I was a young lawyer when the dot com boom was in full swing and when that bubble finally burst. Fortunately, I was working for a large firm at the time, so I was able to see first-hand how a successful law firm weathers fluctuating market conditions.
The shared wisdom in our firm was this: when the economy was strong, our corporate and real estate departments flourished. Deals were getting done, people were investing, and corporations were maneuvering.
Those were the times when my department — the litigation team — was slowest. People were too busy spending money to do much fighting.
So, we pitched in and helped out our colleagues who were buried in transactional work.
When the economy tanked, however, the inverse became true.
Suddenly everyone was suing everyone else to try to recoup dollars they’d lost on one deal or another. Meanwhile, those corporate and real estate attorneys were taking much-deserved vacations and pitching in to help the litigators once they got back.
It worked. The firm survived with very little attrition.
Admittedly, however, there has to be more to surviving a recession than that.
So, with experts telling us there’s a 57% chance of a recession hitting in the next 12 months, let’s talk about additional strategies your firm can deploy in order to weather the potential economic storm.
#1: Build a recession-proof team
Given my experience, I feel confident saying that civil litigation teams can do quite well in a recession.
But, there have to be other recession-proof practice areas, right?
There are.
Specializations like family law, bankruptcy, and healthcare law tend to remain steady regardless of the economy.
So, what do you do if your firm doesn’t currently have these practice areas?
Well, it’s a good idea to build relationships with freelance attorneys and paralegals who specialize in recession-busting areas before the recession hits. Trust me when I tell you their services will be in high demand once the economy becomes bleak.
By fostering relationships with these professionals before there is a problem, they may be more willing to help out your firm when you really need them.
#2: Manage costs
When economic times are good, law firms can be pretty fancy places.
You might see things like gourmet food in the break-room, multiple streaming services on TVs in the attorney lounge, and CLE seminars at costly hotels in exotic locations.
Yet, when times are tough, it’s important to find ways to reduce your firm’s costs.
In addition to reducing the above-listed niceties, other cost-saving strategies include reducing utility costs (through use of motion-detecting lights, for example), purchasing annual subscriptions over costlier monthly subscriptions, and promoting free CLE courses.
Plugging revenue leaks is a discipline that pays off in times of feast and famine, so consider starting that process early.
#3: Lean into remote work
Of course, for most firms, the number one overhead cost is real estate.
Office space is expensive. Yet, if we learned anything during the pandemic, it was that legal teams can function quite nicely when working remotely or in a hybrid law firm.
If your firm isn’t locked into a long-term lease, consider giving employees the option of working remotely while providing shared working areas for times when people actually need to be in the office. This enables you to reduce your office footprint and save a bundle of cash.
#4: Be mindful of employee wellness
When a recession hits, employee stress can reach an all-time high. In addition to the obvious worry about their personal finances, people tend to have very real fears about law firm layoffs.
And while reducing your workforce may or may not be a necessity for your firm, there are ways to make the people on the ground feel less stressed out.
After all, studies tell us that a healthy and motivated workforce is a more productive workforce.
So, how do you keep employees feeling good?
First, offer wellness programs to support employees’ emotional health. Creating an open environment where staff feel comfortable discussing mental health can reduce stigma and make people feel at ease.
Next, consider work-life balance through flexible working arrangements.
This is about more than remote work. Adjustable hours can help employees manage personal responsibilities while maintaining productivity.
Finally, recognize and celebrate achievements, no matter how small. Regular acknowledgment can boost morale and create a positive workplace culture.
#5: Build strategic alliances outside of legal services
Strategic alliances with other professionals such as accountants, financial advisors, and consultants can significantly boost a law firm’s resilience during a recession.
Collaborating with these experts means you can offer comprehensive, bundled services that address clients’ multifaceted needs.
For instance, a law firm specializing in business law could create more attractive value propositions by partnering with accountants to provide clients with combined legal and financial advice.
These alliances produce mutual referrals, expanding each business’s client base.
Sharing resources and knowledge reduces operational costs and enhances your service offerings without substantial investment.
#6: Strengthen client relationships
Let’s be honest, your firm isn’t the only organization worried about a recession. Your clients have the same concerns, and they’ll be looking to cut costs just as vigorously as you are.
And you’re definitely a cost they’d like to cut.
Strengthening client relationships during this time is essential for retention and loyalty.
Take the time to try to understand your clients’ financial pressures. Once you know where they’re at, offer alternative fee arrangements such as flat fees or payment plans to keep costs predictable and budget friendly.
Of course, regular communication is key.
Check in with clients to assess their evolving needs and demonstrate your commitment to supporting them through tough times. This proactive approach fosters trust and reassures clients that their lawyers are dedicated to their long-term success.
#7: Find strong mentors
A mentor who has successfully navigated past recessions can give you priceless insights.
These seasoned professionals possess firsthand experience at overcoming economic challenges — because they’ve lived through it, adapted, and survived. They can share the kind of lessons you can’t find anywhere else.
Mentors can also offer guidance on effective client and employee relations during a downturn.
By leveraging the wisdom of those who have faced similar challenges, law firms can develop a proactive mindset and a more realistic strategy for survival, even in uncertain times.
Conclusion
While no law firm can be completely immune to economic recessions, there’s a lot you can do to at least become recession-resistant.
The best time to prepare for a recession is before it happens. Give your firm a better chance of weathering any economic storm by starting now. You don’t want to find yourself scrambling to lay a strong foundation when the financial problems are already pouring in.
And here’s the thing:
Even if the economy stays strong, these practices will be great for your law firm business.
You really have nothing to lose by strengthening your strategy.
