Consider the Advantages of an Alliance

Published May 22, 2012

Good Communication is One Key to Success

One of the keys to a successful law practice of any size is communication among staff and colleagues, and communication with clients. Smaller law firms have the advantage of being more transparent and having less bureaucracy than larger ones. Clients of such firms typically expect to, and do, receive more personal service. But small or solo firms do not have to be at a resource disadvantage to larger firms that bulk up through formal mergers. Instead, they can achieve their own economies of scale through alliances, from simple to complex, with their peer practitioners.

Advantages of Alliances

Alliances can give small firms big advantages. Law firm alliances using everything from shared space to shared engagements can help smaller firms leverage capabilities without spending on additional overhead or personnel. The decision to pursue an alliance depends on such qualitative factors as whether the practice lends itself to collaboration with other lawyers, whether the firm’s culture is too individualistic to integrate with outsiders, and whether clients will be comfortable if “their” lawyer suddenly starts working with others. Equally important, however, are the substantial financial advantages various types of alliances can offer. Here are three examples:

  • Shared Space Alliances. Rented office space typically takes from 9% to 12% of revenue at most firms. For legal practitioners to share rented space and spread this cost among them offers a variety of options. Some small firm or solo practitioners share space with accountants, brokers and other non-lawyers. Others may be comfortable with a “Fegen suite,” Another strategy is renting an office in a larger law firm on a month-to-month basis, giving both firms an opportunity to refer work back and forth.
  • Collaborative Alliances. An ongoing alliance with another small firm gives the firm that establishes the arrangement a tremendous advantage. From a cost perspective, the expenses involved in direct hiring are eliminated because each participating lawyer/law firm will have independent fee arrangements directly with the client. Here, the lead counsel will receive credit and recognition for having created the team without incurring cost or added overhead. In some sense, the lead counsel may be viewed as the client’s general counsel or consiglieri.
  • Joint Retainer Arrangements. Target clients here are often small businesses that have a variety of ongoing legal needs but are reluctant to put a single firm on retainer without being sure that counsel can indeed handle every issue that comes up. The ideal arrangement is for that firm to offer assurance of being able to call on other allied lawyers for help if the need arises. The lawyer creating the alliance in effect functions as a general counsel to the small business, drawing on other “outside counsel” as needed.

Responsibilities in Alliances

In any such arrangement, the client must agree to it in writing, the total fee must be reasonable, and the lawyers must agree to and document that fee among themselves.

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Audience type: Small Law Firms, Sole Practitioners