Ten Solo and Small Law Firm Trends 2011

Ten Solo and Small Firm Trends 2011

[Editor’s Note This is a long, long post – so you can read it here as a post in its entirety, or download it as a PDF (above)]

Once again, it’s that season when, a blogger’s fancy turns to top trends (H/T Alfred Tennyson). Jack Newton of Clio has already posted a round-up of the prognostications which thus far, cover largely tech (where my co-author Niki Black has some original thoughts on social media trends) or biglaw practice (here, John Wallbillich of Wired GC offers insights on biglaw that are also relevant to solo and small firm lawyers). Another round-up post at JD Supra includes comments from lawyers and consultants on what surprised them in 2010 – most of which relate to social media, the state of the economy and legal outsourcing. But nothing specific for solos or small firms. So without repeating what’s already been said (yes, I agree that mobile apps and social media are here to stay!), here’s my best shot at opportunities and challenges for solo and small firms for 2011 (in no particular order).

1. The cloud is just a start…

Even without Richard Susskind pinpointing it, by now, most lawyers realize that data storage is heading for the clouds. Client portals are all the rage and both state bar associations and the ABA are weighing in on ethics issues related to the cloud. Solos are also fortunate in that several vendors offer affordable cloud solutions for small practices, and have also formed the Legal Cloud Computing Association to define standards and best practices.

So what challenges lie ahead for solos and the cloud? Security, discussed below, is an issue as is the possibility, discussed here of conflicting regulations by state bars that will complicate cloud adoption and increase costs for solos. But the biggest hurdle is the matter of legacy files; all of those paper files, or even paperless files housed on other systems that will need to be moved to the cloud. With the first of baby boomers turning 65 in 2011, older lawyers will be thinking about succession, either partnering with younger lawyers to take over the firm or selling it outright to younger lawyers. If boomers are going to capture the full value of their business, they’re going to have to figure out how to transition files to the cloud, an issue which hasn’t yet received much attention, but will (or at least should) in 2011.

2. Time for lawyers to “man up” about security

As I wrote here, there’s no such thing as perfect security. So rather than devote time and resources to attaining Fort Knox-like standards, lawyers should assess their risks and apply the appropriate level of security to a particular risk. Thus, using unencrypted email or cell phones to set a meeting date with a client or discuss strategy wouldn’t necessarily require exceptional precautions because the potential risk of harm, even in the event of a breach, are minimal. By contrast, where a lawyer routinely deals with client social security numbers or other information where a breach could result in identity theft, lawyers need to “man up” and get serious about security. And what that means is abiding not by ABA rules, but by the federal and state laws governing data protection and security that apply to any other providers who deal with sensitive information. The ABA and state bars should not be making rules about security issues, and I predict that if they try to exempt lawyers from federal and state law on data-protection in favor of self-regulation, that Congress will (as it should) preempt them, as it should. Instead, the ABA and state bars should focus on educating lawyers on best practices for complying with applicable law (e.g., encryption, cyber-insurance or other standard practices).

3. Vendorfactors

In 2010, and more so in 2011, we’ll see more, much more of the vendor-factor phenomenon, i.e., vendors acting as benefactors for solo and small firm lawyers by offering an array of free and low cost web-based trainings and even CLEs. This past year, I participated in webinars (available at no charge to anyone) for Avvo, Lexis and Rocket Matter, though there are plenty of other companies offering programs as well (chime in down in the comments section if you’ve got something interesting for the upcoming year). Education-based marketing is a win-win for vendors and solos: vendors build relationships with customers and save money through less costly and more effective marketing tools than bar publications or sponsorships while solos enjoy courses that are useful, often free and don’t require travel out of the office.

There are losers too: the bar associations. Though once, vendor-largesse subsidized many a bar association, now all but the biggest players can pony up and eventually, even they will question the value. Lack of vendor support packs a double-whammy for bar associations as well, which once touted substantial discounts as a benefit of membership. Now, vendors can offer discounts directly to their webinar attendees, or at group-purchasing sites like Groupon and Living Social or even GroupEsq (aka Groupon for Lawyers, which thus far, apparently offers only deals bargain-basement CLE).

4. And, the bars struggle…

Decline in vendor funding isn’t the bars’ only problem. They’re also struggling with declining membership in a down economy, revealed a 2009 ABA Survey. Indeed, the ABA is feeling so desperate that it
reduced membership fees for solos (I joined thereafter) and hired a new marketing officer.

