Bankruptcy boutique law firms can thrive in any economic climate, even when corporate bankruptcy filings are low.
The issue of the ability for boutique law firms in general and bankruptcy law firms in particular to survive in lean times recently made news when — after over 6 decades of practice — Los Angeles bankruptcy boutique Stutman Treister & Glatt announced that it would close its doors at the end of April, 2014.
As Sara Randazzo repoted in the Wall Street Journal Blog: “The firm’s end comes as the number of corporate bankruptcy filings in the U.S. reaches historic lows, in part because of low interest rates that make it possible for companies to borrow money cheaply rather than restructure through Chapter 11. Stutman, historically a debtors-side firm, spent much of the past decade and a half focused on creditor and bondholder representation.”
One firm shareholder told Randazzo that he “traced the decline of debtors work at Stutman to the rise of bankruptcy practices at larger competitors.” Hence, referrals from those larger firms dried up. Some of the Stutman partners are moving to another Los Angeles bankruptcy firm with a broader bankruptcy practice.
How can bankruptcy boutiques thrive in any economic climate?
Law firms traditionally rely on referral networking to generate new business. This leaves a firm more susceptible to competition – as Stutman was from former referral partner large law firms. Some clients however, will be counter-cyclical – and in need of bankruptcy legal assistance despite an overall downturn in the market. But identifying, pursuing and capturing this business is complicated compared to traditional referral networking
Bankruptcy boutiques should, therefore, adopt and deploy two additional legal business development initiatives beyond solely referral relationship new business development to capture more traditional work as well as counter-cyclical work. These two additional efforts will expand a
boutiques exposure to a larger number of potential clients – by adding new and efficient means by which to identify and pursue those clients. They are:
Proprietary new business origination
Boutique bankruptcy law firms in America in particulary are well placed to focus on generating new proprietary silos of business among Middle Market companies – a vast, diffuse sector underserved by sophisticated professional services providers like investment banks, accounting and law firms. This effort requires the adoption of sophisticated business development practices unusual for boutique law firms – but which have been demonstrated to work effectively in some American boutique investment banks. These efforts would be centered around data on Middle Market companies (revenue, ownership structure, geography, etc) – used effectively to create ideal new client prospecting activities (utilizing industry specific knowledge of firm practitioners among others) carried out ideally (but not necessarily) by trained professionals within the firm specialized in the entire cycle from new client identification – to pursuit and capture of new business. This effort can be modified to what each boutique wishes to undertake – scaling it up or down as is needed.
Sophisticated social media engagement
Boutique bankruptcy firms, as a result of their rarefied services offer – are unique in a marketplace where generalist law firms are numerous. However, many potential referral sources and clients — will often be unaware of a particular boutique – irrespective of how well that boutique may be known within traditional referral relationship business networks. Hence, boutique bankruptcy law firms should publish sophisticated blogs dedicated to issues of importance to their target client base – with an aim to becoming among the leading sources of information on the subject. This effort, expertly and diligently applied – would serve to broaden a boutiques potential sources or new business. Too, this effort can and should be integrated into the proprietary new business origination efforts I described above.
Each boutique requires a unique business development plan
Each boutique law firm – whether bankruptcy focused or not – is unique – and the two core concepts I’ve outlined above can and should be tailored to the particular needs of each firm who may wish to deploy them. In the end, bankruptcy boutiques can thrive in any economic climate – but face a competitive marketplace that requires them to adopt sophisticated, custom business development initiatives in order to most effectively do so.