How mid-sized law firms can survive when large firms steal their market share

You may have seen KPMG's recent announcement that it intends to enter and dominate the SME accountancy marketplace in the UK. Its message to consumers was simple: 'we'll charge the same as your current accountant, but we'll give you more'.
How would managing partners of mid-sized law firms react if a top-10 law firm were to make a similar move into their space?

Among LawNet member firms, most managing partners see little threat from very large firms, as things currently stand. The exception is a firm like Slater & Gordon, which effectively does small-firm work on an industrial scale.

Edward O'Rourke, CEO of Ashton KCJ, believes larger firms can be a positive influence on the mid-sized legal market. His East Anglian firm receives referrals from two City firms for work they do not wish to handle themselves. He believes that, rather than focusing on what the bigger outfits are doing, mid-sized firms should ensure they are attuned to what their clients want and how they want it delivered.

"Rather than worrying about the threats to traditional ways of working, firms should focus on building a strong, differentiated brand. They need to be clear on where their market lies, improve their quality of service and look at how technology can enhance their offering," he says.

Stephen Attree, managing director of Cheshire firm MLP Law, makes a comparison with other professions.
"I could agree to wait 12 weeks for a
GP referral to a specialist or see a dentist on the NHS; I could use a franchised,
high-street optician or an online accountancy provider for my tax return. Yet, I do none of these things because my most valuable purchases are based on relationships and perceived value."

The key word here is 'perceived'. Solicitors must not confuse process with advice and, on the face of it, KPMG's plan is based on maximising its enormous
IT investment. However, if it ends up
being perceived as a 'process' service, clients may be reluctant to pay an 'advice' price for it.

Attree believes that partners in SME-sized law firms have a unique understanding of the needs of SME clients because they occupy a similar space in the market. They are able to empathise with SME clients and private clients in a way that larger businesses could not.

For Simon McCrum, managing partner at Darbys, recent low-ball pricing strategies by some large firms pose a threat to established, mid-market players. Firms which previously would never have considered doing work at SME-firm prices are now buying work in order to utilise their capacity. Whether they are doing this as a loss leader or because they have invested in better processes is irrelevant, except in terms of sustainability.

McCrum notes that the strong marketing and business development capabilities within bigger firms can give them an edge in pitching for work, especially when accompanied by low prices. However, he has also experienced cases where, at the end of the matter, the client is on the wrong end of the discussion that starts with "yes, we said it would cost £x, but because of y and z, it
is going to cost more".

Larger firms with bigger overheads can sometimes struggle to deliver on their price promise and end up charging more or delivering less. A price difference
that might be negligible to one of their larger clients can be very significant to
a smaller one.

For McCrum, the way ahead for mid-sized firms is not to join the price
race to the bottom. "Our strategy is simply to try to make sure we deliver a great service - every lawyer, every time. Clients typically stay with you if you do that and are likely to give you repeat business."

Inter-firm networking, cooperation and sharing of specialist expertise among firms of a comparable market position are important ways of combating the clout of bigger firms with deeper pockets, according to managing partner Dinesh Raja of Bowling & Co.

"It is another way we can add value for our clients and avoid business going elsewhere simply because our firm can't offer that particular specialism," he reflects.

Client satisfaction is clearly the
biggest battleground, so our members undertake mystery shopping and online client satisfaction surveys. These give
them robust data to make improvements to their services and facts to back up their service promises.

Certainly, the experience of other sectors proves that complacency must be avoided. Over the past two decades, the numbers of independent opticians has reduced significantly following deregulation. There has also been considerable consolidation in the accountancy world. But, those who strive to understand what they do best and find ways to do it efficiently, to exploit technology, to change working practices and to keep client satisfaction at the heart of all they do, will be best placed for a bright future.

Chris Marston is chief executive of independent law firm network LawNet (www.lawnet.co.uk)