Down in the valley?
Firms in the Thames Valley are optimistic they'll survive but will have to row harder to make sure they don't capsize in the current economic climate, writes Jean-Yves Gilg
It's an old recipe which fell out of favour in the happy days of the booming economy and easy money in the volume business, but firms that have stuck to a balanced portfolio of clients are now in a better stead to get through the recession. Some of the most successful medium-sized firms in the Thames Valley provide
healthy evidence that this strategy can pay off in an economic downturn, though lawyers are well aware that the legacy of years of sound management will not be sufficient on its own to drive safely through the downturn.
Like elsewhere in Britain, the general mood is not particularly rosy. Property work is massively down on previous years, with only a trickle of activity at the top end of the residential market.
Malcolm Head, partner and co-founder of eight-partner firm The Head Partnership, says his firm's residential conveyancing department is not performing as well as before but that it is in a far better position than others that relied on panel or referral work.
'Panel work has serious long-term drawbacks', he says. 'Working with a large referrer may provide good revenues in the first year but almost inevitably the referrer will start putting pressure on fees; the relationship can become difficult to manage, and in difficult economic conditions, this can leave firms particularly exposed'. Instead the firm, which has offices in Henley and Reading, has made a conscious decision to tap into the local high net worth community to establish solid, long-term foundations and remain in direct control of its client base.
Commercial property is hardly faring any better with lawyers reporting smaller deals and a prevalence of low-value work such as lease renewals, along with a rise in disputes over rents, service charges and general debt recovery which, together, help buffer the decline in larger deals.
Relative resilience
But already there are signs that investors are getting interested again. At 16-partner firm Field Seymour Parkes, Philip Seymour mentions property investors buying blocks of flats and developers registering interest in potential opportunities. 'As long as you are in it for the medium to long term, there are now bargains to be had', he says.
Seymour admits he takes an optimistic look at the property market but he nevertheless believes that the market should start moving again by this time next year. 'It is not so much that prices will pick up but more that they will be so low that there will be real opportunities,' he says. 'In the current context, if you have cash to invest, a property with a good tenant offers better returns than the stock market or a savings account.'
And as in most other regions, corporate work has also contracted, though most firms say their corporate departments have remained profitable, partly because the rise in business recovery work is generating incidental work for corporate lawyers.
The most telling sign of local firms' resilience however is that few have made redundancies. Where there have been any, these were quite limited, though vacant positions tend to remain deliberately unfilled.
So, there have been no redundancies at The Head Partnership, and at firms such as Field Seymour Parkes and Blandy & Blandy the few staff and fee earners who retired or left for personal reasons have not been replaced.
'Like many firms we have a moratorium on recruitment', says Philip D'Arcy, Blandy & Blandy's joint managing partner, 'but there have been no redundancies and we are still taking on the same number of trainees as before'.
Meanwhile, at B P Collins, senior partner Ian Johnson says only one employee was made redundant, in the residential conveyancing department. Staff, however, were invited to look at ways of cutting capacity and an agreement was reached to work shorter hours.
In the main, these firms have always had measured ambitions and lean structures, and are, on paper at least, in a better position to resist the impact of the credit crisis.
Unsurprisingly practice areas such as family law, private client, employment, dispute resolution and insolvency are either steady or growing.
Confirming a trend started in the latter part of 2008, Field Seymour Parkes' Philip Seymour says litigation has become very busy. 'When times are good there is an incentive for both sides to move on and settle their dispute, now if you're advised that you have a good case you are much more likely to fight it,' he says.
But firms cannot rely solely on these traditionally counter-cyclical areas and will have to work hard to generate revenue from alternative markets as well as maximise opportunities from their niche expertise where they have one.
Leveraging expertise
At The Head Partnership for instance, Malcolm Head is counting, in part, on the firm's family legal aid department - the largest in the Thames Valley after other firms (including Field Seymour Parkes) have gradually left the field. 'We're in a large catchment area for legal aid,' says Head, 'and that brings a lot of people to the firm.'
Across the way Blandy & Blandy are focusing on their expertise in the charities sector to provide an additional boost to the firm's revenue. 'We have established experience in the charities and education fields, which we are actively pushing with other potential clients in the sector', says Philip D'Arcy.
Public sector work is another of the firm's specialist areas but D'Arcy says the market is getting more competitive. Firms that had until now not tendered for work with local and other public authorities are getting interested because it provides a relatively stable source of work.
