29 October 2012

Legal Entrepreneurship: Looking Beyond a “Book of Business”

by Zack Bombatch, Staff Writer

Several law firms want their potential hires to “think like entrepreneurs.”  Translation: firms want to bring on attorneys who have perfected the art of bringing in new business.  In fact, www.monster.com reveals that several prestigious firms in the Pittsburgh region require applicants to have a “portable book of business,” sometimes in excess of $300,000.  But what should attorneys, ranging from recent graduates to seasoned practitioners, consider “entrepreneurial” such that they will land a position with an esteemed firm?  Are firms only looking for attorneys who have already attained clients with significant monthly legal needs, or is there something more to being a “legal entrepreneur?”
            The American law firm has emerged as a new animal in the wake of the recent enduring economic recession.  Large firms require much more from their attorneys, even their entry-level associates, by mandating their job responsibilities reach beyond assisting in the provision of legal advice and focus more attention of firm-wide business functions.  While the legal industry is a service industry, firms now realize that they must contain internal costs that cannot be passed along to their clients.  Beyond reducing overhead, firms must now, more than ever, identify areas of society that require legal advice.  Instead of reacting to client needs, firms must proactively pursue areas of practice that will generate sustainable revenue streams.   This is not a novel idea; however, the proactive approach to legal counsel now must reach far beyond the next quarter or even fiscal year.  It must reach into the next decade to determine where the surges in areas of legal practice will emerge.
            In the Pittsburgh area,  the economic boom in the energy industry has provided many Pittsburgh firms with the opportunities to create centers of excellence in oil and gas law, property law, and a myriad of other energy-related law; however, this boom is cyclical.  Eventually, the surge in these interrelated areas of practice will subside.  The true entrepreneurial lawyers will be the ones who identify the next areas of law that will ride the wave of the shale industry. The price of natural gas has plummeted to such low levels that companies from across the nation has explored the possibility of setting up shop in the Pittsburgh region.  There is a plethora of legal practice to be pursued in the decades to come.    The energy industry projects an increase of 1.5 million jobs by the year 2035 for the shale regions.  It is important for attorneys to realize that “drilling is just the beginning” is not merely a slogan, but a truth of the region.  What’s next?  Entrepreneurial lawyers will be able to identify the types of businesses that will relocate to their geographical area, those businesses’ future challenges, and the rights and liabilities of businesses and individuals impacted by this new economic activity.
            This entrepreneurial approach to firm growth is not contained to the legal industry.  Several Fortune 500 companies enjoy sustainable success by taking risks that some start-up companies with less than ten employees would pursue.  A study of Asian business models demonstrates that many companies have adopted a “hundred year business plan,” where businesses project the economics boom and busts of the future and structure their plans accordingly in anticipation of these fluctuations.  Maybe 100 years is a bit far in advance for the legal community, but it is not outside the realm of possibility for a firm to develop a 10 or 20 year business plan that will provide structure and predictability as the legal industry wades through the ocean of the changing legal needs of the region.      
            This approach is not and should not be reserved for large firms.  It is likely that medium sized and small law firms who feel the pulse of the region on a very micro level will identify these trends before they even emerge.  Legal entrepreneurship may require firms to fundamentally shift their practice areas multiple times over the course of several years, but if properly executed through calculated risks, these adjustments should be rewarded.  Failure to look well into the future of the legal industry could put many firms at risk for disaster, especially as a large number of firms have struggled to survive this decade’s economic environment and new legal business arena.