The outlook for 2021, Smokeball reported, is very positive.

Over four in five (82 per cent) of small law firms surveyed said that they expect to increase their profitability this year. Most of those firms expect that such boosts to profits will range between 10-15 per cent, while nearly one in five think they’ll see more than 20 per cent growth.

Among the remaining 17.5 per cent who do not expect to see growth, over half of them are predicting declines in profits of five to 10 per cent, and one in four of this cohort expect profits to decrease between 20-50 per cent.

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Reflecting on the profitability findings, Smokeball chief executive Hunter Steele said: “Conveyancers and property focused lawyers have certainly been the winners in COVID-19 times, with the huge increase in property purchases and research across the country, particularly in regional areas. Given the current economic situation, this looks set to stay the pace.”

Impacts on revenue during COVID-19

Expectations about profit are perhaps influenced by the extent to which small law firms saw cash in the bank in 2020.

More than half (57 per cent) of firms said they saw a positive impact on business revenue during the past year. The key drivers for such outcomes, firms reported, were technology adoption (92 per cent), increased appetite for property purchases (69 per cent), managing staff remotely (64 per cent) and workload (62 per cent).

However, over two in five firms (43 per cent) saw an overall negative impact on revenue in the same time frame, with respondents pointing the following factors: courts and process delays (76 per cent), burnout (62 per cent), work-life balance (49 per cent) and productivity (44 per cent).

Challenges to be faced

The survey also explored the most pressing hurdles to be overcome in 2021, with law firms identifying “some very clear pain points”: time management (56 per cent), client management (46 per cent), health and wellbeing of staff (38 per cent), managing costs (34 per cent) and billing and collecting fees (29 per cent).

Some of those challenges, Smokeball noted, may arise from the continuation of remote working. While 68 per cent of respondents had flexible work policies pre-COVID-19, the company mused, one-third of respondents are unsure or not confident that the small law and conveyancing industry is “properly equipped” to manage remote working on a long-term basis.

According to Smokeball CRO Jane Oxley, managing a remote workforce properly will not be a temporary challenge.

“Our survey shows that after the vaccine rollout, more than half of firms expect to have a hybrid mix of office and remote work, while 13 per cent plan on still having everyone work remotely.  As we settle into the future of work, it’s important to not only maintain productivity and collaboration but also team culture,” she explained.

Billing and admin concerns

Respondents further fleshed out their billing concerns, with two-thirds of firms noting they do not believe, or are unsure, if their billing accurately reflects their firm’s completed work.

Just one-quarter of firms know what percentage of their time-billed work is billed daily and 46 per cent posit they are not billing up to a quarter of their work.

Also troublingly, 27 per cent of small firms estimate they are missing billing up to half of their billable items, while 12 per cent think it is more than half.

The reasons for this, Smokeball mused, include: “fixed fee structures, competitive pricing, being time poor, underestimating the time involved and client expectations of a value-add service, as well as the pandemic problem of family demands interrupting work-time”.

On the time management front, firms said that administrative tasks are the “top drainer” of time (35 per cent), followed by emails (25 per cent) and phone calls (24 per cent).

Interestingly, meetings only account for 1 per cent of lost time, while documents account for 4 per cent. Less than one-quarter of respondents said that they fill in time sheets as they work.

Mr Steele said: “While law firms have largely adopted practice management software, there has until now not been any meaningful way for lawyers to track their time and activity so that they can bill properly for their time billed work, understand their profitability on their fixed fee work, and get visibility into their staff output.”

The future of day-to-day operations

Elsewhere, most firms (79 per cent) said that they do not intend to give up or reduce their office space, with just 14 per cent saying they will reduce the size of their offices and only 7 per cent intending to leave the office behind altogether.

Just over half of small firms (51 per cent) don’t believe they will need to entice staff back to the office, one-quarter think the vaccine roll-out will encourage staff back in, 10 per cent think there needs to be more zero transmission days, and 13 per cent said that they cannot see anyone ever returning to the office.

When asked how long it will take to return to “pre-COVID-19 levels of normality”, over one-third (37 per cent) of firms said it will take two years. Fourteen per cent think it can be achieved in six to 12 months, 10 per cent said six months’ time, 9 per cent think three months’ time, and another 9 per cent said things will never revert to pre-pandemic conditions.

Are you looking to launch your own practice but not sure where to start? Lawyers Weekly’s Boutique Law Summit returns to Sydney this month, designed for individuals who are looking to maximise their competitive edge in a post-pandemic marketplace. The event will be held on Friday, 26 March at the Four Seasons Hotel with a full agenda available to view here. To learn more about the event, click here.