Smaller law firms feeling vulnerable, with almost all expecting “rough times ahead”

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There is a “climate of renewed vulnerability” among smaller law firms, with the vast majority of lawyers (95%) believing there are “still rough times ahead”, a report has found.

The report also revealed that, despite enthusiasm for fixed fees, 77% of lawyers believed their colleagues “don’t always appreciate that they are operating in a service industry” – and that their view on the value they offered far exceeded that of their clients.

The survey by LexisNexis, The Riddle of Perception, was based on the views of 112 mainly senior lawyers in firms with up to 20 fee-earners, and 108 clients.

The latest report in the Bellwether series described the mood among small law firms as “not all doom and gloom”, but “remarkably less bullish than last year”.

The proportion of lawyers describing their business as “growing” over the past three-four years fell to 48% this year, compared to 63% in 2015.

Despite the view that lawyers did not appreciate they were in a service industry, 43% of lawyers saw fixed fees as an opportunity for their firms. Firms offered fixed fees most frequently for wills (89%), conveyancing (84%), employment (66%) and family (46%).

There was also widespread use of fixed fees for business law (41%), personal injury (31%) and dispute resolution (25%).

The report said that use of fixed fees could help in “cementing a better client relationship from the start” and “clients who were serviced on a fixed-fee basis were more likely to recommend the firm to others”.

The survey went on: “Some of the more entrepreneurially-minded firms are using fixed fees strategically, as a ‘taster’ for more bespoke services. As one lawyer put it, ‘we try and avoid fixed fees on the whole, but we’ll do a fixed fee for a first stage.”

When it came to value for money, rather than price, lawyers rated themselves much more highly than their clients.

Almost a third of lawyers (30%) thought they provided ‘excellent’ value, compared to only 8% of clients. Just under a half of lawyers (46%) thought they were ‘very good’ value, compared to 19% of clients.

A third of clients rated the service they received as ‘good’, with a similar proportion (32%) rating it as ‘average’ and 6% ‘poor’. Very few lawyers believed they provided average service (5%) and none poor.

Jon Whittle, market development director at LexisNexis UK, said: “Clients’ perception of value isn’t about money. Lawyers think price and value are the same thing and they’re not.

“Lawyers link value to the quality of their lawyering, but clients want to get a good result for themselves. There seems to be a disconnect between what lawyers and their clients value.”

Mr Whittle linked firms’ fear of “rough times ahead” to their experience of being hit “very hard” by the 2008 recession. However, he said 58% of lawyers planned to grow their firms over the next five years and many were “spending a lot of money developing their businesses and feeling pretty robust about the future”.

Mr Whittle added that LexisNexis would carry out more research later in the year to see if a “sense of gloom” persisted.


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