Small is doable

The real threats to small practices are the problem of recruiting, and looming succession issues. But there are strategies that can, and should, be adopted now

The Journal, January 2008, page 32

As this is probably my last article for the Journal, I wanted to deal with an important subject; and the most important subject I can think of is the future for small practices throughout the country.

Without these practices, there would be a dearth of good legal advice in areas from divorce to employment law, adoption to executries.

I know there are alternatives to real, local law firms – the internet, city firms with good communications systems, banks etc. But, for a client with a personal problem, there is nothing to compare with sitting down with a lawyer you have known and trusted for years, in a real lawyer’s office, for immediate, reliable and personal advice.

So the future for small firms everywhere is important not just to the lawyers and their staff, but also to their clients, and there are, now more than ever, several dangers which could make the future of such firms very difficult indeed.

Danger – reefs ahead

I don’t mean the new Complaints Commission – most firms have few complaints and when they arise, know how best to deal with them. Nor do I mean the fall in legal aid rates, though firms dependent on legal aid will have to adjust to charging proper fees and limiting legal aid to special cases.

Nor do I mean a fall in profits – most of the firms I have dealt with recently are generating perfectly respectable profits and could reasonably expect to do so in the foreseeable future.

There are undoubted threats from Tesco law, the spread of larger firms with branch networks and the internet. But we have become used to dealing with such changes in the past, and most small firms will continue to prosper with a mixture of good quality legal advice, commonsense management and personal attention to clients – the recipe which has served well for centuries and will continue to serve well for a long time to come.

The dangers which are already causing difficulties, and are going to cause the greatest problems in the future, are (1) the difficulty in attracting young lawyers to work for small firms; and (2) the succession problem. These are related, of course, but they are separate problems which need different solutions.

Hello, young lawyers, are you there?

Although the larger firms are scooping up huge numbers of trainees, there still seem to be some who are having difficulty finding a job. If you are a potential employer, ask the Law Society of Scotland for a copy of the training register (which has a number of names of potential trainees), then offer them a generous salary and attractive work prospects. The basic salary (recommended by the Society) and a workload of endless conveyancing are not likely to appeal.

If you feel you cannot afford a trainee, consider sharing with another local firm. Despite the need to train them, trainees offer good value and are also potential assistants.

If you are a student working for your Diploma and looking for a traineeship, think about where you would like to work and approach the local firms. Most of them will welcome you with open arms and tears in their eyes.

Attracting qualified assistants is a more difficult matter. They need to be offered a really good salary (I mean really good, particularly if you are far from the madding crowd) and interesting work. Approach young lawyers with local connections and ask them what it would take to get them to join your firm. You might be surprised at the response. For instance, partnership may not be what they are after.

Headhunting strategies

You may need to offer them some incentives to persuade them to work for you, such as accommodation (which will enable them to hold on to their flat in Glasgow or Edinburgh), a car or longer holidays than normal. But, if they are good lawyers, that investment will be worthwhile.

Look for older solicitors who may have left the law to bring up children, but who live locally and could easily be retrained in the new methods. Part-time work in a congenial office with a reasonable reward may get them out of the house again.

Placing a couple of adverts is not enough and is often a waste of money. Look for an individual: for instance, someone you have dealt with in another firm. Don’t be afraid to poach someone else’s assistant – wouldn’t they do the same to you? Be proactive and innovative in your search.

If you are an assistant, select a firm you would like to work for and approach them – they are very likely to be enthusiastic about someone who is enthusiastic about them. It worked for me once, long ago, and it could work for you.

But, for most smaller firms, paralegals are the future. There are people in your firm with unrealised potential. They don’t have to be fully fledged paralegals, but they can learn legal skills more easily than you may imagine. And a secretary whom you have trained, promoted and enriched to paralegal status is likely to be grateful and loyal to you for far longer than an acquired assistant or a trainee.

Make it part of your business plan to train everyone to learn new jobs, so that they can lift some of the burden of ordinary legal practice from your shoulders. Otherwise the weight may become too much, even for the solicitor with shoulders like Atlas’s.

