The New Normal Is Here to Stay for Small Law Firms

The Second Annual Smokeball State of Small Law Australia Survey released.

The COVID impact of working from home has certainly become the ‘new normal’ for the Australian small law sector with more than one in three small law firms (36 per cent) working from home four to five days per week, a further 20 per cent working from home two to three days per week and only 44 per cent back to working just one day a week from home, according to the second annual Smokeball State of Small Law Australia Survey launched today.  

This successful navigation of a remote or hybrid working model contrasts with the 2021 Smokeball State of Small Law Australia Survey which showed one-third of respondents were not confident that the small law and conveyancing industry was properly equipped to manage remote working on a long-term basis. At that time in February 2022, the majority (79 per cent) were not planning to give up or reducing their office space, with only 14 per cent planning to reduce in size and just 7 per cent planning to give up their office space altogether.

In 2022, Victorian law firms lead the charge in working from home with 41 per cent of respondents working remotely almost full time followed by 39 per cent of Queenslanders and 33 per cent of New South Wales firms.

For two to three days, this drops down to 16 per cent in VIC, 18 per cent in QLD and 24 per cent in NSW. Both VIC and QLD have 43 per cent of firms working one day from home with 33 per cent in NSW.

Business as Usual 

The top five challenges for Australian small law firms in the past 12 months were improving operations and workflows through technology (59%), improving the firm's profitability (53%), growing, or retaining the client base (51%), enhancing the client experience (45%), and attracting, retaining, or upskilling talent (39%).

These challenges are a huge contrast to 2021 where the main pain points were time and client management, followed by the health and wellbeing of staff, managing costs, and billing and collecting fees. 

Jane Oxley, Chief Revenue Officer at Smokeball notes that companies are reverting to a ‘business as usual’ lens, but that the working environment particularly in small law has changed forever. “We are certainly entering a post-pandemic phase in Australia where firms are changing their business focus from staff wellbeing and building their remote working model back to profitability and increasing their client base but are doing this in a wholly new environment and way of working that they are still getting used to. They need to allow themselves that adjustment period and support a flexible working model as the whole team settles into their new normal.” 

QLD firms reflect the general trends in terms of 2021 – 2022 challenges with their top five including: growing or retaining the client base 57.14%, improving operations and workflows through technology 57.14%, improving the firm's profitability 46.43%, enhancing the client experience 46.43%, and managing and/or mitigating compliant risks 42.86%. Their lowest challenge at four percent was to get staff back into the office.

NSW’s top five come in at the same as QLD with improving the firm's profitability 56.76%, improving operations and workflows through technology 56.76%, growing or retaining the client base 48.65%, enhancing the client experience 44.59%, managing and/or mitigating compliant risks 36.49%. Similarly, their lowest challenge was to get staff back into the office but at a higher number of fourteen percent.

VIC’s challenges are similar but with the challenge of attracting, retaining or upskilling talent 45.95% a tougher task that mitigation of risks. They also experienced issues with improving operations and workflows through technology 67.57%, improving the firm's profitability 59.46%, growing or retaining the client base 48.65%, and enhancing the client experience at 48.65%.

The Growth

Over the last 12 months, 19 per cent of firms have enjoyed an increase of 20% or more with an additional 19 per cent of respondents receiving a 10 – 20% increase, 22 per cent reporting a 5 – 10 % increase and 6 per cent an increase of less than 5%.

An increase of more than 20% was reported by 21 per cent of Queensland firms, with 14 per cent at a 10 to 20% increase and 21 per cent of firms seeing a 5 – 10% increase.

22 per cent of Victorians saw more than 20% increase, with the same number reporting a 10 – 20% increase, 19 per cent reporting a 5 to 10% increase and five per cent a less than 5% increase. In New South Wales, profits of more than 20% were seen by 19 per cent of firms, the same percentage receive 10 – 20% profit growth and 24 per cent of respondents experienced 5 to 10%, with 9 per cent of firms a less than 5% growth.

The Decline

In 2021, of the 17.5 per cent who did not expect growth in the next 12 months, more than half expected a profit decline of 5 to 10%, while just over a quarter expected profits to decrease between 20 to 50%. Happily, 88 per cent of respondents experienced no decrease over this period, with 3 percent seeing a 5% loss, one per cent seeing 5 to 10%, 3 per cent experiencing a 10 to 20% loss and 4 per cent more than 20%. NSW firms led the trend with 92 per cent of firms seeing no decrease, followed by VIC at 89 per cent and QLD at 82 per cent.

Of those firms that did experience a decrease in profits in NSW, only 3 per cent saw more than a 20% decrease in profits, and the same number again in a 10 to 20% bracket and in the less than 5% decrease bracket.  In VIC, 3 per cent of firms saw a less than 5% decrease, with the same number again in the 10 to 20% category and 5 percent seeing more than a 20% decrease.  Seven percent of QLD firms saw less than a 5% decrease in profits with 4 percent in the 5 to 10% category, and 7 per cent in the 10 to 20% category.

The Year Ahead

Across the country and sector, the top five priorities for the year ahead were like the last 12 months and include: growing or retaining the client base (83%), improving the firm's profitability (81%), improving operations and workflows through technology (73%), enhancing the client experience (62%), and billing and collecting fees (55%).

This was reflected by all States. NSW also focused on managing and/or mitigating compliant risks (54%) as well as improving the firm's profitability (84%), growing, or retaining the client base (76%), enhancing the client experience (70%), and improving operations and workflows through technology (68%).

QLD’s priorities are growing or retaining client base (89%), improving operations and workflows through technology (86%), improving the firm's profitability (82%), billing and collecting fees (57%), managing and/or mitigating compliant risks (50%).

In VIC, the focus will be on growing or retaining client base (92%), improving the firm's profitability (81%), improving operations and workflows through technology (70%), billing and collecting fees (59%), and enhancing the client experience (57%).

On 17 October, Smokeball Chief Revenue Officer, Jane Oxley and Andrea Foot, Non-Executive Director and Executive Coach, Leaf Logic, will present the key findings of the 2022 Smokeball State of Small Law Survey in a CPD accredited webinar.

Also read top viewed Ai Legal article: The Role of AI in Legal Research.