'Tendering for contract renewal is comparatively safe because you have already proved your worth '“ though even then one should not assume the contract will automatically be renewed '“ but it is getting markedly more difficult to secure new contracts,' D'Arcy says.
Meanwhile at Boyes Turner, CEO and partner Andrew Chalkley is pinning some of his firm's hope on high-end personal injury work, including medical negligence and industrial diseases. The personal injury team has grown from two to eight fee earners (with plans to recruit a further six in the next 12 months) and turnover is expected to grow from £700,000 to £2.1m next year. This new strand is also expected to generate work for the firm's small private client department, such as setting up trusts for personal injury and medical negligence victims.
But as the market is shrinking, concentrating the firm's resources on growth areas is not in itself sufficient to maintain revenue levels, let alone grow the firm's market share. As cash-conscious clients could turn fickle, firms must deploy extra efforts to keep them loyal '“ and it is at times like these that years of careful client relationship management should pay off.
Nurturing relationships
'It's a bit of a cliché but we are a relationship firm rather than a transaction firm,' says Malcolm Head. 'We have never gone for panel work or referral work; instead we have created relationships with people and businesses.'
And Head says most of his clients have, so far, remained loyal. 'Many of the businesses we helped set up years ago, creating the companies from scratch, have become successful businesses and we're now acting on their sale.'
Philip Seymour's firm has a similar tone. 'We build relationships,' he says, before adding, 'which is possibly what other firms are doing too, but this is how we approach business.' Seymour's surmise may be true of most genuinely client-driven firms with their eyes set on the long term, but how each goes about it varies from one firm to the next.
'Our policy is to concentrate our resources on specific clients rather than general advertising in the local press, so we will, for instance, entertain at Wimbledon or Twickenham,' Seymour continues. And while the firm has trimmed back on other expenditures, it is not scrimping on the marketing and entertainment budget.
Junior lawyers are also encouraged to develop their soft client-facing skills. 'We don't spend large sums on training courses,' says Seymour, 'but those who are inclined and have a natural ability will be trained and will be taken out with the partners to meet clients.'
At The Head Partnership a structured programme is in place. 'Every fee earner has a network map and is trained in building relationships,' says Malcolm Head. He agrees the words can sound a little woolly but says the firm has a systematic plan involving training with RADA for businesses on how to get on with people and be an effective communicator who can influence and win clients.
'Perception is all,' continues Head. 'We have to be good lawyers, but it's how we are perceived that will get the business: competent, reassuring, thrusting - soft skills aren't really a skill but a process, it's how you can influence and gain clients.'
Over at Boyes Turner, the marketing and sales effort is equally systematic, though focusing more openly on effective pitching.
Direct sale campaigns are rolled out for a number of practice groups, targeting businesses that are still growing and are likely to buy more than just a one-off service.
'For instance,' says Chalkley, 'a company may have a headline need for employment advice but there may also be a future need for property or IT advice.'
Typically, the marketing director would visit the target client with a partner, sell the firm's know-how and sell the product '“ the partner. 'As a sales professional he is better placed to showcase the partner or the firm, and the partner will be there to answer technical questions,' says Chalkley. 'Ultimately the client will buy the personality of the partner.' According to Chalkley, the conversion rate last year was 30 per cent.
Working hard for the money
Upbeat and determined as they may be, Thames Valley lawyers are nonetheless realistic. These are tough times and they will have to work harder to get clients in. They may be able to offer 'London-quality advice at regional rates' but when clients are trying to avoid paying anything at all, a lower charge-out rate and direct partner involvement are only of marginal help, and lawyers are having to be more generous with their time.
'We're expecting to work harder for less money,' says Philip Seymour, who says lawyers will have to be more willing to provide advice for free now and again to keep clients on board.
In response to the situation, The Head Partnership has expanded its retainer offering, which Malcolm Head says gives clients access to hours of legal advice well in excess of what they would have if they were billed for actual time spent.
Meanwhile, Nick Burrows, joint managing partner at Blandy & Blandy, also emphasises that law firms will have to be competitive on fees. His firm, among other initiatives, is offering specific packages for third sector organisations.
Medium-sized firms in the Thames Valley firms are undoubtedly ready for a fight but their problem is that they are competing over a finite '“ and arguably shrinking '“ select market of healthy businesses and high net worth individuals. They could well all come out of the battle victorious but they will have to show great flexibility and innovation, and be prepared to withstand further shocks before coming out under the calm blue skies.