How can law firms meet SME clients’ evolving needs?
NAB’s inaugural Legal Services Industry Survey offers key insights into what SMEs truly need and value.
Lawyers are critical to SMEs. But that doesn’t mean they get it right every time. In NAB’s inaugural Legal Services Industry Survey, we find out what SME clients really need, want and value – giving lawyers unique insights into how they can better service clients.
Australia’s SMEs are quite prepared to switch law firms, according to NAB’s Australian Legal Services Industry Survey – a comprehensive study of 70 law firms and over 750 small and medium-sized businesses. In fact, more than one in three SMEs has changed their lawyer in the past five years, and almost one in three has done so within the past 12 months.
It’s not that law firms aren’t valued. NAB’s survey also found that lawyers are the second most used professional services provider after accountants, and they’re rated highly by SMEs as business advisers. Indeed, they scored 7.3 marks out of a possible 10 in this regard – the second highest ranking, again after accountants.
Understanding brings opportunities
At the same time, SMEs are important to lawyers. They make up almost one third of law firms’ revenue (31 per cent, according to NAB’s survey). “For law firms looking to grow, these SME customers represent a significant opportunity,” says NAB Customer Executive Professional Services, Brett Moore. “If they can be serviced well.”
That comes down to knowing your client. Better understanding what SMEs think about their law firms – and comparing this with what lawyers think about their clients – was the driving force behind NAB’s survey. The aim was to provide an in-depth study of what clients actually need and value. “We saw it as a wonderful opportunity for law firms to gain valuable insights into their SME clients,” Moore says. “That way, they can aid the growth of their practice and further support their SME clients.”
Know your client
NAB’s survey findings suggest that there are a number of areas where lawyers may be able to finetune their offering.
When asked why they were switching law firms, SMEs pointed to several reasons that could have been avoided. For instance, most SMEs said it was as a result of fees being too high (40 per cent), while about one in four reported that their provider didn’t understand their business (26 per cent) or were poor at responding (23 per cent). About one in five (18 per cent), meanwhile, was put off by work being done at the last minute.
Lawyers need to be aware of these issues if they are to adequately deal with them. But that in itself can be problematic. “The message is clear from SMEs that lawyers aren’t taking enough time to understand them and their business requirements.” Moore says.
Signs of misunderstanding
In fact, NAB’s survey highlights a number of discrepancies between what lawyers provide (or think they should provide) and what SMEs actually want.
For instance, almost one in five (19 per cent) SMEs put taxation law in their top five most frequently used legal services, but just four per cent of lawyers consider this to be a service that their business customers most use.
Pricing – above and beyond high fees – is also an issue, according to the survey. Most SMEs told NAB they preferred fixed fees (40 per cent). Yet only 20 per cent of lawyers considered this to be the case. In reality, 40 per cent of SMEs are being billed for services hourly and only 30 per cent via a fixed fee.
What’s in a fee?
While Moore acknowledges not all legal work can be done on a fixed-fee basis, he says the findings should prompt further discussion with SME clients. “This presents an opportunity for firms to reflect on their current cost models,” he says.
George Beaton, founder of research consulting firm beaton, a leading specialist on professional services, agrees, noting that fixed fees can be a win-win for lawyers and their clients. He points to US research by legal industry consulting firm Altman Weil showing that law firms that charge fixed fees actually make more profit than those charging variable fees for similar work.
Finding your niche
Of course, not all client issues can be readily overcome. Of those SMEs who switch firms, some may be simply looking for a lawyer who meets their particular needs at any given time. After all, NAB’s survey found that SMEs prefer niche expertise above all, with almost one in five (19 per cent) indicating that they most often seek the services of a specialist – a higher proportion than any other type of firm.
This might also explain why many SMEs are using the services of more than one law firm. In fact, almost half (46 per cent) of NAB’s SME respondents were relying on two or more firms; for example, one for employment law and the other for property-related work.
Again, it comes down to law firms knowing their clients – what they want, what they need – in order to better shape their offering.
Making the most of digital
Technology is an integral part of doing business these days – it can help service clients better and also lower costs. According to NAB’s results, law firms believe they are “change ready” for emerging and potential disruptions in new technology. However, this is in stark contrast to businesses in all other sectors.
Beaton is sceptical of law firms’ supposed readiness: “What we know is that of the technologies available to lawyers today, the majority do not maximise the benefits of them; they just don’t know how to. They’re using 10 per cent of the technologies’ capability.”
Time will tell how well prepared law firms are, but clearly it’s something that requires serious consideration if they are to stay ahead of the game. Then again, they might be reassured to learn from NAB’s research that law firms and SMEs both agree technology will never replace the skills of a good lawyer.
A new way of doing law
Technology aside, there’s also the rise of non-traditional firms to contend with. ‘NewLaw’ firms, as they’re known, tend to be a corporation; that is, owned by shareholders and run by directors. These firms reimagine a whole range of services for clients – plus how they are delivered and at what cost.
While NAB’s survey found that traditional law firms had faced very little competition from these new-style firms over the past 12 months, they shouldn’t be dismissed. “They’re gathering momentum and they’re absolutely competing with traditional firms,” Beaton says.
He argues that SMEs are naturally attracted to their offering because, at the end of the day, “they like to deal with a small business like themselves”.
The bigger picture
As Australia’s biggest business bank, NAB understands that lawyers provide a critical service to Australia’s SMEs. That’s why its inaugural Legal Services Industry Survey aims to provide an insightful study into what SMEs truly need and value, says Moore – so law firms are equipped with the tools they need to grow their practice while supporting the growth of Australia’s SMEs, “the engine room of our economy”.
At the same time, our Professional Services specialist bankers are committed to really understanding their clients – connecting them with the right insights, information, contacts and financial support at the right time. To learn more about our Professional Services support, visit nab.com.au/profservices. Alternatively, to speak to a Professional Services specialist banker about how they can help your business, request a callback.