At Marshman Price we are advising and have advised a number of law firms over the last couple of years, both locally and nationally, with liabilities up to about £5m. On the face of it the most obvious cause of the current problems is the stagnation in property markets; although commercial transactions have also slowed down substantially.
A significant problem we have seen however, particularly among the smaller firms, is that they are run as a collection of individual practices, rather than as one business. There is little financial or strategic planning or monitoring of performance; partners have no concept of marketing and PR or corporate governance. Many have no managing board and partners’ meetings are just a scrum where those who shout loudest are the ones whose voices prevail. Innovation and modernisation are stifled.
Many firms have embarked upon unwise and ill-considered expansion into non-core businesses; or launched specialist arms aimed at mass markets – e.g. domestic conveyancing – which have caused massive haemorrhaging of funds when those markets have failed. The risks were simply not properly considered beforehand.
The legal profession – particularly at the smaller end - needs to drag itself into the 21st century in the way it structures its businesses; although this could be a difficult task for its many members who still appear to be rooted in Victorian times!