LEGAL FIRMS NEED TO RISE TO THE CHALLENGE (25/06/08)
Burgess Hodgson is urging solicitors’ practices to be more proactive in identifying business opportunities in light of a number of changes expected to have a big impact on the legal profession.
Changes such as the new Solicitors’ Code of Conduct, which came into effect on 1 July 2007, significantly alters the way firms operate, and the wide-ranging reforms of the Legal Aid system through the Legal Services Commission, which will affect those solicitors practising in civil and criminal law, are all seen as potential challenges.
This is coupled with an uncertain economic climate in which the much-documented challenges of the ‘credit crunch’ and the shrinking of traditional markets like commercial and residential property all present significant problems.
In addition, last year’s Legal Services Act included a proposal to open the market to non-lawyers to own and operate law firms for the first time, bringing with it the challenge of stiff competition in the profession.
Under the proposals for the Alternative Business Structure – expected to come into force from 2012 - the £19 billion legal services market, once the preserve of law firms, may be distributed through banking, insurance and other retail outlets.
With some 4,000 law firms in the UK expected to disappear as a result, Burgess Hodgson is advising legal firms to prepare now to meet the challenges and adopt new strategies for change and growth.
“Now is the time for legal practices to be developing and exploiting their unique selling points,” says Richard Stewart, a partner at Burgess Hodgson. “They should also be looking internally at how they can improve time management and business processes.”
Richard says that too often legal practices do not understand their costs and profitability. This will not help them when the market moves towards fixed fees.
“They should also be looking to reduce the amount of cash that is locked up in working capital by billing regularly and improving debt collection,” says Richard. “This will reduce reliance on bank funding, which may be expensive and short on supply in the current market.”
It will also, he explains, reduce the amount of money partners will have to invest or leave in the practice, and may improve fee income by spotting opportunities to bill work that may have been missed in the past.
“There are a number of other things that legal firms should consider doing,” says Richard. “If they’re unsure of how to proceed, they should seek expert advice. Ultimately, they need to get the practice culture right. With the right practices in place, the challenges the changes present could present excellent opportunities.”
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