms has been paying off and is showing its impacts positively on the marketing of the legal firms or solo law practitioners. This is sure to increase in years to come as the digital legal process will reign for many years.
The future of the law firms will be cloud based technology. The pandemic and its repercussions paved way for rampant online business within a year, which otherwise would have taken at least a decade to achieve. The new norm – ‘working remotely’ and carrying forward the business left no stone unturned and almost every business has been thriving to achieve that, let along the legal industry. The cloud-based communications and business technologies have improved how lawyers could work with their clients and stakeholders and have been able to solve disputes. Although, many law firms have put a hold on accepting new cases, and are working with solving on-going ones, the digital technology advancement in legal business surely has proved to be a boon for the industry. Even courts are having and adopting all kinds of options to deal with cases virtually. There are legal systems via video conferencing to check and track if everybody is a verified participant and using this technology most cases have been resolved virtually. Many legal solutions and systems which otherwise were struggling to make a mark in the field are now widely accepted making law firms more techno-friendly. It also is proving to be more secure and safe with documentation, data transfer or privacy maintenance. A lot of money is also getting saved by implementing the legal systems, which is the future of law.
A competitive analysis shows these law firms are in the same general field as any other, even though they may not be competing head-to-head. These are the largest law firms by revenue. However, they may not have the largest market share in this industry. The law firms are currently focussing on their business rather than expanding into new clients and cases. The law firms that have built enough rapport and trust with clients are sustaining the aftermath and sailing through. Additionally, the ones who kept themselves abreast with latest trends and technologies in the legal markets have also been able to carry forward in the market.