Selecting the Most Profitable Sectors for Your Law Firm

Covid-19 continues to force law firms to re-think their business model in response to clients’ needs. As law firm leaders are deciding how best to develop closer relationships with their clients, it is key they consider adopting a sector-based strategy and reevaluate which sectors to concentrate on for future growth.

Focusing on a sector where firms have particular strength allows them to develop deep, profitable relationships, attract talent, and differentiate themselves from the competition.

Identifying the right sectors is an important part of this strategy for a firm’s leadership team. Done wrong, it will have a drain on money and time. Done right, it can enable a firm to further capitalize on existing experience and expertise to grow clients.

Steps to Identifying the Best Sectors

Understanding Clients

Crucial to developing a sector strategy and deciding on specific sectors is identifying and understanding the makeup of a firm’s client base. This will help clarify where a firm is dominant and the information can be leveraged to develop clients and attract new relationships.

This can be done by either segmenting the client base using a customer relationship management (CRM) system to tag clients by sector or carrying out desk research to identify the standard industrial classification (SIC) for each client, and then grouping clients by their primary line of business.

Reviewing recent opportunities to understand where and what type of work is currently coming into the firm from a specific sector is also useful to understand where your marketing and client efforts are working well. This also allows firms to see where further investment can create greater returns.

It is important to develop an understanding of current clients, what they want, and what they expect when buying legal services. It would be incorrect to assume that what works for several clients will be successful with others across the sector.

Sector Knowledge

Clients need firms with a multifaceted insight into their businesses. This includes external, internal, and macro-economic factors that impact their current and future growth areas and that are important to them, such as environmental, social, and corporate governance (ESG). Conducting PESTLE (political, economic, sociological, technological, legal, and environmental) research on the client, sector, and speaking to your clients is key to understanding the challenges clients are facing.

Firms that specialize in one sector should not assume this knowledge transfers to other areas of the same sector. For example, a firm with a reputation for its work with manufacturers in the aerospace sector may not see that success translate into work for clients in the automotive sector. Each sector has unique terms of regulations, commercial drivers around the supply chain, and other operational areas.

Law firms should understand their firm’s market perception and performance in comparison to their competition in a sector. They should review their competitor’s websites, directories rankings, peer-to-peer data sources, and speak to colleagues who have previously worked there to gather insight into their approach, experience, and client base.

Growth and Recession-Proofing

As highlighted with the Covid-19 pandemic, some industries have suffered while others have thrived. Most law firms will have clients in several industries that are dependent on the economy, which emphasizes the importance of law firms having a diversified approach to sectors. A diversified client portfolio ensures that firms adequately focus on more recession-proof sectors to avoid performance issues.

Firms should consider emerging sectors and those with greater potential for long-term growth. For instance, the technology and energy-focused sectors have potential, with many of these companies focused on sustainability.

It is important to regularly monitor developments across various sectors to identify and respond to challenges that will impact clients and their growth. Reviewing analyst reports and live tracking the S&P 500 index and Financial Times Stock Exchange Group performance can help gauge sector performance.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Dominic Ayres is a senior client development manager at Eversheds Sutherland. Based in England, he is responsible for the development and growth of international client relationships and sector strategy for the Industrials sector group across Europe, the Middle East, and Africa.