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Is Demand for Small Firms Likely to Drop?

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By Casey C. Sullivan, Esq. on August 05, 2016 2:59 PM

After years of demand growth, things are starting to look down for BigLaw firms. Large firms are seeing their first drop in demand since 2013, according to a recent report from Thomson Reuters Peer Monitor. (Disclosure: Thomson Reuters is FindLaw's parent company.) Demand is down 0.9 percent, while productivity has dropped 2.8 percent, even as firm headcounts have grown.

What's that mean for smaller firms and solo practitioners? Could this legal demand slump impact you as well?

Not All Practice Areas and Not All Law Firms Diminish Equally

There's good news for some lawyers, BigLaw and small, though. The drop in demand hasn't been experienced equally in all areas. In large firms, corporate law demand was consistent, growing just 0.1 percent, but not dropping either. Real estate was down 2.3 percent this quarter and tax demand dropped 3.4 percent.

But the demand-drop trend seemed to have left midsized firms unscathed. According to Peer Monitor:

Demand for the segment rose 1.1 percent and is still up 1.6 percent year-to-date. In contrast, Am Law 100 fell 1.0 percent in the quarter and is now down 0.2 percent year-to-date, while Am Law Second Hundred dropped 1.8 percent and is down 1 percent year-to-date.

Midsized firms even saw a "surprisingly good quarter" in litigation practice, up 1.6 percent.

What's That Mean for You?

Sadly, the report doesn't have much to say about small and solo demand performance. And trying to suss out small firm trends from BigLaw is like comparing apples to John Deere riding mowers. Not exactly that helpful.

If we can't divine much regarding small firm demand trends, though, we can probably say that small firms and solo practitioners probably aren't experiencing the same expense increases that BigLaw is. As Lisa Needham writes in Lawyerist, discussing the same report:

For big firms, the main increases expenses came from technology costs, recruiting costs, and pay hikes. Are solosmalls seeing their technology costs go up? Practice management software pricing has remained roughly steady, so it's unlikely solosmall practitioners would see a hike there.

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