As sole traders expand, they can’t forget they’re running a business says Dorian Crighton
This article was produced in partnership with Baker Tilly Staples Rodway Christchurch
For many lawyers, starting out solo or in a small partnership feels natural. The focus is on practicing law, serving clients and building a solid reputation – but as law firms grow, there comes a moment where it’s no longer just about the profession. It becomes about running a business, and that shift can be surprisingly tough.
Dorian Crighton, business advisory and specialist services director at Baker Tilly Staples Rodway Christchurch, says this shift can be particularly challenging for mid-size law firms as they expand. Many firms don’t realise the difference between practicing law and running a business, and set themselves up for pitfalls as a result.
So, what does that shift actually involve? From business planning to cash flow, technology to succession, law firms stepping into this new phase have a lot to think about.
According to Crighton, the most overlooked step is often the most basic – creating a business plan.
“A lot of law firms, even larger ones, don’t have that,” Crighton tells NZ Lawyer.
“They’ll have a basic idea of goals in terms of fees and partners, but that’s not a full business plan. You need to understand marketing and sales discussions, pick a leader for the team, have risk reviews, shareholder agreements, etc. You’ll have to have good cash flow and monitor it properly.”
When it comes to finances, Crighton points out that billing isn’t the same as collecting the fees and monitoring cash flow. Lawyers will often lose sight of factors like billing client communication, the cash flow cycle, and how the client interacts with the accounts receivable process. This disconnect can lead to payment bottlenecks that catch firms off-guard.
“Lawyers are great at practicing law, but very few have done business courses or anything similar, and that means they can come up against challenges during that transition,” he notes.
“Having a strong oversight on these factors from the start will really help in the long run.”
One of the more recent challenges for law firms has been adapting to remote or hybrid work environments. Increased flexibility has been a positive for many, but ultimately, law is still a people business.
“There are the pressures of trying to run a remote practice without getting people on-site,” Crighton notes.
“Firms want to have collegiality, and to bounce ideas off of each other – but there’s always a trade-off if you’re too stringent about it. This means you have to be mindful of your team, which can be a new experience for lawyers who have not had to manage people before.”
Then there’s the future to think about. Crighton notes that for any practice with two partners or less, succession planning is important – otherwise, lawyers may find themselves reaching retirement age with no exit plan.
Crighton also stresses the need to look ahead at the broader picture and plan for anything unexpected that might affect the industry at large.
“Having a crisis plan is vital, mapping out the ‘what ifs’,” he explains. “It might not help you immediately if you’re in the middle of COVID, for example, but it will help you recover much better on the other side.”
Finally, there’s the all-important factor of technology. AI is rapidly gaining traction in the legal industry and lawyers can start by automating admin to offer better client experiences. Crighton points to something as simple as making it easy for clients to pay.
“Roughly 60–80% of emailed invoices are opened between the hours of 7–10pm,” he says. “Unless you have a portal for payment, you’re discouraging the ability for payments to happen quickly. Practices really need to lift their technological game.”
At the end of the day, growing a law firm is about mindset. Crighton reminds lawyers: “If you’re growing, really look at the basics. What do you want to look like in five years? If you want to bring in someone new, what will the impact be on your numbers?
“Your biggest client is now your business – and you need to treat it with respect.”
