The Niche Advantage: Why Narrow Firms Are Out-Earning Generalists

Welcome to the Dominate Law Podcast. I'm your host Angie, and today's conversation is about a decision many law firm owners eventually face. Do you keep expanding your services or become known for doing something exceptionally well? Well, this episode is proudly sponsored by Equa Marketing, helping law firms strengthen their online visibility, communicate their value clearly and attract more of the right prospective clients.

Equa is also offering Dominate Law listeners a complimentary 60-minute growth strategy meeting. Their team will look at how visible your firm is to the clients you want, whether your website clearly communicates your expertise and where potential clients may be dropping off before contacting you. You can book your complimentary session at www .dominatelaw.com slash MSM. Joining us today are Delina Yasme, a business and mergers and acquisitions attorney with a strong background in accounting and taxation, and Stephanie Watchman, founder and CEO of Symmetry Strategies, who has spent more than 20 years helping lawyers strengthen leadership, business development, communication and professional growth.

We're talking about how to identify the right niche, protect revenue during the transition, communicate your value and build a practice around the work you want to be known for. Let's get into the conversation. So what changes are you seeing in how business clients choose specialized law firms over generalists, particularly when dealing with complex transactions or legal risks? Absolutely. So let's actually go back to 1933.

As a tax specialist, I am a little bit of a history buff. And back in 1933, the Rockefeller families had their office in New York and they had a room. It was known as Room 5600. It was actually three floors of the Rockefeller building. And they had at the time over 300 legal and financial experts that were working for the Rockefellers day and night. And these people were assisting them with all of these complex legal and tax business decisions.

So in this day and age, what I am seeing is a major change in trend on the way business is being conducted. And what I mean by that specifically, I've noticed in the last few years we are seeing more and more businesses that are going out on their own. And with the current technology and the capacity that boutique firms have, we are seeing, I wouldn't say smaller, but I would say entrepreneurs, business owners and the middle market already understanding that they need a deeper level of strategy that was once preserved for those families like the Rockefellers.

And at that time, the accessibility was not there. So what I'm seeing right now in particular, two things. I have clients that are coming to me and it really just boils down to the same. But I have clients that come to me either. Number one, these are people who come to me very early on in the startup phase of a business or very early on in the sale because they know that they need a specialist. This usually is coming from either years of experience or just having the common sense and being well researched enough to understand their needs.

And the other thing I see is the people who already went to a generalist or already did the thing the wrong way. And at this point, they are coming to me because something has gone wrong. So in M&A, it may be that they were not dealing with an attorney. They did not have the right guidance in place. And now they've gotten to a point in the deal where things are starting to fall apart. With a startup, it may be that now we have two business partners that are in a disagreement and we are realizing that their operating agreement is an absolute mess and it does not hedge for all of the issues that are arising.

And I truly believe that as businesses are moving more towards becoming brands and having an identity and an online presence, they are recognizing the importance of having the legal and tax perspective thought about well in advance. So in terms of for me, the change I'm seeing is I'm seeing clients wanting to come to me earlier on and they are more eager. And I do not have to do as much to explain the value. They are already seeing what's necessary and they are on board to begin working with me.

No problem. Now, Stephanie, what Dalina was talking about actually brings us to an important challenge. A firm might have excellent attorneys, but if it cannot explain what makes it different, prospective clients may never recognize that value. So where have you seen law firm leaders struggle to communicate their firm's value when serving too many practice areas, particularly during business development conversations?

I think that is a very big issue, especially now when we take a look at what is making a law firm more distinct from another law firm. And it's always boils down to the relationships that they have. So basically, it's like, what are we known for? But then what are the relationships that we have with our clients and with the markets that we serve? How do we communicate what we do best through different media types, through different conferences, CLEs, whatever it may be?

But also, individual attorneys are often not taught how to pitch the firm. They are very good at pitching themselves. So I can say, hey, I'm a real estate lawyer or I do this. So it's very much siloed and individualized. And very often there's not a lot of cross training on terms of how this is how we sell the firm. This is how we promote the firm. And it depends on the firms in terms of what they offer. So I work with some very large firms and they do a little bit of everything and they do it all really well.

