In a Weakening Economy Will Clients Trade Big Law for Innovative Small Firms?
I related to this article, "In a Weakening Economy, Americans Swap Steak for Chicken" because less discretionary income affects all purchases, including legal services. It's called, "Trading Down."
Stung by the housing slump, tightening credit terms, and rising inflation, U.S. households are finding ways to cut back, putting a damper on the consumer spending that is the driving force behind the economy.
Retail sector analysts call it "trading down" when consumers seek out cheaper alternatives, and it is increasingly evident across chain stores and restaurants. Even gasoline consumption has slowed in recent weeks.
"With the burdens of the housing downturn broadening under the weight of tightening financial conditions, coupled with surging energy costs, 'trading down' and 'trading in' behavior should spread, especially as the labor market weakens,"
But unlike cattle farmers, who will have a hard time trying to become chicken farmers to save their business, solos should not trap themselves with one practice area, pricing structure or crushing overhead.
If you are married to one niche or pricing structure or have so much overhead you cannot afford to learn other practice areas or innovate with pricing models or packaging of your services then you are making a critical mistake. (There are exceptions such as you are a 'lawyer's lawyer' meaning other lawyer's are your clients and they require your special area of expertise or you are already established as the go to person for a particular niche or you are in a life and death practice area where clients will sell their homes for your services.)
Others can and have argued with me on this point. They say law is so complex you cannot be good at multiple areas. I don't share their opinion. I think you can be highly competent in two to three areas of the law even if ultimately want to only practice in one area of law. But going into business for yourself and sustaining yourself requires you to be adaptable and talented and ready to do what you have to in order to sustain your practice.
Use Big Law as an example. When a Big Law firm realizes the economy is changing they simple divest themselves of the associates working in the practice they've determined is no longer profitable. They don't go out of business. Similarly, as a solo you need to divest yourself of unprofitable practice areas, not go out of business. This means you need to be competent in more than one area or willing to learn quickly in order to not practice an area of law where clients are few or incapable of paying you.
Or, in the alternative, if you want to stay in your particular practice area you need to be prepared to change how you deliver services to work with clients who are now buying chicken instead of steak. (Yes, everybody and their brother talks about premium pricing, selling your value, etc. It's valid. As Big Law divests non-profitable practice areas there are still those steak buyers who now have nowhere to go. But if every lawyer is only going for the steak crowd, it becomes a buyer's market. Remember, there are alot of chicken and fish eaters out there as well as vegans who would make excellent clients.)
A new solo, (and many experienced solos) need to adapt to the economy, not expect the economy to adapt to them. It's also not your gross sales which matter. It's how much of each dollar you take home. So, imagine finding a way to meet your client's needs through innovative delivery of your services by cutting overhead, providing pricing structures which work for the client and actually netting more of each dollar. This is a business model you should be striving for...bad economy or good.