Client Minimums and the Smaller Firm

At least one large law firm is talking about setting annual client billing minimums, perhaps approaching $200,000. If you won't meet it, you can't come aboard. Down the road, if you don't meet it, we might show you the door. Much rejoicing for small firms or solos, right? No so fast, my little friend. The firm that set this off is one of the largest global law firms. As one intrepid GC has pointed out, if you can't meet the minimums with your international spend, then you really aren't trying. And for a large law firm to risk big conflicts over small clients doesn't make legal or business sense. That is why I think minimums for global law firms (to call them large also seems oxymoronic) will actually move up, that $200,000 could just be a starting point. It is another example that the legal industry is splintering; clearly small local firms in the US are not going to serve clients on global matters. Will they get some clients that formerly went to larger firms? Just be careful about what you mean by smaller. The firm that set this off notes that it has "3,500 lawyers located in 30 countries and 69 offices." So a firm of 500 lawyers is *smaller*, just not *small*. Larger national law firms would probably pick up the slack in the first instance. Smaller firms with specialized practices or mega-firm diaspora are next. Solos? Maybe, but likely only with knowing one of the client's senior executives or board members. The only solos I know who are doing high-level corporate work (i.e., for publicly-held or venture-stage companies) know the CEO or a board member. Litigation or one-off stuff (employment, real estate, etc) is different. As I mentioned Monday, one of the most interesting aspects of the client minimum issue is what it means to senior associates or junior (non-equity) partners. If you have some real expertise, client relationship skills, and guts, you have to think about going free agent. Taking your legal talents to (a virtual) South Beach. These "new solos" won't be solos in the traditional sense, in that they cast a wide net and take a lot of different work that comes through the door. In fact, if they are working out of a spare bedroom, there is no door, not even a shingle. For all client-facing purposes, though, they will appear the same as they did when they were at GlobalMegaLaw. For now, this is not a competitive threat to GlobalMegaLaw. But it is potential collateral damage of the new policy. Some of your best people will leave. And some of those that stay are not the type that attract clients in the first place. When you Google the firm that started the debate, the summary on the initial search page says it "represents emerging growth and high technology companies." The challenge will be that when the once and future minimums kick in, they may keep emerging growth companies from splurging on their services in the first place. Would they have taken Facebook or Twitter or Groupon as clients at the start? If your short-term strategy means you let growing companies slip through your grasp, you are committed to the big-fish low-growth pool. That is where all your competitors are, and they may have trawlers and larger nets. And as far as the lawyer you let get away, she has a more basic approach to the clients you threw back.

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