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We discuss how small law firms are facing threats from tech and innovation, talent attraction and retention, and the need to attract new clients and manage existing clients.

The recent ³ÉÈËÓ°Òô Bellwether 2022 report identified three key threats facing small law firms in the coming months: keeping up with tech, attracting and retaining talent, and generating new business. Each of the threats poses unique challenges and small law firms will need to find appropriate solutions.

In the present article, we explore each threat individually, discuss the potential reasons behind the threats, and explore ways in which small law firms can meet the threats and mitigate risks. 

Keeping up-to-date with processes and technology 

The first threat focusses on the internal workings of small law firms, with an emphasis on tech and innovation. Respondents to the Bellwether 2022 report highlighted the tech they are currently using. Almost 80% of respondents said they had used teleconferencing services, followed closely by legal research tools (69%) and collaboration tools such as .

That was all expected. But more advanced tech – tech that other sectors are increasingly adopting – has not seen high levels of adoption across small law firms. Only 6% of respondents said they are  using advanced legal tech such as AI robots, while only 5% are using more simplistic AI such as chatbots.

Another interesting point from the report is the tech respondents want. Customer Relationship Management systems, legal research tools, and e-verification signatures are the most commonly sought-after tech tools for small firms, at 19%, 18%, and 17% respectively.

But, interestingly, almost half (47%) of respondents said they had no plans to implement the tech, citing lack of time, expertise, and budget. The sought-after tech is not particularly complex or costly – they are relatively common, generally part of small-scale automation – but still seems out of reach.

 The second most widely adopted tech tool was legal research. But the report revealed that a surprising number of respondents still use free legal resources, such as (74%) and (64%), while more than half use ³ÉÈËÓ°Òô (52%) and more than a third use Thomson Reuters (38%).

The above clearly demonstrates the threat: the failure to innovate using the latest tech, whether high-tech or simple tech solutions, can rapidly leave small firms unable to compete.

Attracting and retaining talent

The second threat revolves around lawyers. Half of respondents (53%) of the Bellwether report said that they felt  â€˜somewhat confident’ about competing for legal talent over the next two years and 18% expressed doubts about their ability to compete.

Attracting talent is certainly a threat for small firms, particularly with the emerging appeal of US firms, the Big Four, and platform law firms. But perhaps the larger threat stems from retaining talent. The report suggested that, while job satisfaction was high, levels of stress were also high, with three quarters (75%) of respondents with stress levels between six and 10 and 44% between eight and 10.

The most important factor for lawyers is , according to the report, with 45% of respondents ranking it highest in terms of job attraction. Small firms hoping to attract and retain talent through better work-life balance may wish to change their attitude towards remote working, as remote working broadly offers more autonomy, reduction of personal costs, and greater flexibility.

But 43% of respondents to the report were still expected to work five days in the office, which is a much higher number than other industries. Only 6% could practice complete remote working.

Another key driver of better working life is the reduction of admin. Nearly three-quarters of respondents said they spend between 20–50% of their time on admin. The vast majority of lawyers would prefer to spend their time on business-critical tasks. Firms that want to attract and retain talent should consider streamlining inefficient process and potentially adopting small-scale automation.

To tackle the threat of attracting and retaining talent, small firms need to reduce stress, abolish admin, embrace hybrid or remote working, and broadly ensure a better work-life balance for employees.

Driving new business and managing clients

The final threat revolves around clients. Law firms still broadly rely on referrals, with more than half of respondents citing referrals as the number one source of new clients. Upselling and cross-selling followed in second. But, interestingly, online search and social media now generate significant leads.

Small firms need to move with the times, perhaps dedicating more resources to an to generate new business, raise brand awareness, and network across the sector. The report showed early movements in that direction, but the sector needs to go even further.

A final interesting point is that 58% of respondents believe clients now expect the same or a greater service than a year ago. Client expectations are higher and may grow higher still, with an increasing number of clients expecting lawyers to be available outside office hours.

That is a key challenge for small firms in the future. They will need to improve work-life balance to attract and retain talent, while simultaneously meeting increasingly strenuous client demands.