Law firms, recession, and economic pressure: 5 tips for survival

law firms recession

 

 

With the economic downturn and increasing costs of living, many businesses are beginning to see a reduction in profits, including those within the legal industry. So, how can a law firm survive a recession and ensure long term success for their business?

If you are a struggling law firm, or a firm starting to become concerned about the consequences of the oncoming recession, the options below may help you to conclude on the next steps you should take for the future of your firm.

 

Law firm recession tips

  1. Get your finances in order – Understanding your finances is key to surviving any recession. Figure out which types of cases are bringing in the most money and which are not. Review your outgoings and make decisions on which expenses can be cut to improve cash flow for your firm. Get advice as early as possible to ensure you make the best decisions for your firm.
  2. Remote working – The pandemic forced us to adapt in our ways of working and has shown us that working remotely as a law firm is possible, and in some circumstances, a more viable option. Allowing your staff to work from home, either part time or full time could allow you to reduce the size of your offices and reduce your outgoings on real estate, heating, and electricity in difficult economic times.
  3. Exit an unprofitable market – The legal services industry has faced many challenges over the past decade. It is unsurprising that some law firms have made the strategic decision to exit specific practice areas to allow them to focus on more profitable markets. With the help of Recovery First, you can ensure a smooth, compliant exit from any market, placing files with the most suitable firms from our panel of solicitors.
  4. Free up value locked in your WIP – If you decide to exit an unprofitable or less profitable market, you will be required to transfer your existing files to an alternative firm of solicitors. Using the Recovery First method will ensure you recover the maximum value locked in your work in progress, thus helping to improve cash flow when you need it most.
  5. Consider a merger or acquisition – It has become clear in recent years that larger firms have more power to compete in such a competitive legal market. Due to this, the number of mergers and acquisitions in recent years has increased substantially. In some circumstances, the merging or acquiring firm may not wish to continue in a specific legal market. If this is the case, Recovery First can assist firms in leaving an unsuitable market and placing files with a suitable firm on our panel.

 

Closing your firm due to a recession

Unfortunately, not all firms will survive the recession, and some will be required to close their firms due to insolvency or cash flow issues. If you are considering the closure of your firm, it is important that you seek professional advice and assistance as early as possible to avoid a distressed situation.

The formal insolvency process for solicitors can be a lengthy one, and will require liaison and input from the Solicitors Regulation Authority (SRA), as well as insolvency lawyers and insolvency practitioners.

Quite often, we are approached by firms facing insolvency; we can assist by effecting introductions to appropriate experts, with a proven track record of working with law firms.

If necessary, we will work closely with the insolvency team to complete a structured and compliant run-off of files. We will aim to recover 100% of the firm’s recoverable WIP by distributing the files to our panel of solicitors. We have anecdotal evidence of projects where the outcome has exceeded 100% of the recorded WIP value.

 

How can Recovery First help you?

Recovery First can work alongside your firm to help you leave a less profitable market, improve your cash flow by releasing value from your work in progress, and assist if you choose to take the merger or acquisition route for your firm.

The unfortunate reality of recession means that not every firm will survive. If this is the case, we can work alongside your team of professional advisers to manage to profitable run off your files.

Our process involves discreetly selling a firm’s cases to multiple purchasers on our panel of solicitors. This mitigates the risks to the buying firms and results in a higher value for the work in progress being recovered, whilst ensuring SRA compliance.

Our team manage the whole process from  transfer of files to appropriately qualified panel firms suited to deal with their unique client matters through to collection and management of costs at conclusion.

If you would like to find out more about Recovery First’s process, feel free to get in touch with our Managing Directors on a confidential basis: David Johnstone at david.johnstone@recoveryfirst.co.uk, or 01357 440140, or Sally Dunscombe at sally.dunscombe@recoveryfirst.co.uk or 01357 440140

 

It's never too late to speak to Recovery First. Contact us now in the strictest confidence

Sally Dunscombe:

sally.dunscombe@recoveryfirst.co.uk

David Johnstone:

david.johnstone@recoveryfirst.co.uk

Telephone:

01357 440140

Manchester Address

106 Kennedy Building

Murray Street

Manchester

M4 6HS

Registered Address: 

North Torfoot

Drumclog

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