2025...happy and prosperous for small law firm owners or not?

2025 ushers in for small law firm owners a perfect storm of operational challenges and financial problems, or a tremendous opportunity to achieve financial health in their practice…the choice is 100% in the hands of the owners!

Here we are again at that time of year when it’s traditional to wish others a happy and prosperous year ahead, and I certainly have no quibble with that tradition.

However, as I rapidly close in on 37 years in the business of management consulting for small law firms permit me to caution that for many such firms 2025 will not be a great year if some important tweaks are not made to their business.

As fast as some things are changing other long-term challenges are not, and small law firms really will need to be ready and stripped for action to have a great year because it will never happen by accident.

Readers will be certain to be able to add to these issues in play and prioritise them for their unique circumstances:

·????? staffing, including talent acquisition and retention,

·????? pricing methods upheaval,

·????? AI pros and cons,

·????? increasing regulation,

·????? client demands,

·????? lawyer and non-lawyer competition,

·????? productivity,

·????? declining demand for some services,

·????? increasing overheads,

·????? cost effectiveness of marketing,

·????? inadequate time for key management responsibilities.

The unfortunate reality is that during 2025 the financial health of the big majority of small law firms will deteriorate further from their current parlous state, moving from probably not viable to certainly not viable.

The bulk of the remainder, on the surface very similar firms to the majority…with similar challenges, will negotiate all big challenges, consolidate their solid financial health, and set themselves up to be still around, and looking after clients well, in 2035.

A small percentage of firms that are not currently doing well, and are almost certainly trading insolvent, will have lawyer owners who realise they need help with what makes ALL the difference…ironically just the practice management fundamentals.

“The practice management fundamentals” …the phrase rolls easily off the tongue, but very few small law firm owners can identify what they are correctly.

Even fewer can pinpoint how to address the 3 really critical ones.

Fortunately for those owners who decide to get help while they can afford it, truly experienced practice management consultants will be able to quickly identify which of the few things that matter in making reasonable profits and underpinning financial health can be, and should be, adjusted carefully in their unique practice, and provide them with clear guidelines and processes to implement the relatively simple fixes.

Importantly, dramatic changes can take place quite quickly if the few important levers are used a bit better because they begin to work together to improve profitability without any need to get everything absolutely spot on.

Robservation: This is the key to unpacking financial literacy for lawyers.

Just because an owner, well-educated, and experienced in law, doesn’t presently understand what needs to be done to fix persistent highly unsatisfactory profitability in the practice doesn’t mean the answers are highly elusive, only available to intellectual giants, “lucky” owners, or owners with deep-pocketed fairy godmothers.

Once identified, and clearly explained by a genuine expert, the solutions are pretty obvious, and most owners are somewhat surprised that those solutions were hiding in plain sight.

Two inherent dangers lurk, and they aren’t necessarily what most owners would guess.

1.??????? Expecting to get truly expert advice to help them cut quickly to the chase from the plethora of “wannabes” in the marketplace who profess to having the answers.

2.??????? Having a genuine expert assess the practice and provide the correct guidance, only to have the owners fail to follow through with the clear action steps provided…permanently (the fundamentals just do not change)!

Robservation…Will a lot more lawyer owners in early 2025 resolve to embrace what artificial intelligence can do to assist with effective practise, at the same time as applying a good dose of human intelligence to getting help with the most fundamental practice management keys where they so clearly need it?