What are the biggest risks to SME law firms emerging from the pandemic?

Mike Stevenson at Iceberg says SME law firms must carefully manage their financial liquidity situation and balance this against talent retention needs as government-backed Covid-19 business support winds down

We are now well into the second quarter of the year, which has so far proved just as unpredictable as the last. Many law firms will still be sticking to the approach they’ve applied throughout 2020 – doing their best to predict which financial challenges might be on the horizon and then planning for the worst-case scenario.

However, as we look to the second half of the year, some risks stand out as more significant than others. There are also some considerations to make and measures to take in order to ensure the rest of 2021 (and beyond) is as smooth sailing as it can be.

Making the most of the support available  

Now the Coronavirus Business Interruption Loan Scheme (CBILS) has come to an end, firms that have successfully applied for the funds need to also consider the best way to use them.

If legal businesses have successfully applied for one or more CBIL, they might want to use those funds as a buffer to create long-term, stable liquidity. Firms can consider more short-term financing options for expenses due in less than 12 months, which are tailored to this purpose.

Managing the end of the furlough scheme

The Law Society’s financial benchmarking survey recently revealed that a third of law firms are planning to make redundancies once the furlough scheme ends.

The scheme has proved an invaluable lifeline for many businesses and dealing with it coming to an end will take thought and careful planning. Whether they are considering redundancies or not, firms should ensure they are in a position of high liquidity by the end of September, in order to manage the change as stably as possible.

It’s also key to consider employee communications carefully during what will be a sensitive period across many businesses. It’s important that employees are kept in the loop, particularly considering many will be feeling anxious about the possibility of redundancy. Employee communications during this time should be clear, honest, empathetic and people-centric.

Talent retention

However, it’s vital for the legal sector to remember it is a people-driven industry, where competition for talent remains fierce. As the industry stabilises post-pandemic, the challenge to retain high-quality fee earners will once again top firms’ lists of priorities.

Some data published during the pandemic suggests solicitors are looking for more flexibility in the workplace. Some larger firms have already responded to this trend by announcing permanent flexible measures, allowing solicitors to choose whether to come into the office or work from home.

On top of this, legal SMEs need to consider whether they are offering the right opportunities for young talent to develop and thrive within the firm, with adequate chances for growth and progression. Talent retention includes more than retaining quality senior staff – legal businesses must also grow and nurture talent from within and motivate those people to stay for the long-term.