Challenges and opportunities for boutique law firms in FY25–26

Challenges

Attune Legal director Yule Guttenbeil – who appeared earlier this week on The Lawyers Weekly Show discussing how best partners in firms can and must get to grips with artificial intelligence (AI) – said that his primary concern centres on client financial constraints.

“While demand for legal services has increased, clients are increasingly reluctant to spend on legal assistance,” he said.

“Even with significantly discounted fees, we’re experiencing unprecedented levels of aged debt as clients struggle to meet payment obligations.”

Additionally, Guttenbeil went on, talent acquisition “has also become more challenging, with lawyers hesitant to change positions amid economic uncertainty, limiting our growth potential”.

For Gemma Nugent, director of Gemma Nugent Legal, a key challenge for boutique practices – particularly for herself, operating in the contracts space – will be volatile external market forces.

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“The unpredictable geopolitical climate has made clients jumpy,” she said.

“However, uncertainty always brings opportunity, particularly for boutique law firms that are inherently more agile than larger service providers.”

Elsewhere, Gravamen founder and principal James d’Apice said that as a new financial year dawns on many boutiques, firm owners will have to “apply a critical eye to the technology solutions we’ve recently embraced”.

“Some of us have invested in very elegant solutions to problems we simply don’t have; high-quality hammers when we are short on nails!

“Those of us who are lucky or well prepared will be judicious with these investments, including doubling down on those we take value from,” d’Apice said.

Opportunities

On the other hand, there is much for small law firm owners to get motivated about in the coming 12 months.

For Guttenbeil, the most exciting prospect is the emerging opportunity for strategic collaboration between boutiques.

Rather than competing in isolation, he said, “we’re exploring partnerships with other excellent small practices to leverage complementary expertise”.

“This collaborative approach represents the greatest opportunity for boutique firms to thrive in FY26 – pooling resources and knowledge to deliver enhanced value while maintaining our agile, personalised service model,” he said.

The continued growth of AI, Nugent added, is also cause for excitement for small firms.

“The usefulness of large language models has increased exponentially in the last couple of years. Dare I say that AI may be the Uber to the legal profession’s taxi drivers,” she said.

“Boutique law firms will flourish by approaching this disruption with a curious mind and a strong understanding of the uniquely human value in their firm’s offering.”

d’Apice reflected on firm owners’ chances to bolster branding: “As BD guru Mike Bromley advises, firms who embrace employer branding will be putting themselves in a good position. In the coming year, Mike will be proved right: strong branding today will lead to a lower recruiting spend tomorrow.”

For him, optimism “springs from the same source it always has” – that is, the highly intelligent and diverse voices of the younger practitioners joining our profession.

“While those of us who identify as male, pale, and stale may still have a little value to share, we will need to increasingly make way for other voices,” he said.