If you know someone who is working as a paralegal in a conveyancing factory, they may be grateful for an opportunity to work in a smaller office, with more varied work and a chance for greater responsibility, better client contact etc. And you can advertise your vacancy on the Scottish Paralegal Association website (www.scottish-paralegal.org.uk). Happy hunting.

Après moi, le déluge?

As the Baby Boomers approach maturity (some of us still have that as a distant target), the problem of succession in law firms is becoming more and more acute. Larger small firms, with big client banks and high profits, are finding it difficult to find buyers for the firm, and impossible to find young potential partners.

If you are young (and these things are comparative – we Baby Boomers who are well over 50 still consider ourselves to be young), there are endless opportunities all over the country. Many more firms are looking for successors than are currently advertising. Any three-partner firm with a partner aged 55 to 60 is wondering about the future, and if there are two partners aged 50 or more (you can work it out from the Law Directory – add 24 to the difference between the current year and the year in which they qualified), the rocks are dead ahead, or at least looming on the horizon.

Despite the improved physical prospects for older people and the disappointing outcomes of many pension plans, a lot of partners are looking to retire before 60 and are becoming less sanguine about the prospects of a large payoff from the firm. The reality is that the firm often cannot afford to lose them, and cannot easily replace them. There are no obvious successors.

So, if you are thinking of moving elsewhere, look around – there are lots of potential vacancies, whether they are advertised or not. Select an area or a firm and approach them with a proposal, whether aimed at three months or three years in the future.

Saleable asset?

If you are a partner in a firm with this problem, the sooner you start the process of looking for a solution, the better, whether that is searching for a merger partner or seeking out a replacement, younger partner.

If you have tried all the possible replacement partners (partners in other firms, lawyers working elsewhere but with local connections, experienced assistants working elsewhere) without success, a merger with another local firm or a larger firm may be the only answer, and is often a good solution.

But, be warned – the Usual Suspects are becoming very picky about taking over small firms, and less keen to pay a substantial sum for goodwill. In the wrong circumstances, you may have to accept that the chances of getting any payment for goodwill are small.

Some larger firms are looking only for commercial business; others only for good quality private client business. Very few are looking for conveyancing business, which they do not see as part of the profitable future.

A mixed practice may be unattractive, and a partnership with one or two partners who want to continue as partners in the merged firm may be distinctly unappealing. They will be interested only if the merged firm is likely to show better profits per partner, and that means as few profit-sharing partners as possible.

In some regions, the large firms may have no interest in acquiring any law firm, and the other local firms may have the same problems regarding succession as yourselves. In such a case, you may have to bite the bullet and either accept a very small payment for goodwill or regard a gradual winding down of the firm as the only way forward.

Whatever you do, plan

Once again, if you have spotted the problem in plenty of time, there is a possible rescue in the form of your paralegals. The process of converting a paralegal into a solicitor is a lengthy one (though it may be abbreviated once the Society has completed its review of education and training). If you have anyone who may be suitable for this route, the sooner you get them started, the better (though it may be worth waiting to see how the Society will change matters).

Then again, the new rules regarding multi-disciplinary practices may allow paralegals to become partners, which may be a partial solution in a few cases, although the rules are likely to insist on a majority of solicitors in a partnership. Perhaps amalgamation with another firm, combined with the assumption of a paralegal as a partner and continued training towards full qualification, may be a long-term, if complex, solution to more than one problem.

These are the problems facing smaller law firms everywhere. They are not new, although they are becoming more pressing. I am sure they will be tackled by the partners in these firms with the same forthrightness and independence which lawyers in small firms have always exhibited, and that solutions better than those I have suggested will emerge.

However, the need to plan ahead to deal with these problems has never been more urgent. And the solutions lie only in your hands. You can rely on no-one else to help you.

Brian Allingham retired six years ago from Allingham & Co, the firm he founded in 1982. Since then he has developed a management consultancy, which recently has specialised in finding buyers for law firms. He is now retiring from that business. To save you looking up the Law Directory to calculate his age, he is 57.