Future Fridays: Hitch Your Niche To Another Law Firm
The niche practice as the future of law is also yesterday’s news. Meaning that the benefits of niche practice have been well documented forever, nowhere more extensively than at Chuck Newton’s Third Wave Blog, which is jam packed with dozens of niche practice ideas.
But I don’t like re-blogging old territory. So here’s a little twist on the niche. Instead of starting a niche practice with the goal of becoming, in the words of Seth Godin, the best in the world, why not incubate a niche as you might a start-up, with the end goal of selling it out to another firm.
That thought occurred to me after coming across this news story-cum-press release a UK-based general corporate law firm which acquired a specialist dental law practice. According to the article:
The acquisition and the addition of corporate lawyer David McEwan as part of the deal will allow Schofield Sweeney to offer services to dentists, dental agents, accountants and financial advisers.
The marriage of the two firms makes sense. With the addition of a dental practice, the general firm obtains the both the skills and reputation of a specialist which would have taken years to build up, and may have been impossible to do anyway without working against the firm’s ability to market to a broader array of client. As for the dental practice, it gains resources to serve a broader range of its clients’ needs, as well as those of potential referrals.
I’ve long suggested that large firms could outsource innovation to smaller firms. But that’s not gonna happen anytime soon – big firms would rather hire pricey consultants than seasoned practitioners to get the job done. Still, that doesn’t preclude solos and smalls from developing niche practices on spec – initially as a stand-alone, with the prospect of selling them out down the line.
If that’s the approach you intend to take, you’ll want to engage in some advance planning. You’ll want to be scrupulous about maintaining conflicts lists and developing resources – specialty guides, checklists and systems – that will make it easy for an acquiring firm to take on your practice, especially if you intend to step aside.
The benefits of niche practice — higher rates, a way to LegalZoom proof your practice against generic providers, and increased intellectual satisfaction are indisputable. Still, many lawyers shy away from the niche because they fear that their chosen practice focus is too narrow to be sustainable. Maybe getting hitched is the solution to this potential hitch in starting a niche practice.
Interesting idea Carolyn. My biggest issue with this would be that many solos who (correctly) niche their practice very much enjoy being a “solo”. If I work hard to develop a practice niche that allows me to charge higher fees and work with more exclusive clients, why would I want to take that practice to a larger firm where I now have to answer to other partners?
I guess if they offered enough $$ I might be inclined to change my mind… but I don’t know. I guess that would be a good problem to have!
I encountered this issue in a slightly different form a couple of years ago, before I started my own firm. I was getting back into practicing law after a 20-year break, and looking at Craigslist ads for attorneys. Firms looking for lateral hires routinely said that they wanted someone that could bring them a book of business of at least $300,000. Well, if I’m a solo and I’m bringing in $300K or more, why on earth would I want to share it with a bunch of other guys, and deal with the politics and other BS? I don’t see a scenario where I’m taking home more money at the end of the day.
Paul: exactly right. I was already a partner at a very large firm. One of the main drivers that led me to go solo was the approximately 66% overhead on “your” book of business at BigLaw firms. (Back of the envelope calculation: lateral partner compensation, at least in the D.C. market, is about 1/3 of portable business. Ergo, 2/3 overhead rate.) My overhead as a solo is less than 10%; large clients are comfortable using a solo in my niche; I still bill at close to my former rate; and I am to use highly experienced contract lawyers in place of associates. Financially, why would I go back?
Thank you both for these comments. I’m experienced, in a niche area, solo (and never liked being in law firms due to the BS, personality issues, etc.) and some other lawyers keep urging me to build up $300k and be acquired by a firm. WHY?? is also my first reaction – so I can pay for excessive overhead? When was that a good idea?