But in an Internet age, the bars’ powers are (or should be) constrained. In addition to the considerable potential for conflicting regulations as has been the case with the ethics of looking at metadata,
bars have no business trying to self-regulate how lawyers handle personal information like social security numbers, credit card numbers and drivers license, issues circumscribed by federal and state law. Likewise, where the ABA or state bars, even under Bates, may play some role in regulating ads created by lawyers, they simply have no power to regulate user-generated content posted at third party platforms. Regulating marketing-based speech by lawyers is one matter – personally, I don’t like it but advertising isn’t accorded the same level of protection as political or expressive speech. By contrast, bar restrictions on clients or lawyers’ business colleagues’ ability to express opinions about a particular lawyer on a third party platform like Avvo, Yelp or a self-created website violates the First Amendment and far exceeds the bars’ police power over lawyers.

So should solo and small firm lawyers simply forget about the ABA and state bars? Many of my colleagues have reached that point, but I’m still a hold-out. In particular, ABA and state bars provide significant programming and listserves to solo and small firms. They’re also default providers of important services like lawyers’ assistance programs and courses on starting a law firm that provide reasonably priced, jurisdiction-specific guidance. Many bar associations also have Practice Management Advisors who stay abreast of trends and will provide personalized advice on starting a law practice at no cost (though query whether vendors can or will eventually replace the how-to type services, if not the listserves or lawyer assistance programs). Turning these functions over to the private sector might result in more varied programming, but without the state bars as a backstop, private providers might price practice management or lawyers’ assistance services out of the range of the new or struggling solos.

Still, there’s much room for improvement. Think of what the state bars could do if they pooled their resources. Together, the bars could sponsor effective public education campaigns for the Internet and even TV to help solo and small firm lawyers compete with all of the Legal Zoom advertising. They could establish an online presence for bar referral services that might have a prayer of being listed on the first page of Google. In this way, the bars could compete with the “pay per click” companies instead of bringing specious ethics claims against the solo and small firm lawyers who use those services because they can’t afford Internet advertising any other way. They could develop a suite of high quality forms and checklists – retainer agreements, declination letters, contracts for outsourcing web design, best practices for security – available at no cost for lawyers to use in their practices.  They could collectively hire independent tech experts to review different types of technology and make recommendations on security, and “certify” approved applications which lawyers could use without any added due diligence.  In short, if the ABA and state bars really want to serve their members’ interests and needs in the 21st century, they need to pull together.

5. Local and Location-based marketing

OK, location-based marketing isn’t all that new or original. I blogged about it last year at Legal Marketing Blawg; Jordan Furlong had a terrific post on
Hyper-local Lawyer at the end of 2009, and just last month, Ernie the Attorney emphasized the importance of understanding how location-based social media may impact your firm. But this is the year that both local and location-based marketing will really gain traction.

Why now? First, lawyers aren’t immune from macro-trends, and this year, food trends are going local, says the National Restaurant Association. Top 20 food trends for 2011 include locally sourced meats and seafood, locally gown produce, “hyper local” (restaurants with their own gardens) and locally produced wine and beer. The local theme dominates the Tech World as well, with group-buying sites like Groupon and its copycats focused on local deals and larger companies like Google looking to pounce to leverage Groupon’s existing relationships with local vendors.
For lawyers late to come online, location-based advertising still remains a wide-open game, with opportunities to focus on local markets and come up on top in the search engines. Social media reinforces location-based marketing; firms can use sites like MeetUp or FB or Linked-In’s events pages to facilitate and publicize local seminars or charitable events.

Don’t assume that location-based marketing only works for consumer-oriented, smaller town practices. Solo and small firm lawyers with unique expertise in areas like litigation or local-court practice or a state-specific regulatory practice can create a niche in that area, acting as a local counsel – almost a sherpa – to out-of-state law firms or corporations with cases in the state.

6. Impact of Big Events on Solos and Small Firms

This past year saw the emergence of several major developments with implications for solos and small firms, including Westlaw’s acquisition of Pangea3, acceleration of the biglaw to boutique start-up, the ABA’s launch of the Commission on Ethics 2020 to explore the impact of technology on existing ethics rules and countdown til the 2011 effective date of the UK’s Legal Services Act. I realize that this topic merits a post in itself, so I’ve elaborated on the Westlaw/Pangea3 acquisition and will reserve commentary on the other topics for future posts.

