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Is organic growth becoming harder for small law firms?

While some boutique firm owners — as well as ChatGPT — think that organic growth is increasingly difficult in the current climate, others are not as convinced.

user iconJerome Doraisamy 01 February 2023 SME Law
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In this week’s episode of The Boutique Lawyer Show, Justice Family Lawyers founder Hayder Shkara reflected on organic growth for small law firms and how myriad marketplace factors have combined to make it more difficult for practices.

Speaking about how and why acquiring other small law firms can, in certain instances, be a good strategy — something he did in mid-2022 — Mr Shkara said: “I think it’s becoming increasingly difficult for [boutique] law firms to grow organically. There [are] a lot of competitors out there. Clients have access to other lawyers. Clients are able to look online and look for somebody else if they’re not satisfied. They’re able to ask other people. And, because there are so many law graduates and there are many lawyers out in the workforce, I think it’s highly competitive.”

In conversation with various other boutique law firm owners across the country, Lawyers Weekly learned that maintaining organic growth at this critical juncture may indeed be more difficult. For some others, however, there are certain steps that can and must be taken to ensure that one’s practice does not get lost in the shuffle.


‘No question’ of a different marketplace

Organic growth is “definitely becoming more challenging” for boutique firms, Justitia Lawyers and Consultants managing partner Melissa Scadden said, agreeing with Mr Shkara’s sentiments.

“It’s a crowded market, with more lawyers self-selecting away from big-firm life and setting up as sole practitioners or micro/small firms. Mid-career lawyers are also burning out and leaving the law altogether, which makes recruitment and retention of experienced staff even more challenging, and a potential risk to service delivery,” she outlined.

Redenbach Legal principal solicitor Keith Redenbach agreed, noting that there is “no question that legal practice now is distinctly different and involves more challenges” than it did 20 years ago.

“Indeed, from my observation, there has been a step change in the past 30 years, which has seen more evolution in the provision of legal services than the oldest law firm in the world, England’s Thomson Snell & Passmore (1570), is likely to have seen in its entire lifetime,” he posited.

“Those significant changes have been brought about by significant advances in technology (including in the use of practice software, email and, more recently, AI programs and document management platforms) and new ways of working (such as work at home) supercharged by a once-in-a-lifetime global pandemic.”

“With this step change playing out right now, law firms that hang onto the old way of doing will end up the way of the dinosaurs; extinct.”

Embracing market hurdles

For Norton Law Group partner Gabriella Pomare, increasing competition from firms, big or small, doesn’t necessarily mean organic growth will become a problem.

“Competition is always a good thing. It forces us to do our best, and that can only be good for the client. Competitors whose motive is merely to compete, to drive other competitors out, never carries very far, and is often short-sighted,” she argued.

“I see the success of boutique firms as linked to the passion of the lawyers in their chosen area of specialisation and having a willingness to adapt and change, to be better than you were yesterday.”

“Your only competition is who you were yesterday. Trust me ... clients will notice this approach will deliver natural organic growth via referrals. It has certainly worked for us as we become more sought after and grow a larger and more specialised referral network.”

Pearce IP CEO and executive lawyer Naomi Pearce backed this, noting that “competition for talent has always been fierce, there is nothing new about that”. 

“I have had no challenges with organic growth. In my experience, people appear to be more prepared now, than they were a few years ago, to ‘back themselves’ by stepping out of big law into boutique specialist firms. I started Pearce IP in 2017 and have grown it in five short years to its current team of 21,” Ms Pearce said.

“We see our competitors in the market, and for talent, as BigLaw. Although our firm is small, our team is considerably bigger than most big law IP teams, which is a drawcard in itself. I am fiercely committed to identifying talent, and incubating them, creating opportunities for them to grow and shine. This is very important to me, and one area where a small firm can offer a tailored career trajectory [that] is less ‘cookie cutter’ than BigLaw. People are drawn to that.”

Finding different ways to organically grow

MA Legal principal Rex Afrasiabi — who has acquired three law firms in this time as a business owner — said that he is of the “strong belief” that “it is easy to create your own brand and sustain strong organic growth”.

“I don’t believe enough lawyers participate in enough personal branding or often have their social accounts on private away from clients,” he said.

“My strong opinion to any practitioner is to focus on their own marketing and branding as I believe organic growth is easier today than ever.”

“In terms of acquisitions, I would suggest only acquire people, not clients; that is, acquire for the principals, not their clients, or acquire a firm you know you can add immediate value to by providing their clients with additional ancillary services their current firm doesn’t provide.”

Navigating a market that can make organic growth harder

In order to compete and thrive, Ms Scadden submitted, boutiques need to make the most of their agility and try new things.

“Use tech to make your lawyers’ and clients’ lives easier. If something isn’t working, change it — don’t be so wedded to a particular path that you can’t course correct. It’s okay to make mistakes. And most importantly, prioritise (and listen to!) your people,” she suggested.

“Try different working practices and be as responsive as possible to the needs of your team. Boutiques need to keep evolving, and one of the biggest mistakes they can make is not ensuring that employees are engaged, invested and happy.”

Mr Redenbach, too, has looked to leverage such marketplace headwinds: “I am pleased to report that my practice has secured recent panel appointments that will significantly expand its reach for many years to come.”

“By being an early mover on technology, and responding to client needs in a very tailored way, my firm has secured over 200 panel appointments which will soon see the need for rapid expansion.”

“So, the moral of the story is change is good, even great!”

Remembering what it means to be ‘boutique’

The secret to her firm’s success, Ms Pomare pointed out, has been understanding what a boutique firm has to offer and making our firm a point of difference.

“So, does size matter? Absolutely! Generally, ‘boutique’ means a smaller firm. You might be looking at three or fewer partners, and maybe 10 to 20 staff. Not too big and not too small is the key to maintaining that work/life balance a boutique firm can offer and to maintain a high level of specialisation,” she said. 

“So, I would argue ‘boutique’ as really meaning, ‘we are intentionally staying around this size, and we like it that way, and our clients love it that way!’ This is where ‘boutique’ can differentiate itself from ‘small’ and, indeed, from ‘big’.”

What does ChatGPT think?

Elsewhere, Mr Redenbach put the question of whether organic growth is becoming harder for boutique firms to chatbot function ChatGPT. It gave him the following answer:

“… Yes, organic growth for law firms has become increasingly challenging in recent years due to a highly competitive market, economic pressures, and shifts in client behaviour …”

Perhaps, he mused, “we should let the world of artificial intelligence have the last word”.