Author: Stephen Mabey

Law firms, as part of their normal evolutionary path, have historically moved from small practices to full-service mid-sized firms.

Their reasoning for expansion made sense. Markets have historically punished service gaps more than they have punished firms that overreached, and midmarket-sized clients have sought firms that could handle all or most of their legal affairs.

Further, lateral hires and a lack of succession planning resulted in the addition of practice areas and industry alliances – national, global, and specialty-focused - that have allowed firms to "punch above their weight" by reinforcing the ability to offer full-service locally.

Current market conditions, however, are making the traditional evolution less financially prudent than in the past. Several developments are contributing to this:

• Client consolidation and paneling are resulting in reduced demand for outside counsel.
• Talent wars with big firms and specialized boutiques, recruiting senior partners and practice groups from midsize firms.
• Scale economics and cross-border reach.
• Price/fee pressure and alternative arrangements.
• The ability of boutiques with clear niche expertise (e.g., securities, competition, FinTech, life sciences) to attract premium mandates.
• Technology and process investment and efficiency variations
• Declining revenue streams for mid-sized firms due to clients shifting routine work to alternative legal service providers or in-house legal ops teams.
• In‑house counsel sophistication.
• Marketing and international networks that midsize firms cannot belong to or capture.

So, what are the simple indicators that big law firms and specialized boutiques are squeezing your mid-sized firm out? They include:

• Fewer mid- to large-sized mandates and more commoditized work.
• Competing on price without the scale or tech to reduce costs.
• Losing rainmakers or senior lawyers (talent drain) undermines client retention and the capacity to handle bigger matters.
• Being perceived as lacking specialization or bench strength for top-tier work.

A full-service "focused" model, while not the only solution, has the greatest chance of responding effectively to their squeeze play.

A key criterion for evolving into a "focused" full-service firm is the discipline to stick to the necessary strategy. The strategy involved in such a transition should include:

1.  Choose 3–5 "anchor specializations" and dominate them. These are practice areas where the firm can realistically rank in the top 3 in the region.
2.  Maintain "supporting" practice areas – but only those that protect client retention, are profitable, and do not require expensive, large infrastructure.
3.  Increasing your complement through alliances, referrals, and co-counsel, not adding bodies.
4.  Dedicated investment in operational excellence - speed of service, responsiveness, AI-enabled delivery, workflow efficiency, etc.
5.  Redesigning your service pricing to match mid-market client expectations, including various alternative arrangements.
6.  Building your brand on specificity, not generalist (we specialize in X, Y, and Z and support your legal needs across the rest).
7.  Embracing succession planning as a recruitment tool, a client retention strategy, and a growth opportunity.

In pursuing this strategy, Steve Woodruff's comment comes to mind, where he pointed out, "Not all business is good business, and not every customer is a good customer." ― Clarity Wins: Get Heard. Get Referred.

Moving to a "focused" full-service firm is not the only long-term solution, nor will it guarantee a leveling of the playing field with big law and specialty boutiques, but doing nothing will result in an increased squeeze on mid-sized firms at multiple levels.

Stephen has been advising law firms for over 15 years on a wide range of issues, including - strategic action planning, leadership, understudy (succession) planning, compensation (Partner and Associate), organizational/governance structures, partnership arrangements, business development, capitalization of partnerships, partnership agreements, lawyer & staff engagement, marketing, key performance indicators, competitive intelligence, finance, mergers, and practice transitions.

Applied Strategies Inc.'s website contains references from clients describing the value of the services rendered https://www.appliedstrategies.ca/references.php.

Stephen can be reached by email or by phone at 902.499.3895.