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How hard is the economy hitting Main Street lawyers—and how much worse will it get? Five experts from across the country share their views.
Q. Bill, the economic meltdown is on everyone’s mind, but what I’m mostly seeing on the legal news sites and elsewhere are stories of how it’s affecting the big firms in urban areas. What are your thoughts on what’s happening in the rest of the profession?
A. The legal press is abuzz with news about law firm layoffs, breakups, downsizing and implosions. But you’re right that most of that news is about the large Wall Street firms that have been hit hard by the meltdowns in the banking system and the real estate and stock markets. So, since most lawyers work in much smaller firms (or in businesses or government agencies), I turned to five of my colleagues who work with “ Main Street” lawyers to give you their impressions of the situation. My panel of experts includes David Bilinsky, Ross Fishman, Arthur Greene, Reba Nance and Edward Poll.
The first thing I asked them was whether the effects of the economic recession seem to be spread evenly across the profession, or whether some lawyers and firms are getting hurt harder than others. The general consensus is that solos and the smallest firms are, along with the megafirms, feeling the most pain. In terms of practice areas, real estate lawyers and lawyers representing banks and doing “deals” are particularly hard hit. Other lawyers, they say, are doing relatively better. Here’s a closer look.
Where’s the Shakiest Ground?
Arthur Greene, formerly a longtime managing partner at a New Hampshire firm, consults with small to midsize law firms on improving their profits. His view is that “solos in certain practice areas and firms with only a few lawyers are getting hit hard, but firms of 10 or 15 lawyers are, in many cases, in the best position to ride out the crisis.” While he concedes that some small firm lawyers “are leaving the practice to get jobs elsewhere,” he generally likes the prospects of firms between 10 and 50 lawyers because they have “a diversity of practice areas and a sufficient volume of business” to see them through the rough times. Also, he adds, “the well-managed small firms with a positive culture and strong forward-looking management are in a much better position than those poorly managed firms that were struggling even in the good times.”
Ross Fishman, a specialist in law firm marketing, says this is not a good time for lawyers with practices that are “general, generic or fungible” and that associates or junior partners whose skills can be described that way are at severe risk. He likes the prospects of lawyers with “in-demand specialties.” He also points out that litigation boutiques, which in particular had a strong 2008, are predicting a strong 2009 as well. Those firms, he says, “are now marketing aggressively to steal work away from the larger, costlier firms.”
Dave Bilinsky, who works out of Vancouver as a practice management advisor and consultant, sees a bright spot for lawyers doing commercial litigation. On the other hand, he finds that real estate lawyers and lawyers involved in mergers and acquisitions of all kinds are “badly hurting.” His perspective on the Main Street-area of family law is that it’s currently a mixed bag—the workload is up, but the family assets are down, so fewer divorcing couples can afford to pay legal fees.
Lawyer and practice management consultant Ed Poll sees the economic troubles being based on both specialty and geography. He’s finding that transactional lawyers are feeling a lot of pain, but bankruptcy and intellectual property firms are “doing great.” He also says that small firm lawyers in hard hit areas such as Ohio and Michigan are feeling it worse than in Florida or California.
My friend Reba Nance, who’s Director of Law Practice Management and Risk Management for the Colorado Bar Association, says that in her state a dramatic drop in business has been seen by lawyers who do “transactional work—specifically buying and selling businesses.” Those lawyers are telling her that “if it’s not an urgent situation, clients are holding off doing anything until they see where the economy is going.” Another sign of the times is that she has been getting calls from lawyers interested in getting into handling bankruptcy cases, thinking that bankruptcies are a “recession-proof” area.
How Much Worse Can It Get?
Next, I asked my colleagues to look in their crystal balls and predict how bad this economic crisis will get before it turns around. The predictions range from pretty wary to downright pessimistic.
Greene believes that those lawyers with substantial practices will “skate through this without anything other than a disappointing year or two. On the other hand, it will knock a number of lawyers (ones who are not efficient or flexible) out of the profession.”
Pointing out that “things are bad and predicted to get worse,” Fishman says “there are a lot of resumes on the street, but few firms seem to be hiring lawyers who don’t have at least $500,000 in business, and that’s the firms with less than 150 lawyers.” And according to Bilinsky, “the real waves haven’t hit”—although, he adds, we’ll have to wait to see whether the economy responds to the government stimulus programs.
While Poll agrees that things are bad, he points out that they’re not as bad as in the banking and auto industries. “The feeling is worse than the facts,” he says.
Predicting how bad things are going to get and how long they will remain bad is, of course, as difficult as predicting how far down the stock market will go. But at this point, my group of experts all agree that a lot of retirement-age lawyers will be staying on to work a few extra years now that their retirement accounts have dropped 30 or 40 percent. In fact, Nance reports that she’s fielding calls from retired lawyers asking about getting their malpractice insurance reinstated so that they can go back to work.
Overall, it appears that the legal industry is just beginning to feel the pain and, while I hate to say it, the pain most likely will get worse. How much worse? I read recently about a lawyer in New York who posted a fake help wanted ad on craigslist for a $30,000-per-year associate position in Manhattan and actually got several applications before announcing that it was a hoax. I don’t know what lawyers applied for the job, but whoever they were, it is not a good sign.
The bottom line, in my opinion, is that if your practice is genuinely solid and you believe you have the capacity to simply “weather the storm,” you might just tighten your belt and keep doing what you’ve been doing, particularly if you have a little money put aside. On the other hand, if your practice has seen a dramatic decline in revenue and you think it may take several years to improve, just trying to skate through this recession is going to be an ill-advised move. My experts say that you should consider switching into more-profitable practice areas (or even finding another line of work).
K. William Gibson is a personal injury lawyer and arbitrator in Clackamas, OR. He is the author of How to Build and Manage a Personal Injury Practice , 2 nd Edition (ABA, 2006). Have questions about your career, your practice, your computer or anything else? Send them to Bill Gibson at email@example.com.