Statistically, or at least anecdotally, over the last 5 years there has been more movement than ever by law firm partners from larger well established practices seeking an alternate to national or leading law firms. While there are plenty of young funky upstarts in the mix, throwing in their Gen X (or god-forbid it even Gen Y) towel, and moving to set up with their equally adept mates, there are also plenty of grey-haired Boomers taking to the streets in search of alternative firms.
So, what is it that boutique firms offer that their bigger brethren are missing? Surely it’s not the glamour, the money or the size of the draw?
The partners we talk to who are either working in boutique firms, or who are looking to downsize from their larger practices fall into different categories. Sure, there are those who aren’t meeting targets in their present firm, but the vast majority of the partners we talk to who are considering a boutique offering are actually moving of their own accord. And here are the reasons they give us:
1. They want to control their own destiny
One of the perceived benefits of working for a small firm, irrespective of the type of work it does, is the chance to control your own day, your own budget, and your own destiny. This freedom to decide, to lead, mould and shape a firm is one of the most commonly given. In larger practises this has often been supplanted and passed to practice leaders, managing partners or CEO’s, and in the case of the global firms partially passed off-shore. And we lawyers, like most humans, like to control our destiny.
2. Smaller firms are often more profitable, as a percentage of billings
Each year when profit tables are put out, the larger firms show profits of around 30-40% of gross billings. (*Yep that’s an actual statistic, but it varies widely, with some firms recording figures in the 20’s and the odd one over 40%). However, talk numbers with a sole practitioner or a very small firm partner and even 45% can be low. Some achieve as high as 60% profit, with their lower costs and less overheads. That doesn’t mean that large firm partners are heading off in droves for the riches of the boutiques – they aren’t – but those that don’t have the huge clients and practices find that rather than being a small points equity partner, or highly paid salary partner in a large firm, they can have full equity in a boutique firm and do equally well, with less gross fees.
3. Smaller firms can be more flexible
Flexibility can come in different forms, my hamstrings excluded apparently. Here, I mean the flexibility to charge lower or one-off rates, take on work that may not be a fit with a larger firm, work different or reduced hours, or even the billing practices on offer – such as fixed fee etc. Generally, the feedback we get from partners is that while the larger firms are more flexible than ever, smaller firms are still streets ahead on this point. And like I said about most humans and “destiny”: people as a whole like to be able to make decisions, have variety, please other people and decide how they will do this. Being flexible helps that.
4. Lower rates
For lawyers working in particular areas or with clients that are heavily rate sensitive, a lot of partners are moving just to ensure they can keep their clients or attract new ones. For some clients rates are key, and for those partners a smaller firm can usually give an advantage. Many partners give this reason as their number one cause for making the move.
5. Opportunity for promotion to partner or equity
One of the key factors driving gun senior associates from the largest and the global firms, as well as causing strong fixed draw partners to look elsewhere has been the perceived or actual difficulty to be promoted, either to partnership or to equity. Smaller firms can be seen to offer faster promotion, more transparency, easier access to equity and more stability once partnership is achieved. With some larger firms we are witnessing a continual shifting of goal posts in terms of the size of the practice needed to achieve both salaried or equity partnership, although there are some firms starting to address this. Smaller firms tend to have smaller teams, affording a more direct path to partnership than the pyramids of the biggest firms.
6. Less Politics, less conflicts
We have also had plenty of disenfranchised partners in large firms looking to avoid what they see as the politicking of a large, corporate firm and seeking out more traditional law firm values – the values of firms that perhaps they may have commenced their careers with. We also have partners faced with national or global conflicts as a result of mergers who are finding their most valued client now a competitor to another partner’s larger client, and resulting in a need to move the client to a different firm. There is also a perception that if you join a smaller firm, perhaps where the partners share similar life experiences, background, values or interests, that the collegiate feel which can result is worth the move.
7. A specialist strategy – marketing as a driver
While for some the move is driven by a variety of other factors, for specialists in areas such as technology, employment, insurance , construction etc, there can be perceived benefits in setting up as a specialist firm and using that as a market differentiator. For partners entering smaller firms in the insurance space, for example, this has been a key driver.
8. Work/life balance
There is a perception that lawyers in larger firms work more hours, have less flexibility and more demands placed on their time than those in smaller practices. While this may be true more often than not, and is definitely a driver for some, the reality is that in boutique firms there are also less support systems, less management, more operational issues to deal with and less people to cover leave. So while you might find it easier to slip out early for parent teacher night, it might also be harder to take that month off to hit Cinque Terra in July.
So what has been the reason for the apparent increase in the volume of partners joining or setting up boutique firms? Have larger firms lost their way? Is it the proliferation of global and national mergers and the increased pressure of highly commercial environments? While that holds true for some partner moves, the reality is that most moves we see are only in part a rejection of larger firm cultures, ideals and work practices, but more often motivated by the individual needs of the partner in question. If you want to talk about what drives you and what you are looking for in a firm feel free to call us to discuss it personally.