Small, specialised law firms are becoming more prevalent – and more profitable – even as the big firms continue to merge and consolidate, and mid-sized practices establish global footprints. Meet some of the pioneers who have discovered the benefits and challenges of establishing and maintaining a boutique law firm.
In late August 2015, Karen Espiner invited Carol Younes for a Saturday morning meeting at a café in Five Dock. Younes didn’t realise it at the time, but her then colleague had more than a caffeine hit in mind. “I thought it was just coffee with a friend,” says Younes. “But by the end of the meeting, Karen had not only raised the idea of starting a firm, she had also convinced me that running our own firm would mean working fewer hours. She had the whole concept mapped out in her favourite yellow notebook.” They resigned the following Friday and scrambled towards the start line. “We didn’t have anything in place,” says Espiner. “We didn’t even have unrestricted practising certificates.”
Today, Younes + Espiner Lawyers has expanded into a firm with six solicitors and, having outgrown a second set of offices, recently moved into a larger space “with a view”, says Espiner. They have also been recognised as a “first-tier” law firm in both the 2016 and the 2017 Doyle’s Guide for NSW Leading Criminal Defence Law Firms. However, the dream of spending less time at the desk, especially when they were getting the firm off the ground, hasn’t quite come to fruition.
“I don’t know what happened, but we are definitely not working fewer hours,” Espiner says. “Right from the outset we were our own secretary, receptionist, mail man, IT support and accountant. We did everything, and for a period of time it was a really heavy workload to balance.”
“We’ve been very fortunate,” says Younes. “We’ve had great support from people in the industry and we’ve built really good relationships over the years, which means we are referred a lot of work. We’ve also managed to build a great team of lawyers and support staff in a short time, which is critical to running a successful practice.”
That’s not to say there weren’t nerves from the outset. “I always feared going out on my own because I knew I couldn’t do it all myself,” says Younes. “Being able to share that load with someone else who I work really well with, who I like to work with, and who my clients feel just as comfortable with was the only solution.”
The story of Younes + Espiner is part of an ongoing trend towards smaller, more boutique firms. Among the eight comparable practice areas covered by the 2008 and 2016 Urbis NSW Profile of Solicitors reports, seven showed an increase in the number of firms with one to four partners working in those areas. In some areas, the number of firms of this size grew significantly. Some notable examples include family law (a 17 per cent increase), wills and estates (24 per cent), criminal law (21 per cent) and corporate law (45 per cent).
Right from the outset, we were our own secretary, receptionist, mail man, IT support and accountant. We did everything, and for a period of time it was a really heavy workload to balance.
Younes + Espiner Lawyers
These numbers are backed by more qualitative analysis in the latest Thomson Reuters Australia: State of the Legal Market white paper. There, the authors noted the growth of global boutiques, defined as “the Australian office of an international firm that practises in Australia in selected practices (not full-service) [with fewer] than 30 partners” as well as “boutique start-up firms [that have traditionally] focus[ed] on one particular work type, such as employment or corporate M&A”.
Macquarie Bank’s 2017 Legal Benchmarking Report also noted that small firms (those with a gross annual revenue below $4 million) “achieved some of the fastest growth rates and highest profit margins in our survey”.
Although it did not categorise the firms as “boutique”, the report noted they “tended to be specialists, earning a high proportion of their fees from relatively few practice areas”. And while it did not report on the number of firms, it did focus on their increasing profitability: small firms saw an average fee growth of 12 per cent from FY2016 to FY2017, outstripping the 5 per cent growth of mid-tier and large firms.
Stephen Polczynski is managing partner of Polczynski Lawyers. In March, his two-partner firm, Polczynski Lawyers, will merge with Robinson Legal, expanding from their team of 10 lawyers to one with 17.
To increase their global footprint, Polczynski’s firm is a member of LAWorld and he is the founder and chairman of ACQUES, a legal global network providing international underwriters with specialist trade credit, surety and insolvency advice.
It’s all about focus
For Polczynski, being boutique is less about the number of lawyers and more about its focus.
“A boutique, primarily and principally, is one that does certain business lines very well and specialises in those areas without trying to do everything,” he says.
“It doesn’t try to be something for everyone. We are not trying to offer every service like a lot of the mid-tier law firms.”
Polczynski believes one key advantage boutique firms have over larger firms is the lack of bureaucratic layers.
We don’t have as many conflicts, the politics associated with large firms, or the difficulties in being part of a global firm where partners take direction from New York or London.
Managing Partner, Polczynski Lawyers
“We are able to work in a streamlined fashion that major international law firm often can’t,” he says. “We don’t have as many conflicts, the politics associated with large firms, or the difficulties in being part of a global firm where partners take direction from New York or London.”
Being part of a smaller team also brings an individual’s work into sharper focus.
“You can see someone’s worth more easily in a boutique firm,” says Polczynski. “There really is nowhere to hide. I also think that if you are progressing as a young lawyer in a boutique, it’s going to be based on the quality of your work and not on an expectation that you’re putting in 12 billable hours a day.”
Give me flexibility
Small firms are also allowing lawyers to break out of the traditional legal pathways. For Rhys Bower and Nick Wood, who formed Bower Wood Lawyers in Wagga Wagga a year ago, starting a small firm was about creating both professional and personal flexibility.
“Before we started the firm, getting rid of the timesheet was a pretty big topic of conversation between us,” says Bower. “As was getting away from a model where you needed to pour in more and more of your time and your life in order to have financial success.”
Wood agrees that not having a distinct sense of destiny was a key reason to move beyond the firm he was with for almost a decade.
“We didn’t really know where we were going to end up, and to an extent we still don’t know where this journey is going to take us,” he says.
“But we have the freedom to go anywhere, whereas where we were, the path was pretty well trodden and pretty well defined.”
However, he does confess that stepping off that path is not without its perils.
“Lawyers are trained to be risk-averse,” he says. “You get comfortable doing what you’re doing. You know how to do it well and you stick to it because you are good at it. That’s why many people stay in the more traditional firms.”
And, adds Bower, there was no guide for going it alone. “There’s no manual you can pick up that says ‘Here are the things you’ve got to do to open your own firm in 60 days’,” he says. “There are no precedents.”
Even in larger or more established boutique firms, maintaining efficient systems can be a trial. For Polczynski, upsizing his firm will allow him to address some of these administrative issues.
“Part of the challenge is having the right personnel in the operations side of the business so I am not intrinsically involved in day-to-day operations,” he says.
But the challenges of starting and running a boutique firm are often offset by advantages that are sometimes less than tangible. “One of the biggest pros is having a role which involves supervising, assisting and helping younger lawyers in our team,” says Espiner.
“We’ve seen them really flourish and develop their careers, and even though it hasn’t happened by design, being a firm that is currently all women is something we’re really proud of. I see real value in women in the workplace, especially in this particular area of law, which I think some people don’t necessarily understand or see.”
Younes agrees. “I think it’s really exciting and positive for the up-and-coming young females in the industry. We took a risk, and in a short time it’s paid off better than we could have imagined.”
For Wood and Bower, too, the non-legal part of their new enterprise has been extremely satisfying.
“When you’re running a business, you get to run a business,” says Bower. “When you’re in a big firm or a medium firm, you don’t get to run the business. You can spend your time being a lawyer, which some people might prefer, but for us making decisions and operating the enterprise is really rewarding and as interesting as the lawyering side of the business.”
When you’re in a big firm or a medium firm, you don’t get to run the business. You can spend your time being a lawyer, which some people might prefer, but for us making decisions and operating the enterprise is really rewarding and as interesting as the lawyering side of the business.
Founder, Bower Wood Lawyers