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2 Business Models for a Legal Practice

I was working with a law firm a little while ago, helping it through some changes in it’s practice. The managing partner said to me “You know, were really just a collection of sole practitioners”. That summed up beautifully one of the business models have I come across many times when working with firms. I explore 2 business models below.

Collection of Sole Practitioners

So, what did my client mean by this phrase? I think it was as much attitude as size. The attitude would be one where the clients belong to the solicitor (partner). The connection is personal. They either do the work or they direct and delegate to their team – which might be a secretary, team of secretaries, paralegals or suchlike. Each partner operates independently of the others and brings to the partnership the fruits of their labour. In this model the business is the sum of the parts that each brings.

Pros:

  • Easy to bolt on a new service line, new partner
  • Simplicity of the model
  • Direct accountability to the ‘owner’ of that area
  • Well suited to a start-up
  • More flexible – can scale back more easily

Cons:

  • Easy for the ‘partner’ to leave with his/her service line
  • Can lead to everything being measured by the fees generated by each partner
  • The business can be less stable
  • Can lead to factions and infighting
  • Can prevent cross-selling
  • The business seldom adds up to more than the sum of the parts

 The Integrated Business

In this model the interests of the business are placed above those of the individual owners. All effort should be aimed at driving value into the organisation. This takes more effort and is not natural to many people working in the professional services sector. The risk is that everything can become less personal – which is not good when the business is focused on providing a personalised service to clients. However, that can be avoided with good management. If the business has invested in its processes, it can better withstand the departure of one of the owners or staff. The business can be more than the sum of the parts. This model is seen more commonly in other areas of our economy but can also work in the professional services sector.

Pros:

  • Is more resilient
  • Can give a better return on investment as it better facilitates scaling of the business
  • Harvests better cross-selling and cross-area operational benefits
  • Better supports a shared goal and so can better harness staff potential
  • Succession may be easier
  • The business can build up genuine goodwill
  • Facilitates hiring experts in running particular aspects of the business

Cons:

  • Involves more investment (thought as well as money)
  • Difficult if the business is very small
  • The needs of the business overrule the preferences of the partners
  • May be difficult to change behaviours of those used to a more traditional approach
  • Difficult to scale back if you lose critical mass

These are just a few thoughts. What will be appropriate will depend on the circumstances in each case. A typical consultant’s comment! There are other business models and ways of doing things. I’ve only looked at 2. Seeing the variety is part of what I enjoy.

We’d be very interested to learn people’s views and hear of other pros and cons and people’s experience.

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