Where will BigLaw get the sales force it needs to sustain revenue?
Let’s begin with some foundation. Despite the rosy revenue picture painted by the very top firms, a number of recent studies expose lots of competitive reasons for BigLaw firms to be more than concerned about their ability to sustain or grow revenue going forward:
ALSPs: The alternative legal service provider market grew 25% from 2015 to 2017, and is experiencing rapid growth exceeding expectations, and is predicted to grow to $40 billion by 2024, which would equal the total revenue of the 25 largest AmLaw firms today. 74% of corporations use ALSPs in at least one service category; 39% of firms said they face increased pressure from clients to use ALSPs
Big Four: The Big Four’s legal services business grew from $900 million in the 2016 survey to $1.2 billion in the latest report. 23% of large law firms reported they had a client use a Big Four firm for work the law firm expected to win.
Baby Boomer retirements: 16% of partners will retire in the next five years and 38% in the next 10. Those partners are responsible for at least a quarter of law firm revenue at 63% of the responding firms, and 35% of revenues at 42% of firms.
Pension costs: Many law firms don’t fund their pension obligations, so benefits will have to come from annual profits produced by the next generation.
Return of capital: Because capital is tied to compensation levels, law firms are returning more capital to retiring partners than they’re bringing in from new partners.
Overcapacity: 40% of US law firms blame “chronic” under performance. Overcapacity is diluting profitability in 58% of all law firms
This paints a picture of serious demands on law firm revenues. So, how perilous is the future revenue picture in BigLaw?
It seems like the burden of retaining clients and generating sufficient new revenue to finance ongoing firm operations and fund retirements necessarily falls on the next two generations of lawyers. How well prepared are they to shoulder the business development burden?
Law firms have spent a lot of time and money attempting to broaden the ranks of revenue generators by helping their lawyers acquire and apply marketing and sales skills through training and coaching. How well is this working?
Firms can’t afford to offer real training and coaching to everyone. How do they choose which lawyers will receive such investment?
What percentage of lawyers who are given training or coaching make good use of it, and what percentage waste it through inaction or inattention?
Why do you think lawyers waste BD training and coaching?
What can firms do to try to reduce the training waste, and produce a cadre of reliable rainmakers?