After several strong years of performance, and looking ahead at economic uncertainty, the time has never been better for firms to revisit and reevaluate their capital structures to ensure that contributed capital is effectively supporting the firm’s current and anticipated future capital needs.
While some of the elements of differentiation among firms are based on factors like geography and history, others are driven by actions firms have taken to change (or preserve) their competitive position. Based on our work with high performing firms, we see four broad themes that drive superior performance.
Over the past several years, we have seen a growing gap between the highest performing firms and the rest of the market. In working with and observing law firms across market segments and jurisdictions, we see clear differences in how firms respond to market changes. The most agile firms benefit from a strategic advantage based on their ability to respond to change and capitalize on opportunities more effectively. This agility frequently drives superior performance relative to the rest of the market. By contrast, firms lacking agility seem to fall behind, whether through inertia or because their focus is elsewhere.
As we enter the second quarter of 2021, the picture looks fairly rosy for many law firms. Preliminary signs point to the potential for another growth year in terms of demand across a number of practice areas. Signs of increased demand, combined with strong 2020 financial performance, indicate that some firms are poised for material revenue and profit growth and the potential to leapfrog competitors over the coming years.
Succession of client relationships is a top-of-mind issue for many law firm leaders. Yet it remains a challenge for leaders to make meaningful progress, often because partners resist succession efforts. In some cases the resistance is for legitimate reasons, but in other instances it is based on myths. Our work with law firms and our interviews with the clients of law firms highlight many of these illusions.