Family law is doomed. I’ve said it before, and I’ll say it again. Many of the lawyers doing it now will not be doing it at some point in the future.

Practice areas come and go. Family law won’t be the first one to shrink dramatically. Just look at what happened to bankruptcy over the past few years. Spend some time examining the data around the number of lawyers handling worker’s compensation claims, personal injury, or residential real estate. The list of practice area booms and busts is long. Things change.

The Numbers You’re Studying Don’t Tell the Whole Story

I was giving a speech recently and pontificating about the difficulties of sustaining a family law practice when someone unexpectedly asked a question that slowed my momentum and undermined my credibility.

The questioner (AKA smart aleck) asked, “What’s happening to your business?” “Are you growing or shrinking?” he wanted to know.

The helpful answer would have been to say that we’re shrinking. In fact, my speech would have been perfect if I could have declared bankruptcy right then on the platform.

Unfortunately (or fortunately), we’re growing. Our revenues are up. Our profits are up. We’re doing pretty well. Saying that out loud doesn’t help me make my point. I stuttered, stumbled, and nearly fell off the stage.

You know how you think of exactly the right thing to say, but you don’t think of it until an hour after the conversation is over?

Well, now I know what I should have said. In fact, it’s what I would have said if I were quicker on my feet and fast thinking. Oh well.

Watch for Hidden Signs of Decline

There are signs, even in a strong, growing business, of decline. You have to look harder to see the signs when the revenues are increasing quickly, but they’re there. The signs are in the data.

You should watch these indicators regardless of the strength of the top line and the bottom line. These indicators tell you what’s coming. They are among your leading indicators.

Keep an eye on the following data:

• Number of consultations. You’d think this would be an important indicator of decline, but it’s not. You can drive up the number of consultations by increasing your marketing expenditure. Don’t be lulled into believing all is right with the world because this number is growing. Like revenues, this indicator can lull you into ignoring the problem.
• Cancellations. Keep a close eye on the number of initial consultations scheduled and then canceled. This is less of an indicator when you don’t charge for consultations (which usually makes little sense). It’s an important indicator if you’re charging for these meetings. One lawyer admitted to me that she had seen an increase in cancellations but that it was trivial. “Trivial” turned out to be a 30% increase (from 8 to 10.5 per month). That’s not trivial: it’s horrible.
• Conversion rate decline. Measure the number of consultations that turn into clients. This is where the rubber meets the road. A decline from 60% to 50% is too big to be ignored. This number should be increasing, not decreasing, over time as your sales team becomes more effective. A steady or declining conversion rate does not bode well for your future.
• Cost to acquire a client. How much money do you spend to acquire each client? This is your marketing cost divided by the number of new clients. Is it creeping upward? Graph five years of this data to get some perspective. As word of mouth increases, the number may decline. Happy clients send you business and reduce your marketing expenditure (per client). If client acquisition costs are climbing, you’re witnessing the decline of the practice area.
• Average fee per client. A decline in this metric indicates reluctance to use your services fully. Many practices are dealing with clients using non-lawyer options to complete the work previously done by the law firm. If this number is going down, you’re not as healthy as you think.
• Extreme price sensitivity. This one requires subjective judgment. Compare the pushback you’re getting on price now to what you were getting last year and the year before. Of course, you’ll see support for your opinion in the other indicators, but it’s helpful to listen carefully to the feedback from prospective clients.

How to Succeed Despite the Numbers

How do I keep our firm growing even when we’re suffering declines on some of these metrics? We market our practice like crazy. That drives up revenues and allows us to increase our gross profit even as our margins decline.

However, we are driving up the cost to acquire each client. Eventually, that cost becomes so high that it drives down profit. That’s when they stop the music, take away the last chair, and the game ends.

There will be winners and losers in this game. There will always be a place for litigators of complex matters. There will be roles for lawyers as new options for family dispute resolution evolve. However, there will be many lawyers who need, just like in other practice areas before, to find alternatives.

Keep an eye on your indicators so you’ll know what’s coming. The numbers tell the story.