More than any development I’ve seen since I started this blog in 2002 (including the rise of Legal Zoom), the Thompson/Westlaw/Pangea3 acquisition makes me nervous with regard to its implications for solo and small firm lawyers. The combined company possesses enormous research resources and economies of scale and employs both US and foreigh lawyers. True, it likely has a decent amount of overhead, but that’s counterbalanced considerably by the low cost of offshored labor. All of these factors mean that this new behemoth can provide fairly good quality services as very competitive rates. Pangea, which will remain a separate division for the time, plans to open a US outpost – which means that lawyers stationed in the US offices could supervise and sign off on foreign lawyer’s work. According to Pangea’s site, the merged company will provide a suite of services to corporations.

Prior to the acquisition, Pangea3 had been assuming responsibility for tasks previously handled by first year biglaw associates. But now, I could also envision Thompson/Westlaw/Pangea3 stepping into the shoes that small virtual firms are trying to fulfill: that sweet-spot of low-cost online unbundled services, with the extra value add of lawyer-assistance. Trouble is, because of its size and infrastructure (presumably Westlaw/Pangea already has a top of the line cloud-based portal system), Westlaw/Pangea could provide the same service even less (because of lower labor costs and economies of scale).

At the same time, this new hybrid may also pose a challenge to high-end temp services like Axiom Legal, which at $200 an hour, already charge less for corporate work than most solos I know. And as the Law Without Borders blog predicts that these same services provided by Axiom will be cheaper still when off-shored.

As discussed over at Donna Seyle’s Law Practice Strategy Blog, experienced freelance contract lawyers can bring a value add that an outsourced firm cannot. Having used these “higher end” contract lawyers, I agree. But that’s not much comfort to newer attorneys who want to handle contract work because with little experience, it’s questionable as to how much value they can offer, both on substance and ability to turn work around quickly. This poses a conundrum for solos like me who want to send work to lawyers in the US, but don’t want to pay more for the same or lesser quality particularly when biglaw partners who earn 10 times what I do aren’t willing to cut their profits to help the next generation of lawyers. The only suggestion I have for new solos who are looking to contract work to supplement their practice is (1) develop expertise in a new practice area or focus on bespoke work, like in person court appearances, which can’t otherwise be replaced; (2) figure out ways to leverage offshore lawyers to your benefit or (3) hope that Westlaw/Pangea3 prices itself in a way that makes the service uneconomic for solos and small firm clients.

7. We get over technology

When’s the last time that you waxed poetic about the virtues of a yellow legal pad? Or boasted about talking on the phone, sending an email, taking out a classified ad or attending a bar lunch? Exactly. The legal pad, the phone, the newspaper are all longstanding tools for capturing knowledge, communicating or building relationships but because they’ve been around so long, we don’t bother to pay attention. I predict that this is the year that we’ll start to view technology, whether it’s ipads or social media or mobile credit cards or the cloud with the same nonchalance. In other words, we won’t regard tech gadgets or online medium as anything inherently special or worthy of mention, but just another one of the many, many things that we use to serve our clients.

8. Practice Growth Areas

There are so many exciting 21st century practice growth areas that it’s hard to figure out where to start. But here’s a few: the law of social media as it applies to employment law. Regulated industries (one of my new specialties where I’ll have an exciting announcement soon). Health care. Legal ethics. Defamation. Having researched the law of social media online for several reasons, I’ve found very few decent resources on the topic which is shocking. It’s a wide open field, one where newer lawyers stand on equal footing to more experienced ones.

Another hot area: privacy. Issues related to privacy of data and consumer use of social media and commercial websites, a topic just covered by the FTC in this report. Privacy relating to consumers’ energy consumption data collected by third parties administering Smart Grid, a topic covered in this DOE report . Fourth Amendment privacy issues related to searches of cell phone data and email.

There’s also 21st century legal ethics issue – serving as “outside ethics counsel” for solo and small firms. Laws related to project management and cloud computing and data security. medical marijuana. And with boomers turning 65 and reluctant to retire, watch for a potential increase in age discrimination cases as well as a need for business succession planning (law firms too), litigation over long term care insurance contracts and family leave taken by children to care for aging parents.

