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The Boutique Firm Business Plan for 2021

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As managing partners and practice group leaders weigh the costs and benefits of returning to their offices, they should take advantage of the next six months to modernize their business plans. Three areas in particular are especially ripe for new approaches right now – real estate, practice area mix, and talent acquisition.

Lawyers are creatures of habit steeped in the importance of following precedent. But that doesn’t mean firms should reflexively return to the way they used space pre-pandemic. Surely, the last year has shown that most firms can function with a much smaller real estate footprint. Many lawyers may initially enjoy aspects of a traditional office setting, but this could be a fleeting feeling. Don’t just assume that face-to-face interactions among co-workers boost productivity. Instead, consider how you can downsize and use real estate savings to invest in technology or other innovations.

Boutique firms are well positioned to change their practice area mixes as well. For example, if your practice has been litigation-heavy and that’s left you worried about how courts will be able to handle the backlog of civil cases, this is an unusually good time to explore new practice areas.

The shift away from the physical workplace also opens firms up to more options when it comes to recruiting and retaining talent. You can avoid losing lawyers who relocated during lockdowns and want to stay where they are, however far it may be from the office. You can also bring on additional attorneys with their own books of business who previously were too remote. Moreover, the new world of legal services doesn’t require recruiters who cost a big chunk of a new hire’s first-year salary. Instead, a firm can list an opening on job sites for as little as $20/day and get in front of lawyers who can help the firm expand and diversify.

Simply put, the second half of 2021 will present numerous opportunities for boutique firms that are willing to embrace the changes that the last 16 months have brought.

California SB-939 Signals Potentially Major Changes in Real Estate Leasing

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Businesses in California will have an opportunity to rehash traditionally long-term leases if Senate Bill 939 is passed. Applicable to commercial tenants who have experienced a decline in average monthly revenue equal to or exceeding 20% since government restrictions altered the economic landscape, many could qualify “to engage in good faith negotiations with [landlords] in order to modify any rent or economic requirements.”

This provision applies to tenants in food and beverage, entertainment, and performance venues. By its terms, SB-939 would not appear to cover law firms and other professional services companies. Moreover, the bill was recently amended to eliminate perhaps its most far-reaching tenant protection – the ability of commercial tenants to walk away from leases while capping their financial exposure.

Although the protections afforded tenants under SB-939 are narrowing, it is clear that COVID-19 and its aftermath have fundamentally changed commercial real estate. After decades of leaving commercial landlords and tenants to negotiate their own deals and live with the results, the last few months have seen prohibitions on the eviction of commercial tenants and other government interventions that would have seemed unthinkable a few months ago.

In this environment, some law firms are likely to take aggressive action to renegotiate leases. As consultants to law firms, we have already been contacted by managing partners looking to reduce their square footage, especially as relatively few lawyers have expressed enthusiasm about returning to work in a high-rise office.

It would be a mistake for law firms to conclude that they can just walk away from their lease obligations. In this legal and economic environment, it would be easy for law firms to overplay their hands in discussions with landlords. The next few months do, however, provide law firm managing partners with a rare opportunity to address their real estate needs and perhaps negotiate a more appropriate lease.