Tarter Krinsky & Drogin’s Managing Partner Alan Tarter authored the article titled, “Diversifying by Design: How Mid-Market Firms can Embrace Diversification for Success,” featured in Law.com’s Mid-Market Report. (subscription required).
Diversifying by Design: How Mid-Market Firms can Embrace Diversification for Success
Whether to diversify is often a difficult question for law firms to ponder –a business diversification strategy can come with different rewards and risks, especially in challenging economic conditions like we face today. The key for firms, though, is not just to diversify but to do it strategically.
Mid-market law firms are uniquely positioned to maximize opportunities for success now and in the long term as they have abundant resources and less bureaucracy. Instead of cutting headcount or tightening costs when the market experiences downturns, which can become a self-fulfilling prophecy, mid-market firms should view this as an opportunity for change. This mindset begins with intentionality and emphasizes diversification and the evolution of our business practices.
By threading diversification into many areas of a firm’s fabric, including its business originators, business sectors, cross-selling, client diversification, lateral hires, succession planning, and geographical diversification, mid-market firms will find success.
Diversification in Services: Structuring Offerings to Withstand Downturns
Throughout the legal market, there are different firm structures –some specialize in one niche practice, others focus on services in one or two industries with some additional offerings, and certain firms offer a wide range of disciplines.
As we’re seeing in today’s economy, businesses solely dependent on one practice area may experience financial downturns and, for some, turn to layoffs or mergers to compensate for lower-than-expected revenue. Since they’ve primarily relied on a limited number of business streams, they risk falling victim to industry shifts and recession.
This is where diversification becomes key. Diversifying services across practice areas and sectors in both complementary and contrasting areas allows firms’ businesses to fluctuate along with the economy. Forward-thinking firms take advantage of opportunities that present themselves. For example, Anthony Hunt at London-based, 250-plus attorney Howard Kennedy suggests continued economic uncertainty into 2024 will likely lead to a rise in the number of startups founded over the coming months as the market has less competition. In response, the firm is launching a new product brand catering to these customers, focusing on high-value offerings. Establishing early relationship loyalty with their C-suite or General Counsel also enables opportunities for cross-selling services across various practice groups as these companies grow.
Another way to rethink your structure is by adopting alternative fee arrangements, which benefit both firms and clients. To supplement hourly work, Shannon Clark of Gallagher & Kennedy, a 64-attorney firm with offices in Phoenix and Santa Fe, said they established a healthy contingent fee practice and offer hybrid fee arrangements for many cases, including consumer fraud, commercial, creditor and taxation, in addition to legal malpractice.
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