Despite last year’s hopeful release of functional COVID-19 vaccines, full economic recovery has evaded many law firms. But that’s not the case for every legal services industry firm. A select group of high-growth law firms still managed to achieve a high growth rate in 2021.
What are these firms doing differently that sets them apart from their peers? Are there lessons to be learned that will help law firms navigate the years ahead?
The Hinge Research Institute recently investigated the answers to these and other questions in the Law Firm and Legal Services Edition of the High-Growth Study 2022. The study surveyed executives from 115 law firms to explore their biggest challenges, successes and priorities — and more importantly, to pinpoint the technologies and strategies that were their secrets to success during these difficult times.
This article examines the four factors that helped law firms achieve remarkably high levels of growth last year.
Surprisingly, last year’s high-growth firms did not achieve this growth by sacrificing any profits: Nearly 80% of them were highly profitable, which was a 100% increase from last year’s figures. Meanwhile, only 29% of no-growth firms managed
to churn a high profit.
Also, high-growth firms did not achieve their growth from merger and acquisition (M&A) activities. In fact, growth attributed to M&A declined by 18% last year for the high-growth firms.
Instead of these usual explanations for growth, the 2022 study found that high-growth firms are currently achieving their success through the following:
Let’s review the specific technologies, techniques and contracting strategies that brought high-growth firms so much success last year.
As the economy continued to suffer in 2021 — and more firms deepened their reliance on remote teams due to the pandemic — high-growth law firms doubled down on their use of advanced digital marketing technology that allowed them to boost their efficiency and effectiveness during lockdowns.
For example, high-growth law firms used customer relationship management (CRM) software twice as much as their no-growth peers in 2021. This helped them establish better client relationships despite social distancing and fewer face-to-face interactions.
CRM tools also helped high-growth firms sell a wider range of services to existing clientele while reducing their business development costs.
High-growth law firms are also putting a greater emphasis on different marketing techniques than no-growth firms, and they’re achieving better results when they use them. The top five most impactful marketing techniques of high-growth firms include:
Networking on social media
Except in the case of “providing assessments and/or consultations,” when no-growth firms use the above techniques, they’re receiving dramatically less impactful results. This means that they are usually not recognizing — or realizing — the tremendous benefits these techniques can bring when executed appropriately.
“High-growth law firms increased their annual growth by 43% over last year’s figures — achieving an average of 37% growth in 2021 compared to 25.7% in 2020. In contrast, no-growth firms suffered an average growth rate of -3%.”
No-growth firms most likely receive such poor results from these techniques because they lack the right talent on hand to execute them. Unfortunately, today’s climate of the Great Resignation is making it more and more difficult to source the right talent, but some firms are finding an easy solution to fill their talent gaps. That solution involves working with third-party contractors.
High-growth law firms often have more financial resources available than no-growth firms. This helps them pay for the talent required to effectively use the latest marketing and business development technology and techniques. Compared to no-growth law firms, for example, the Hinge Research Institute found that high-growth firms tend to benefit from the following skills advantages:
Compared to no-growth firms, high-growth law firms are significantly more likely to outsource tasks related to SEO, graphic design and strategy development. Therefore, no-growth firms may want to start focusing on outsourcing these tasks first to receive the highest ROI.
High-growth law firms have their sights set on specific topics and challenges for 2022 and beyond, and these differ from what no-growth firms are focusing on. For example, the best-performing law firms are particularly interested in artificial intelligence (AI), blockchain, big data analysis and virtual law firm technology. Meanwhile, no-growth firms have shown significantly less interest in these topics.
Finally, high-growth law firms are nearly twice as likely as no-growth firms to focus on alternative billing models. If there’s one area that could help no-growth firms overcome their challenges, alternative billing models could be extremely important in an increasingly competitive marketplace.
Having achieved an average organic growth of 37% in 2021, high-growth firms clearly did something right last year. Thus, it can be extremely valuable for no-growth firms to examine what their high-growth peers are doing differently.