And each department does it really well. But when the lawyers are engaged in the client relationship, they're not always sharing what the other departments do as well. And I think that's an opportunity that's often missed to say, I'm curious to know if you're needing anybody to do estate planning or things like that, because those are services that we also offer and those messages aren't always communicated to clients.

So I think it has to happen organically as well as on a larger scale. But I really do believe that it does boil down to the relationships that the lawyer has with their clients, with the community and with their own areas of expertise, but also expanding upon that when those relationships are growing, just to communicate what else we do and to bring other lawyers into some of those meetings. Yeah, so being good at the work and being able to communicate that value are two different skills.

A successful niche actually needs both, right? Now, Delina, I'd like to get back to you. We've talked about why clients may prefer a specialist. Now let's look at that financial opportunity, because not every specialty will be equally equally profitable. What patterns in client demand or transaction complexity suggest that concentrating on a particular legal specialty may create stronger financial opportunities for a firm?

Absolutely. So for me in particular, something that I noticed as my firm began to hone in on its focus, which is working with startups and dealing in mergers and acquisitions, I took the know-how I had from prior years of experience. I'd worked at Deloitte and PwC, and I noticed specifically what is the need and what is a need that is highly specialized that I can provide. So I understood that in the current middle market for startups and M&A, there is a massive need for a tax understanding of a lot of issues that are happening.

So we have a lot of M&A attorneys, but those M&A attorneys do not understand the tax structure behind what a deal may need or what an entity may need. And for me, that became a highly specialized issue that I happened to be able to answer. And it was something that I saw, well, there is a gap in the market. So immediately I recognize that if this is the foot that I am putting forward, I am able to differentiate myself.

And it is also something that allows me to, from a financial standpoint, bill the right amount for my time, because this is something that other attorneys simply do not have the capacity to be able to provide. So I have had many situations where even now I have clients that have the M &A team that is doing the deal for them and they still need to bring me in. So honestly, for me, special specialization is not just about, you know, attracting more clients.

It's about from a financial perspective, looking at what I can do very, very well that others cannot, that is needed where there is a gap in the market and attracting clients who understand the complexity of the problem that I can solve and why they need my particular background. For me as well, I found that because I'm dealing in this specialty arena, a lot of the whether it be other attorneys or whether it be CPAs have an understanding of what I'm bringing to the table.

So from a financial perspective, again, they are already acting as lead generators for me and clarifying to the potential client what it is that I'm bringing. I also, if a client can understand your value, as Stephanie was saying very clearly, they will be more inclined to want to work with you. Something that I'm able to do very easily is I'm able to tell a client in numbers, you know, I can likely save you X amount of money.

And therefore, there's pretty much when I work with a client, I'm either telling them, listen, I can save you this amount of money, I can grow or make this amount of money for you, or I can protect you in this way. So if you can clarify those things and if you can provide a value that others cannot, the finances will take care of themselves and you will be able to really receive your worth. Yeah, definitely. Stephanie, if you don't mind, I'd like your perspective as well.

How can a firm's existing relationships help leadership test whether that niche has real potential? I think it's a real question of doing some asking of questions and listening to the answers. This is something that I see a lot of my clients do half of. So they'll ask the question, but they're not really listening to the answers. Sometimes we have to think about what is interesting to us might really not be a credible opportunity for the firm.

And so you have to ask some good questions. I think doing your due diligence in terms of thinking through, what is that area of expertise that I'm really looking for? And is there really client demand for it? So, for example, I've worked with a number of firms where they started to do that. I say, hey, no, I really want to dive deeper into this area that I'm very, very interested in. And we can see some examples of that with like AI or cybersecurity, or I had a client that was doing work on drones when they just came out in aviation.

So identifying some areas. So maybe they're already working in the firm in aviation, but they haven't focused in on drones. Maybe they're already doing cybersecurity work, but they haven't done AI. So to see where there's opportunity, like credible opportunity within a niche, I think that's really the first step. And then asking those questions to say, is there a market for this? Can we build for this? And can we build enough for this that it's worth our time to really invest in?

