Based on research I have undertaken regarding demographics of the legal profession in NSW over the last few years, I've projected changes for the next 10 years from statistical information available from the Law Society of NSW. I believe the information is especially thought-provoking.

First, based on current patterns, there should be around 10,400 private law firms in the state by 2020 - up from 3725 in 2003. However, I suspect that we have had a surge in sole practitioners as a result of many firms shedding staff over the last year or so. As a result, I think we are likely to see a slowing of this and so we may not actually reach this 10,400 mark.

However even if it was "only" 8000, that greatly exceeds projected population growth and when one realises that much of this growth has and will be among suburban solicitors, it is going to be an increasingly crowded marketplace.

If you are in this space, some form of specialisation is vital to create a point of difference as is the ability to premium-charge.

The recent shedding of staff, particularly from larger firms, must represent opportunities for medium-sized firms to pick up experienced practitioners in particular niche areas.

Medium-sized firms face the challenge of retaining good people to provide them with the gearing necessary to be profitable. The increased number of lawyers should assist in this regard. A strategy of targeting good sole practitioners should help - although managing dilution of equity will need careful thought. A sole practitioner brings zero gearing with them.

The Law Society of NSW also predicts a continuing reduction in the number of two to four partner law firms - by 2020 representing just 11.5 per cent of total firms. I agree that this will probably occur, and I say this because a sole practitioner can react more rapidly to the marketplace and quickly satisfy client demands. Small partnerships often lose the ability to react quickly because they have to have a certain amount of infrastructure to be able to operate - and yet there is not the economy of scale to allow them to have the level of support services that the larger firms have. I think the best strategy for firms in this space is to try to move out of it. Such firms need to merge or acquire to double or quadruple their size as quickly as possible.

The trend of an ageing profession is going to have an effect within law firms that have a number of non-equity lawyers. Progression to equity is going to slow down. This leaves firms in danger of losing their senior lawyers if they get frustrated at lack of progress. The best strategy to deal with this is for senior equity holders to start a gradual selldown of equity to tie in their senior people and to let them "touch and feel" a future which has them in the driver's seat.

Paul Matthews is the managing director at MatthewsFolbigg