Impact of the Coronavirus on the Legal Profession
The legal profession is similar to many service industries. That is, lawyers are selling a service consisting of their advice, their skill in the courtroom, their skill in drafting documents and their time. Lawyers, unlike most other service professionals, are not selling any product.
Lawyers however are similar to most service industries in that they are simply a business. Lawyers have to be involved in business development i.e., bringing the business in the door. Once the business comes in the door they need to provide the service called for. Either before or after the service is provided, they need to make sure they are getting paid. Those are all the same tasks that any service business is confronted with.
Lawyers are also like many businesses in that they either operate on what I call “the margin” or they may operate at a higher end of the business scale. By operating on the margin, I mean that they are essentially operating on their cash flow. It is that regular influx of cash that keeps them going. Some lawyers, in particular larger law firms, have large cash reserves. In the alternative they may have large credit lines. Lawyers that operate on the margin typically don’t have either of those.
The businesses, whether they be service businesses or otherwise, that are most dramatically affected by the Coronavirus are those businesses that operate on the margin. They don’t have a large cash reserve. They don’t have credit lines to draw on. They rely upon cash flow. During this time of crisis the cash flow has ended for many small businesses. That is devastating. That lack of cash flow means they can’t pay staff. They can’t pay for services that they need consisting of perhaps other professionals, books or other such things that are the staple of the legal industry. In not being able to pay for those things, they fail. Most creditors have little mercy. If you don’t pay your Westlaw bill for 2 months, your account will probably be canceled. You may be able to reinstate it. When you reinstate it you may have to pay a higher fee. Your landlord likewise may not be terribly flexible. The landlord wants the rent. If the rent is not forthcoming, you may have to vacate. The landlord may have some other use for that space or the landlord may have a tenant next door that wants the space who has a large cash reserve and can afford to pay for the space.
As such to answer the question above, you would need to know how long the current health crisis is going to last. If it lasts more than 8 weeks then I would say that the effect on the legal industry is going to be devastating. Devastating in particular to those operators that live on “the margin”, as defined above. Those that operate with large cash reserves or large credit lines probably are not going to be permanently affected. Once the crisis passes, those latter firms can simply infuse cash into the business and ramp up to full speed.
A large part of American business is small business. A large part of those small businesses operate on the margin. Those businesses that operate on the margin include many single practitioners in the legal field and many small practitioners. The effect on them I believe is going to be devastating.
Most lawyers are fighters. They are scrappers. They know how to come back when the odds are against them. As such many of these lawyers that are adversely affected will come back but many of them may simply move on to other professions or to other work situations where they no longer operate their own business but rather work for someone else.