And then you have to kind of drill down from that, because it's one thing to have a great idea about where you want to have your niche. But then it's, OK, well, who's going to lead it? Who's going to chair this department? Can we test it to see how worthwhile it is? Is the firm ready to make a commitment? For example, is our marketing team willing to send us to conferences or put us in journals or sponsor us in different ways?

So I think those are some of the questions you have to ask, because identifying and having a niche is a really valuable way for a lawyer to easily market themselves and easily market the firm, because this is something that we do and we do very well and we're experts at. I'll have one little example that I'll give you. I have a lawyer that I work with that works in the ATM industry, and that's all this lawyer does is ATM work.

And they're known. They are the lawyer that firms go to if we need to work with or companies go to when we need a lawyer that knows ATM industry. And that's it. Not that they don't do other legal work, but that's what they're known for, and there's a market for it. So that's just an example of how that works. Yeah, thank you, Stephanie, for that. And I would like to stay with you for another moment to talk about choosing between an established specialty and a new opportunity.

So how can law firm leaders decide between specializing in an established practice area and perceiving a promise niche that requires developing new expertise? You know, that's a really interesting question because you have to think about what's your capacity right now. Are you a senior associate? Are you a partner? Are you a managing partner? Like, what's your capacity for doing anything new or different? And I think it's always good.

I really do. I think it's really good, even if you're a senior associate or a partner. If you have an area that you're interested in and you have the right amount of capacity, then you can explore it. And maybe you can partner with another lawyer in your firm on it. You can do some collaboration or co-marketing. But you have to have that capacity. And if you don't, then you can't do it well. You can't do it properly. You can't invest in it.

You can't write on it. You can't speak on it. It's very hard to do that. So the first thing I would say is identify what kind of capacity you have to invest in something a little bit different. So I have a lot of examples. I've worked with tons of lawyers and firms around the world. And one of the lawyers I work with is a litigator, an amazing litigator. Knock your socks off. Great. And he started working with another practice leader who was doing franchise law.

And before you know it, they were co -collaborating because he really found that he had an interest and then developed an expertise in helping with the franchise side of things in litigation. That's not to say he wasn't doing all these other matters, but this was an area that he had capacity for and an interest in and developed with another attorney. Yes. Thank you, Stephanie, for that. Zelina, now we'll get into the numbers.

Specialization can sound attractive, but law firm owners need to know whether it will actually improve their financial position. So what financial factors deserve the closest attention when a law firm evaluates whether narrowing its services could improve profitability over the coming years? Absolutely, Angie. So something I'd actually like to tell you a little bit about. When I was looking to start my law firm and being a tax due diligence attorney, I do my research well in advance.

So I knew I wanted to start a firm years before I ever did it. And I went to one of my mentors who is one of the top tax partners at one of the big law firms. And we went for coffee in Santa Monica. And he told me, Zelina, two things. First of all, he said to me, you need to figure out your niche and you really need to hone in on it. And then the other thing he said to me was that, you know, you are very great at just speaking to clients and communicating and the clients will come.

Don't worry about that. Now, aside from working in tax, I actually had a pretty unique background as an attorney. I ended up after I was working at Big Four, I decided that I wanted to litigate and I wanted the experience of a real lawyer. So I worked in federal immigration. I was traveling to different countries like Costa Rica, working with the U.S. Consulate. I ended up also litigating at a major firm. And so to make a long story short, I had some very interesting experiences that most tax attorneys simply do not have.

And this gave me the ability to actually be a generalist in a lot of ways. In addition, I also do consulting work for LegalZoom. So I've done now over a thousand consultations with business owners. And if I tell you, I have seen every issue and every question you could imagine. And a lot of times these clients wanted to work with me afterwards. So the first thing that I did when I started my firm is I took everything under the kitchen sink, knowing that eventually I wanted to get to the niche.

