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Is the law of diminishing returns a threat for boutique firm owners?
As boutique law firms seek growth and expansion, an award-winning firm owner discusses how the law of diminishing returns can present a significant roadblock to achieving this if not adequately considered.
Grace Robbie
Speaking on a recent episode of The Boutique Lawyer Show, Claire Styles, the principal of C Legal & Co and a former winner of the Sole Practitioner of the Year at the Australian Law Awards, expressed how the law of diminishing returns holds significant implications for boutique law firm owners as it impacts growth, efficiency, and profitability.
In the same episode, she discussed how identifying and capitalising on a firm’s “low-hanging fruit” can serve as a pivotal strategy for boutique law firms seeking to enhance operational efficiency, strengthen client relationships, and drive profitability.
She elaborated on the concept of diminishing returns, stating that when “you increase your input” – whether that’s time, resources, or labour – while your “output is decreasing”, the cost of that additional input “is greater than the benefit” it generates.
Styles explained that, as the principal of a conveyancing law firm, she encounters this phenomenon regularly by showcasing a practical example of what she has to navigate.
“As a principal of a law firm, if you don’t have a conveyancer and you’re doing all of the conveyancing work yourself, you don’t have time to bring in more work. You’re sitting there, and you’re doing settlement statements, and you’ve got deadlines to deal with your current clients,” she said.
“There’s a huge input required in conveyancing. If you don’t leverage that out and hire conveyances and paralegals to support a practice that requires volume to be a successful conveyancing practice, your input is so high and so great that those fees and what you’re receiving ... the costs outweigh the benefit.”
Styles pointed out that the law of diminishing returns is a concept frequently encountered by owners of boutique firms, as these individuals are often required to assume multiple roles and responsibilities within their organisations.
“Especially as a boutique law firm owner, you’re wearing so many hats. You are wearing the business hat; you are wearing the principal of a lawyer hat; you are wearing the responsibility of being a lawyer hat. You’re also managing the staff that you have,” she said.
Styles stressed the necessity of engaging in self-relation to break from this cycle, as this process allows individuals to discern the aspects of their business that they genuinely enjoy.
By identifying these elements, she elucidates how one can delegate responsibilities effectively and enlist others to manage those tasks while also allowing firm owners to reclaim their time and focus on activities that align with their strengths.
“By doing a self-reflection piece by saying, what parts of the business do I actually really enjoy?
“Let’s say, for instance, you’re a lawyer who loves lawyering, and you’ve started this firm because you actually want to be lawyering 24/7, and you don’t really want to be bringing in the business or working on the business side of it, you’re going to need a business manager,” she said.
She went on: “Alternatively, if you’re somebody who is an entrepreneur and loves the business side of law, you’re going to hire a lot more support staff to support your firm so you can do what you want to do, which is bringing in the business and having that client relationship and more the high-level kind of dynamics when it comes to operating the firm.”
However, Styles explained that self-reflection should not be perceived as a singular event; instead, it is a practice that she strongly encourages firm owners to engage in regularly.
“I do think there’s that self-reflection piece that comes into play, and also, you know, that’s not just a one-off. I always encourage people to do this in your yearly review,” she said.
“We’re coming up to 2025. It’s a perfect time over the break to reassess and think about how I can actually access this low-hanging fruit.”
