Every law firm wants to provide a top-quality service to their clients. However, do lawyers in larger firms recognise that giving clients the best service might mean referring them to a smaller law firm?
When do referrals work well for larger firms?
The types of enquiries that a larger law firm might receive and refer are things like:
- A small business handling their first experience of a contentious situation
- A small business not having the budget to pay a larger firm that is likely to have greater overheads than a smaller practice and so wouldn’t be able to be as cost-effective on fees
- A larger, long-standing client with a claim that’s suitable for the small claims track or a claim that wouldn’t be cost-effective for the client to instruct a large firm to deal with
- Discrete, ad hoc queries from prospective clients who want a lawyer’s opinion. Perhaps that’s an opinion on a contract, or what to do next in a dispute, for example.
That’s not an exhaustive list, but it gives you an idea. We’re not talking about multi-million pound disputes. It’s the sort of work that fits within a client’s smaller budget, and tends to be for clients who aren’t yet long-in-the-tooth in business disputes.
Why it benefits larger law firms to refer the work
It may seem counter-intuitive for any law firm to turn away work. But there are several advantages to larger firms in referring work to a smaller outfit.
1. Improved profitability
Larger law firms have staggered hourly rates for different levels of seniority, and in the round those rates tend to be higher than smaller firms. The model works well for big ticket litigation. But for matters restrained by budget, the firm often takes a hit in terms of write-offs or reducing the hourly rates. It’s more profitable for larger firms to focus on higher value litigation.
2. Keeping clients happy
Long-standing clients see you as their go-to firm. They know you, like you and trust you. You can actually enhance that trust by advising your clients to work with a smaller firm on discrete matters. Explain that they’ll benefit from the advice of equally senior lawyers, but who can complete the work within budget.
Clients respect that sort of honesty and transparency and will continue to trust you with their complex matters.
3. Building a strong referral network
Referrals work both ways. Smaller firms often receive enquiries for large matters which require more resources than they have, such as large-scale disclosure exercises, or multi-party litigation. Or we get enquiries that are outside of our specialisms. We refer work to law firms that we know have those specific departments.
If you’ve built a network of referral partners, you’ll receive more of the high-value matters, and work that fits into the wider strategy of the firm.
Why smaller law firms are often better placed for the work
The way large law firms make smaller matters more profitable is to ask a junior lawyer to carry out most of the work, with light-touch supervision from a more senior lawyer or a partner. But smaller firms can work on more flexible pricing structures. That means that the client has an experienced lawyer working on their matter, at a fraction of the cost of a partner.
This works particularly well for clients who aren’t familiar with litigation. With the benefit of experience, we can walk a client through their options, and the possible routes through their dispute. We make them feel comfortable at a stressful time, with the reassurance of years of experience of similar situations.
We often work on fixed fees, so no matter how many calls or meetings the client needs, the price won’t escalate beyond their budget. And we usually have one lawyer on each matter, so the client has consistency and continuity with one person. Being a smaller firm means that we can dedicate this additional time to the smaller matters, without being pulled in all directions to hit utilisation, billing and profitability targets.
When you refer work to us, you can rest assured that we’ll give clients an astute, yet personal service with certainty on fees.
There’s a time and a place for every size of law firm. Sometimes that’s the big’uns, and sometimes that us little guys.
If you’d like to have a chat about the types of referrals we can pass between us, please contact me on LinkedIn. I’d love to meet more lawyers looking to build their referral network.
Catherine Hyde
Founder, HooperHyde