Finally, the global and international component of traditional practice areas, from to entertainment law to defamationto family law to will increase. We may also see foreign companies with new technologies looking to bring them to the US, and therefore in need of corporate lawyers who can set up a corporate presence for them here. And this past year, a little discussed (in the solo world, anyway) decision issued out of the EU, kzo Nobel Chemicals Ltd v. EU (Case-550/07), which held that the legal professional privilege to in-house counsel communications with clients. The EU’s theory is that because in-house counsel are employees of their clients, they may lack the independent judgment necessary to justify extending the privilege. However, companies can still preserve attorney-client privilege by running in-house counsel’s advice through an outside attorney. I’d always thought that offering EU “privilege protection” services seemed like a neat little niche for solo and small firms, which would charge far less for the service than biglaw, and indeed, “selective use of outside lawyers” is one of the recommendations for protection of privilege offered by the ACC to its corporate members. What trends are you seeing?

9. Bespoke on a budget

What’s this year’s “killer app” for lawyers? Last year, I said it was Your Client as Your Partner. This year, I’m going with “bespoke on a budget.”

The dictionary definition of bespoke means custom or made to order. For Richard Susskind (as summarized here, bespoke legal services are individually tailored, one-on-one non-reusable services like courtroom advocacy or specialized skills which rank highest up the legal food chain, and therefore command the highest payment. (Next comes recurrent legal tasks, systematized legal tasks, packaged legal tasks. Finally, there’s commodities work – wills, leases, incorporations that are often the province of solo and small firms – which Susskind predicts which will be replaced entirely by IT solutions administered by non-lawyers)

The problem with Susskind’s model however, is that he assumes, incorrectly in my view, that ordinary consumers with run of the mill legal problems don’t need or want bespoke services. While its’ true that most consumers can’t affordbespoke services and thus, have to settle for DIY solutions or doing without, that doesn’t mean that they would turn down bespoke services if given the option.

Again, I reference other social trends as proof: bespoke services are gaining popularity as technology makes them more accessible. Consider, for example, the growth trajectory of Etsy, a website focused on sale of handmade (or bespoke) crafts: sales jumped from $130 million in November 2009 to $400 million at the end of December 2010. Moreover, Tech Crunch is predicting that added growth will come from a popular Etsy service called Alchemy, added in 2008, which allows customers to put out a bid for custom-made goods – which is as bespoke as you can get!

But bespoke is gaining traction in other places, both on the web and off. Recently, I came across this Groupon Deal, half price for custom made jeans. There are several sites where you can design shoes for purchase. And in Bethesda, Maryland where I live, food chains like Sweet Green and Yogiberry where customers can create a burrito, salad or frozen yogurt concoction by creating combinations from ten or even 20 different ingredients (quasi-bespoke) are far more popular than standard fast-food joints that don’t give customers much choice.

Technology allows us to provide bespoke services on a budget. It reduces our overhead and more importantly, makes us more efficient so that we have time to focus on the matters where we’re irreplaceable. Just like this Pittsburgh doctor I described here.

10. We start being lawyers again (not a prediction, but wishful thinking)

I’ll admit, last year’s seemingly endless trend of blog posts and seminar talks on how lawyers should be like Zappos, or Starbucks or the Ritz-Carlton or Lady Gaga on was interesting at first. Agree, client service matters . Point well taken.

But while I run a business, at the beginning of the day and the end, I’m a lawyer. The people or businesses that I represent and counsel are my clients, not my customers. I return phone calls, explain the legal issues, answer their questions and assuage their fears, keep their confidences, don’t work for their competitors and do the absolute best job I can not because it’s good customer service but because it’s my professional obligation. A business has a choice about the quality of service it provides. As a lawyer, I don’t.

In a world where technology and non-lawyer providers are replacing what we do, our path to survival is to be lawyers, in the best sense. That online form generation company won’t protect the the private information that a consumer submitted to generate a will or LLC document – but a lawyer will take it to the grave. That Stop Foreclosure Now “team of professionals” will buy clients some extra time in their home while waiting for a court ruling, but it sure won’t show up fighting and determined even when all seems lost like a lawyer would. What we solo and small firm lawyers do matters, and leave a lasting impression on our clients even when we couldn’t do much at all.

Have a wonderful and prosperous 2011!