Boutiques are next up in our law firm taxonomy, and first a word about what I mean when I say “Boutiques,” because I may be using it a bit differently than you might assume in common parlance.
In my nomenclature for purposes of this taxonomy, boutiques are firms that do one and really only one thing exceptionally well. They may or may not be small.
This means two things: First, one could conceivably envision a 1,000-lawyer “boutique” (size isn’t a criterion), and second, “they do one and really only one thing exceptionally well.” The “really only one” condition means if you name one of these firms, there will be widespread agreement on what that one thing is—even if they have ancillary practices that may (or may not) exist to serve that primary calling card.
So what about boutiques?
For starters, they will always be with us. In industry after industry, boutiques have proven themselves a very durable model. Why? Most obviously, boutiques are an evergreen category: Someone or some group is always coming along founding another boutique. Even if the mortality rate is high (more about that anon), the fertility rate is at least as high. After all, the commitment required to launch a law firm is well within reach of thousands of people—hundreds of thousands if you count solo practices.
As we’ve often observed, law firms are not intrinsically capital intensive, so there goes one potential barrier to entry. Second, in this market in spades, talent is widely available. Vacant office space can always be found even in the tightest of markets, particularly given the tiny footprint boutiques typically launch with. And technology tools are ubiquitous, commoditized, and thanks to Moore’s Law faster-better-and-cheaper every year.
Finally, clients are always and everywhere the scarcest commodity, but show me the founder of a boutique who launched without one or more marquee clients and I’ll show you a subject for extended psychoanalysis (or an intensive boot camp in Accounting 101 under a CPA with a sadistic streak).
Hence the very high boutique fertility rate, which, importantly, is only enhanced in Law Land because lawyers are autonomy-seeking guided missiles always prepared to chafe at even the most unjustified feeling of being “managed.” Some are walking hair triggers prepared to light out for the territories.
So what are the pros and cons of these creatures?
Pros:
- Vitality and a youthful outlook
- Focus
- Clarity of vision
- Charismatic leadership
- A dream in terms of branding
Cons:
- Limited resources
- Zero or immaterial diversification
- Narrowness of scope, vulnerable to cyclicality in markets
And the management priorities and challenges of boutiques?
- Succession planning
- Management has to actively, purposefully, and continually cultivate—not just allow—next-generation talent to thrive
- Rigorously maintaining focus
- Running a firm that does “really only one thing” requires you to keep saying no
- Maintaining a high level of involvement in the firm
- Avoiding the cult of personality around the founders and ensuring that everyone feels they’re contributing in a meaningful way that’s recognized, appreciated, and rewarded
- And did I mention succession planning?
Stepping away from Law Land for moment (as regular readers know is my wont), boutiques are ubiquitous across the economy, in industry after industry.
For example:
- Cars: Ferrari, Lamborghini, Smart, Scion
- Retail: Cartier, farmers’ markets, shoe repair, dry-cleaning and copy shops, Etsy
- Apparel: Bottega Veneta, DSquared2, Savile Row, your local thrift store
- Liquor: Single malt Scotch, Two-Buck Chuck
You get the idea. The study guide takeaways are as follows:
- Boutiques can be high-end or low-end; what’s distinctive about them is that they actually are distinctive and everyone knows it, including, most importantly, clients and potential clients;
- And boutiques—this is non-negotiable, folks—have to stick to their knitting or risk promptly and irreconcilably alienating their customers and confusing everyone else.
I promised to talk about mortality among boutiques.
It’s high.
The moment of truth usually comes when the baton needs to be passed from first to second generation management and leadership. It has felled many great and noteworthy firms in the past (you can supply your own list here) and many more less visible ones.
What goes wrong?
To some extent, it’s not boutiques’ fault. To be more precise, it’s not a failing of the Boutique Business Model; it’s a failing of execution and tactics. Boutiques, as we noted, are typically founded by visionaries who are charismatic and electric personalities. They can be a hard act to follow (which is understandable) but they can also subtly or overtly impugn, demean, and undermine anyone who might rise up behind them to assume the mantle (which is inexcusable).
Where does this leave us?
If you’re at a boutique, or thinking about going to a boutique, or tempted to start a boutique, ask yourself what Generation Next might look like. At least if you’re young, out of self-interest, or if you’re older, out of a sense of stewardship. Be prepared to be excited. Be prepared to relentlessly say No to the wrong things. Celebrate the rare luxury that clients and prospects will know automatically what you’re good at. Excel at that thing. Avoid distractions. Stay true to your mission.
And pray for Generation Next.
