Covid-19 caused a significant drop in law firm profits. A recent study by U.S. legal marketing firm Martindale AVO shows that 80% of U.S. law firms registered showed profit decline due to Covid-19. Around 27% of these firms recorded a more than half decline in revenues. This is despite the fact that 95% of the law firms sampled continued to accept new clients. The study found that only 5% of surveyed firms raised marketing expenditures.
Although law firms reported lower profits, the demand for legal representation was high. 52% of consumer respondents surveyed stated that they would continue hiring attorneys during the pandemic. Over 40% of consumers were also comfortable hiring lawyers who had adopted communication options like phone calls, video, or email.
Covid-19 Created New Opportunities in the Legal Sector
Law firms navigated the Covid-19 situation well. For every field of law that recorded a decline in demand, opportunities emerged from other fields. For instance, areas such as employment and labor, M&A, intellectual property, and bankruptcy saw a surge in activities.
Vehicular accidents also increased significantly during the pandemic despite the frequently empty roadways due to stay-at-home restrictions. Data collected during the national lockdown shows that there was a noticeable rise in car accidents, increasing the demand for services of a car accident lawyer.
How Law Firms Pivoted to Survive and Flourish During the Pandemic
The pandemic completely disrupted business development in the legal industry. Traditionally, business conferences, casual events, and travel for face-to-face interactions were essential for business development. With all those options unavailable or extremely limited due to Covid-19, many law firms slashed their marketing spending and reallocated it to other areas of business. That move, however, put these firms at risk of losing new opportunities arising from the crisis and becoming irrelevant with clients due to little or no engagement.
A few law firms increased their marketing efforts and spending. They also tailored their strategies to the new world of social distancing. Instead of retreating, these firms brought their clients together, ensuring they were available to provide professional advice, quality services, and guide conversations. Thanks to these well thought out strategies, these firms saw a growth in revenue during the crisis.
Law firms that pivoted and flourished after the Great Recession were able to handle the Covid-19 situation relatively well, as they already had the experience of dealing with downturns. The ALM Intelligence data shows that out of the 100 firms ranked by Am Law, only 27 have managed a year-on-year profits growth since the 2009 financial year. Some of the features that these law firms share include a focus on profitability, thoughtful planning, and succession planning for the management of clients and leadership positions.
Effects of Covid-19 on the Entire Legal System
The courtroom is one of the main areas that felt the impact of COVID-19 on law practice. The number of cases significantly dropped, with hearings delayed, depositions suspended or rescheduled, and deadlines prolonged.
Many cases were suspended or canceled and some courthouses temporarily closed. Courthouses directed their attention to essential court cases such as family court hearings regarding child custody and visitation, as well as criminal bond sessions. Nonessential court activities, including workers’ compensation, evictions, and personal injury, were either postponed or canceled.
Law firms dealt and continue to deal with older clients that need more in-person interactions. Covid-19 has added a layer of urgency to estate planning as clients need to make tough decisions in the wake of potential disability or death. Clients who have been laid off need immediate legal guidance from employment attorneys, as they work through joblessness, non-compete clauses, redundancy pay, and a variety of other challenges.
