Top 10 Challenges of Running a Law Firm

In a recent Platforum9 Session, Tom Bohills, founder of Founders Law, shared valuable insights about the key challenges of running a law firm. Drawing from his experience growing his firm from a solo practice to nearly 30 people over three to four years, Bohills outlined the top 10 challenges law firm leaders like him face.

1. The Lawyer-to-Manager Transition

“You start a law firm because you’re a good lawyer,” Bohills explained, “And you end up having to become a manager, someone who’s decent at finance, marketing and sales.” This transition is particularly challenging because lawyers are trained to be analytical and detail-oriented, but not necessarily to handle:

  • Marketing budgets
  • Personnel management
  • Compliance issues
  • Financial planning

2. Maintaining Service Consistency

As firms grow, maintaining consistent service quality becomes increasingly challenging. Bohills noted: “You go from being a one person and you very much know what your skillset is and how you deliver your advice to trying to mould them into your image of what you think the law should be like.”

3. Managing Client Diversity

Different clients have varying:

  • Risk profiles
  • Business needs
  • Communication preferences
  • Previous experiences with lawyers

As Bohills observed: “Some of whom (clients) want to know every single detail in the contract and others who basically say to you, if it’s more than three lines, I’m not reading it.”

4. Managing Peaks and Troughs

Law firms face significant challenges in managing workload fluctuations. Bohills explained: “You are not a piece of SaaS. You are not just doing a monthly subscription. You get times when you are incredibly busy and everyone’s very stretched and then you have a month where things die off.”

5. Talent Retention

In a competitive marketplace, retention is crucial. Bohills’ firm addresses this through:

  • Remote-first working
  • Flexible part-time arrangements
  • Realistic billing targets
  • Transparency in financial performance
  • Team involvement in firm growth

6. Bills and Fees

Estimating fees has always been more of an art than a science and doing it accurately is challenging due to:

  • Changing client requirements
  • Scope creep
  • Educational aspects of client relationships
  • Different client needs and expectations

7. Compliance Requirements

Bohills highlighted the significant cost of regulatory compliance: “We’re SRA regulated. We’re insured. We have to carry out KYC and AML for every single client.” The cost can be substantial, particularly for:

  • International clients
  • Complex ownership structures
  • Sanctions compliance

8. Financial Liabilities

Law firms face significant financial exposure and potential bankruptcy from:

  • Unpaid bills
  • Unfulfilled payment plans
  • Client assumptions about law firm wealth
  • Client financial difficulties

As Bohills noted: “We have several hundred thousand on file that clients can’t pay. After a series of months, that can get quite painful.”

9. Professional Liability

The high-stakes nature of legal work creates significant risk: “We’re not selling any kind of ice creams. The advice you’re giving has serious real world implications.”

10. High Cost Base

Law firms, unlike other service industries face substantial fixed costs:

  • High salaries even for junior lawyers
  • Long notice periods
  • Professional insurance
  • Operational expenses

Additional Considerations

Cash Flow Management

A crucial addition suggested by participants was cash flow management. As one participant noted: “There are plenty of profitable businesses that go over the wall, and it’s based purely on cash flow.”

Technology Integration

While not listed in the top 10, the role of technology was discussed, with participants noting that its importance varies by firm type and client expectations. As one participant observed: “The idea of using AI can be your best asset or your worst asset because you want to differentiate from the market.”

Remote Working Considerations

Bohills shared insights about their remote-first approach:

  • Maintains an office for 12 people despite having 30 staff
  • Hosts client meetings and social events
  • Provides space for junior lawyers to collaborate
  • Balances cost savings with practical needs

Conclusion

Running a law firm requires balancing multiple competing demands while maintaining high service standards for clients and managing significant risks. As Bohills demonstrated, success requires not just legal expertise but also strong business acumen, people management skills, and strategic thinking.

The challenges are particularly acute for growing firms, where the transition from individual practitioner to business leader requires developing new skills and systems while maintaining the quality and consistency that clients expect.

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