Law Firm Growth Strategy: What to Fix Before You Expand or Hire
Growing Your Law Firm
A law firm growth strategy is a deliberate plan for the kind of growth the firm wants and the changes it needs to make to get there. The growth might mean more revenue, higher profit per partner, a different mix of clients, new practice areas, a second location, or a larger team. Firms that grow well tend to have decided which of these they want before they start spending money on any of them.
Many firms begin with tactics instead. They hire an associate, open an office, add a practice area, or increase their marketing. Any of those can be the right move. The difficulty is that each one adds load to the firm's existing systems, and systems that worked at a smaller size can strain at a larger one.
Competition for attention is also rising: the Thomson Reuters 2023 State of U.S. Small Law Firms survey, as reported by Legal.io, found that 93 percent of firms run marketing or advertising campaigns, up from 84 percent in 2021. More marketing alone is a weaker advantage than it used to be.
Start With the Kind of Growth You Want
Not every firm wants to be bigger, and a static firm is not always a failing one. A boutique that has chosen to stay small may be exactly where it wants to be. Before building a plan, answer a few questions:
- What should the firm look like in three years in revenue, profit, headcount, and client mix?
- How much of the founder's or managing partner's time should the firm require?
- Which clients and matters does the firm most want more of, and which would it rather stop taking?
- Is the goal to build a firm that can run, be sold, or be handed on without its founder?
The answers set the direction. Without them, every opportunity looks equally attractive, and the firm ends up growing in whatever direction the next inquiry points.
Check the Foundations First
Five areas determine how well a firm absorbs growth. Checking each one before adding anything new is usually quicker and less expensive than repairing them later.
1. Intake and Conversion
Look at what happens between a prospective client's first contact and a signed engagement. How fast is the response, who handles it, and what is the follow-up? If inquiries go unanswered or are handled inconsistently, spending more to generate leads simply sends more of them through the same gap. Tracking the number of inquiries, the number of consultations, and the number of signed clients for a few months gives you a baseline.
2. Pricing and Profitability
Growth in unprofitable work makes the firm larger and no better off. Determining what work is the most profitable is a step too few firms take. Find out which practice areas, clients, and matter types produce the best return per hour of lawyer time, and which consistently run over budget or go unpaid. Firms often find that a small portion of their work produces most of their profit. Pricing and positioning also matter here, and our article on how law firms can differentiate without competing on price covers that in more detail.
3. Capacity and Delegation
The same Thomson Reuters survey found that lawyers spent about 61 percent of their time practicing law, up from 56 percent the year before. That leaves close to four hours in every ten spent on something else. If the managing partner is also the person who answers every operational question, new hires will not fix the problem on their own. We describe the pattern in how overreliance on one attorney limits law firm growth.
4. Systems and Automated Processes
A process that lives in one person's head cannot be handed to a new hire. Intake, conflict checks, engagement letters, onboarding, billing, and file closing should be as automated as possible.
5. Financial Visibility
A firm that grows without current numbers is hard to steer. At minimum, the firm's leader(s) should see revenue, expenses, cash balance, and receivables every month, and should be working from a budget. The same survey found that concern about cost control rose to 72 percent of firms from 56 percent two years earlier, so the pressure on margins is widely felt. Our posts on how much cash a law firm should keep in reserve and law firm financial management are good starting points to learning more about this aspect of managing a law firm.
Choosing Among Growth Moves
Once the foundations are in reasonable shape, the choice among growth moves becomes clearer. Each has its own question to answer first.
- Hiring: Is the existing team genuinely at capacity, is there enough work to keep a new person busy, and is there someone ready to train and supervise them?
- Adding a practice area: Does it serve current clients, and can it be delivered at the quality the firm is known for? Our article on growing into new practice areas without diluting quality goes through this.
- Expanding geographically: Does the firm have a reason to be in the new market beyond the opportunity, and the management capacity to oversee a second location? See whether to expand geographically or add practice areas first.
- Increasing marketing: Does intake convert the inquiries you already receive, and do you know which sources produce your best clients? What is easiest to replicate without spending more on marketing?
Build a Twelve-Month Growth Plan
A workable plan is short enough that the partners will read it and specific enough to be checked. One way to build it:
- Choose one to three goals with numbers attached, such as revenue, profit margin, or number of new clients from a particular source.
- Identify the foundation that most limits those goals and fix it first.
- Sequence the growth moves so the firm is not absorbing several large changes at once.
- Give each action one owner and a date.
- Review progress monthly against the numbers, and revisit the plan itself every quarter.
A plan like this will not remove uncertainty, but it gives the partners a shared basis for saying yes or no to the opportunities that arrive during the year.
When an Outside View Helps
Partners who are busy practicing law often have little time to examine the firm's foundations, and they are too close to the work to see where it is straining. An outside review can speed that up. Wellspring Business Strategies does this with law firm leaders through our Law Firm Growth Solutions, starting with a look at how the firm really operates and what limits it. If you are weighing a hire, a new practice area, or a new office, book a free consultation before you commit, and we will talk through what to check first.
Frequently Asked Questions
What is a law firm growth strategy?
It is a plan that defines what kind of growth a firm wants, which changes it needs to make to support that growth, and in what order to make them. A good plan names specific goals, identifies the firm's foundations that need attention, and assigns responsibility and dates for each action.
Should a law firm hire before it markets, or market before it hires?
It depends on where the constraint is. If the firm already has more work than its lawyers can handle well, hiring likely should come first. If it has capacity but too few inquiries, marketing may come first. In both cases, make sure intake and follow-up are working, since new hires or new leads will be wasted if prospective clients are lost along the way.
How long does it take to see results from a growth strategy?
Changes to intake, pricing, and internal processes can show up in the numbers within a few months. Changes involving hiring, new practice areas, or new locations usually take longer, and results from marketing and networking often take six months or more to appear.