But in order to get to the niche, I think that you have to understand, you know, what are the possibilities? Because there may be something that I was going to do that would be much better. So I kind of started in the first year of my firm really taking anything on. And there were a lot of issues that would come that I noticed from clients. So the first thing that I would say is you need to know your data. A firm should be bookending its weeks, its months, and its quarters.

And looking at, you know, what is my revenue by client and matter type? What are the direct costs that are associated with each matter? And this could be something from the financial perspective, you would be looking at, you know, what is the effective hourly rate when everything is said and done, even if it's a flat fee? You know, what is my collection rate? What level of work am I writing off? How long is it taking me to get paid?

But the other thing I actually think is very important that I often find attorneys or firms in general overlooking is that the cost of a client is much more than just the financials, right? Clients can be exhausting. They can be draining. And I may have one client that, you know, takes up so much time and energy, even just clarifying the scope or having to go through things with them, that the cost of that client is not worth it.

So the first thing I started to do was look at my numbers, look at the areas where I had clients that seemed to just run smoothly. And from there, once you have an understanding of, you know, for example, for me, it may have been something between looking at smaller entity setups or actually taking an M&A deal from end to end. An M&A deal might take me several months. It might be a lot of work and you're working with somebody, you know, through the end.

Whereas if you're taking on a smaller deal, those are things that I can get done quickly and move forward. So for me, and this may be different for every firm and for every company, I had to understand a few things. And Stephanie, I think you already touched on this. So it's exactly what I was thinking. Is number one, you have to look at your own capacity. And to do that, you have to understand, you know, do I have, or does my firm have the expertise to be really good at this one thing?

I would like to call it, you know, can I be the in and out double -double of this area? Right? You see if, you know, whoever may be familiar with in and out, they do one thing really well. They do burgers, fries, and shakes. You do not see in and out going into the arena of chicken fingers or anything else. They do one thing very well. But in order to do that very well, you have to be the best. You cannot put out an ordinary hamburger.

It has to be something that you're very good at. So the first thing is, do I have the capacity to be very good at this one thing? And secondly, if I believe that I have the expertise, do I reasonably believe that I can create the demand? So if you haven't stepped foot into that niche yet, you have to do the market research. You have to do, you know, look at your competitors, look at the market. And Stephanie was saying this a little bit as well.

Where can I differentiate myself? So for me, you know, really looking at it, I recognize that we have a lot of middle market M&A deals. A lot of middle market startups that simply cannot afford the high level cost of working in big law. But when you look at the current market, you don't really have many other alternatives. And this was something that my mentor told me. You know, he said, Dalena, we don't really have a lot of lawyers that can do what you do that are not in big law.

So I looked at my expertise. I looked at the capacity and whether or not I would even be able to make an offering that was needed. And how do you get the word out? That's the other thing, right? You may have the capacity. There may be a demand. But if you can't get the call out there that you are ready and available, then the financials are never going to get you to where you need to be. So all of this needs to be taken into consideration before you focus on a niche.

Because otherwise, you will either end up with mostly to me, I think the biggest hurdle or the biggest bottleneck in the beginning is that you may have the capacity, but you simply do not have the demand. So it's figuring that part out before you dive into the niche is my understanding of the most important aspect. And you do that by understanding the numbers. You do that by doing your research in advance. You do that by coming up with the financial plan in place and having your goals and then checking yourself, like I said, weekly, monthly, and continuing down that road.

And if it's not working, then you adjust. Oh, so interesting, Delina. Thank you so much for that. Now, Stephanie, we'll get into one of the biggest concerns that owners have. It is what happens to the revenue they're already generating while they make that shift. So how can firm leaders decide between protecting revenue from existing clients and redirecting their team's attention towards a more specialized practice during a transition?

First of all, good question. And I want to come back to Delina for one second, because I took a bunch of notes because you had some super gold in there that I definitely want to reiterate a couple of things, if that's as I come back into this topic. And they all segue in. But having a mentor is so helpful and so critical to so many attorneys out there. Even if you're an experienced attorney, to have somebody else to talk to, to bounce things off of that you really can trust, it's just huge.

