8 Reasons Law Firms Fail

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It used to be that law firm failures all came around the time of the annual deadline for the Yellow Pages listings. The lawyers scrambled to find new places to land and wanted to be sure they had their number in the book.

Today, failure takes place year round. We can ruin our practices 24/7/365. Excellent.

These are some of the top reasons law firms fail, unravel, disintegrate, and explode.

1. Fighting Between Partners

Lawyers can be nasty. You know? Sometimes they take it home to their spouses. Often they bring it back to the office. What do they fight about? Money, of course. But they find plenty of other things to fight about too. They say upsetting things to one another. They treat each other badly, and they fail to communicate. A business filled with partners who can’t get along won’t last long. You’ve got to find a way to get along with the other owners if your business is going to last.

2. Failure to Focus on Clients

When clients are an afterthought, it’s not long before the firm is a faint and distant memory. When clients aren’t the highest priority, the firm goes on life support. You can see it in the little things—like parking places near the door reserved for the lawyers—and you can hear it when the receptionist is explaining why the lawyer hasn’t yet returned the call. Most firms don’t survey their clients and, if they finally do, are shocked to find out that their clients aren’t happy. We latch on to the opinions of the few happy clients and hope the others don’t speak up.

One thing you can be sure of: while they may not tell you what they think (unless asked), they don’t hesitate to tell others. Over time, the reputation of the firm declines, day by day, as clients spread the word about feeling unimportant, unappreciated, and not worthy of attention. The clients will destroy you if you don’t make them happy.

3. Internal Orientation

Firms focused on policies, procedures, and practices, to the exclusion of marketing and client management, are headed in the wrong direction. What good will the procedures do when there are no clients? Focus outside of the walls of the law firm and find the business. Take care of the internal matters when you’re busy. Until then, stay focused externally.

4. Refusal to Learn

They finish law school and lock down their knowledge. They put it in a lockbox and don’t add to the repository. They don’t invest in learning what’s new. They don’t take risks and acquire knowledge because it might be interesting. They don’t learn about management or marketing. They don’t learn the latest developments in the law. Some of these firms feel like time capsules and are covered in dust. You’ve got to keep learning.

5. Lack of Focus

Some firms chase the dollars. They have shiny object syndrome. They go this way—full blast—and then they change course when something else comes along. We all watched it with the recession. One day they did family law. Then, suddenly, they were a bankruptcy firm. Then, boom, they were in the foreclosure defense business. Blink, and you almost miss that they’re in the student loan arena. Then, whiplash, they’re a personal injury firm.

Instead of getting to be good at something, they shift their focus from thing to thing to thing. It doesn’t work. Focus builds trust, it builds reputation, it builds goodwill, and it generates a steady stream of business from former clients and referrals. Focus is key.

6. No Experiments

Experimentation is the key to growth. If you’re not moving forward, you’re moving backward. If you move backward long enough, you back right out of the picture. Do you try a new practice area? Bring in a lateral? Price differently? Market differently? Try new technology? It’s all about finding out what works and what doesn’t. If you don’t try something, then nothing changes, and you’ll fail eventually. It’s just a matter of time.

7. No Growth Budget

Experiments cost money. You need to budget for growth and experimentation. Some of those experiments will fail, so this budget needs to be money you can afford to lose. Running experiments without a budget is like not running experiments. You need to build growth into the business plan if you’re to survive. Invest in your future.

8. They Don’t Adapt and Change

Shiny object syndrome is bad. But experimentation, growth, and adapting to changing conditions make sense. Deliberate, organized, planned change is important. My father’s practice from the ’70s looked very different than it would need to look today. Things change over time: just ask the music industry, newspapers, movie business, or taxi drivers. You need to keep your crystal ball on the corner of your (virtual) desk and keep looking into it to see what’s coming. As it appears on the horizon, it’s useful to react, adapt, and find a new normal. Nothing stays the same for long.

Law firms are not forever. They come and they go. All the while, some persist and stick around year after year. You can lead one of those enduring firms if you’re willing to avoid these mistakes.

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