And if you're a younger attorney, an associate, find a mentor to ask these questions to, especially when it comes to identifying your niche and working through these things, because chances are they've seen it, done it or know somebody else. So I love that. And then the next piece of it is that capacity without demand. Having your own practice is having a small business. Really, that's what it is. And going into that question that you asked about, how do I transition?

You have to really take a look at the business. If I give this up, if I transition it. Let's just say I've been working with a client for a really long time, and I am the originator of this relationship. If I then transferred over to an associate, what's going to happen to that relationship? Is it going to be fragile at that point? Or is that a secure enough relationship? I've had clients that have areas of expertise, and they want to go and do some other types of work, or maybe they're litigators, or maybe they're doing some offside general counsel work, or whatever it is.

But they've had an established relationship with a client for 10 or 15 years, and they're bringing in a million dollars worth of revenue, and they don't have somebody to support them that's been in that role for a very long time. That's a real challenge. That's a real struggle. I can't just pass this over to somebody else who doesn't have that relationship, because then those relationships, they can get really vulnerable to another law firm or lawyer picking them up, and that happens.

So you have to treat your relationships like a business, especially to Delina's point, that you have to have a financial plan, but you also have to have a really clear transition plan. So if you're the one that has the relationship with the client, you're the originator of that relationship, have a plan in terms of how I'm going to introduce the person that's going to come in and take over the most responsibility, if it's a senior associate, another associate, another partner, and then make sure by asking really good open-ended questions as the transition happens, to let them know, communicate with them what's going to happen.

Very often when relationships go sideways, it's because there's a breakout in communication. Clients do not like to be ignored. They do not like to be passed over. They don't like to be shoved to the side without understanding what's happening. So if you were to say to your client, I am going to be working more, I'm going to be spending more of my focus right now on security or AI or pharma or whatever it is, and Stephanie is going to handle your account right now, but I'm still going to oversee it, and this is how the transition's going to happen.

And so Stephanie will be taking on more and more responsibility. I'll be in the loop for the next few months, and then we'll slowly transition, and we'll see how things go. But you're building those, you're still building up that relationship, and you're supporting the person who's taking over that position. All right. Thank you very much. We'll get back into the conversation. Delina, I'd like to get back to you. Now, one of the realities of specialization is that existing clients don't necessarily stop needing other legal services.

So how should firms navigate those relationships? So when an existing client requests services outside a firm's new specialty, how can the attorney structure that conversation around expectations, referrals, and professional responsibilities? Absolutely, and Stephanie touched on this already quite a bit, but I'm happy to get into it. I have this happen quite a lot, and a couple of things I will get into. So for example, something that recently happened with a client of mine, I have a lot of clients where disputes occur naturally when you're in business.

And because I have litigation experience, and they already trust me, and they've already created a relationship with me, they want me to see the issue through to litigation. So the first step to me is, as Stephanie mentioned, it is always providing the clarity and being upfront with your client and letting them know exactly what it is that you can and can't do. So for example, I may assist in essentially evaluating the matter.

I may be able to do some things right off the bat. So I always let them know that, number one, this is what I can and cannot do. Number two, I will never leave them hanging. Number three, this is where, for my firm at least, because we are boutique, it's important to have great relationships with other attorneys. I am very fortunate that early on, I already had the forethought to have created relationships with other attorneys that are necessary, and I have a network ready to go.

And so when it comes to areas that I am not able to take on, it ends up being a conversation with the client. I let them know what I can do. I let them know who my suggestion may be. And if they don't want to necessarily work with that attorney as well, I'm also always happy to help them in the transition process. And I always say that I'm more than happy to work with or give guidance to or clarify the situation with any new attorney that may be coming.

So I think it's setting the boundary with clarity, having the grace to also explain. I think sometimes if you even just have a candid conversation with your client and let them know why you can't assist, I think that helps and goes a long way as well. And then making sure that the transition is very smooth. So having the right network to be able to refer them to, and if it's not the case as well, making sure that you are ready and available to see them through as they're moving forward into the next step or what's necessary.