As Australian businesses grapple with economic challenges like rising inflation, tightened budgets, and shifting consumer demands, law firms offer a valuable blueprint for weathering such uncertainty.
Nearly half (49%) of Australian small business owners are concerned about the economic outlook and research from Litera shows half (50%) of Australian law firms have been forced to seek ways to cut costs and almost 46% had no choice but to increase their fees to adapt to the evolving economic landscape.
There’s much that businesses of all types can learn from how law firms are adapting. From reevaluating pricing models to leveraging technology and data-driven decision-making, law firms are demonstrating how to stay resilient, maintain client trust, and improve efficiency — all essential strategies for thriving during challenging times.
Focusing on value and efficiency through technology
Traditionally, law firms relied on the billable hour model, but increasing pressure from clients has prompted a shift toward value-driven alternative fee arrangements (AFAs). At Litera, we’re seeing 88% of Australian law firms now using AFAs — such as flat fees, success-based or contingency fees, fee caps, portfolios, risk collars, and subscription-based plans — clients benefit from more predictable costs while firms can emphasise outcomes and expertise rather than time spent on tasks. This approach aligns with client demand for greater transparency and clearer return on investments.
Small businesses can learn from this by focusing on delivering value rather than just cutting costs. Offering tiered pricing, subscription models, or service bundles that cater to customer needs can create predictability and build trust. During economic volatility, customers seek clarity and assurance — providing value-based services allows businesses to meet these expectations while retaining client loyalty.
However, efficiency is key to maintaining value without compromising profitability, and this is where technology plays a critical role. Law firms are increasingly turning to AI and digital tools to streamline operations, cut down on manual tasks, and free up valuable time for strategic work. AI-driven platforms like Litera’s Kira, which automates contract review and analysis, are transforming how legal teams handle time-consuming processes. According to Litera’s research, 82% of legal professionals attribute efficiency gains to AI, making it an essential tool for improving productivity while meeting client demands.
For small businesses, adopting similar AI-powered tools — such as automated invoicing, customer relationship management (CRM) systems, or data analytics platforms — can lead to substantial time savings and enhance customer experiences. By automating routine tasks, business owners can focus on higher-value work, such as strategic decision-making or improving customer service. In doing so, they can respond to market demands more effectively and remain competitive.
Streamlining operations with integrated systems
In law firms, the rise of integrated platforms is breaking down departmental silos, allowing for better collaboration and decision-making. Tools like Litera’s Foundation Dragon provide legal teams with instant access to comprehensive data from previous transactions, streamlining everything from deal negotiation to contract drafting. This integration fosters collaboration, reduces errors, and improves overall productivity.
Many small businesses are faced with the challenge of managing disjointed systems that create inefficiencies and delays. By embracing integrated platforms that centralise data and improve communication between departments, small businesses can streamline operations and reduce manual errors. Whether it’s through adopting an all-in-one management solution or CRM software, integrated systems allow for better coordination across the company and enable teams to focus on core business tasks.
Integrated platforms also enable real-time access to critical business data, providing insights that help owners make more informed decisions. For instance, businesses that rely on manual processes for inventory management or customer tracking can benefit from an integrated approach that offers real-time visibility, helping them respond to market shifts and customer demands more quickly.
Data-driven decision-making and client-centric models
The ability to harness data and use it for better decision-making is one of the key drivers behind the transformation of law firms. AI-powered tools like Litera’s Kira not only automate the manual review of contracts but also extract valuable insights from data that legal professionals can use to guide their strategies. This not only improves the quality of their work but also allows them to provide more informed advice to clients, who increasingly expect data-driven insights as part of legal services.
Similarly, small businesses can leverage data analytics to make more informed decisions. By using data to understand customer preferences, sales trends, or operational inefficiencies, businesses can adjust their strategies to maximise growth opportunities. Data-driven insights help business owners remain agile, ensuring they stay ahead of competitors by proactively addressing customer needs and market changes.
In addition, the shift toward more predictable and client-centric models — like AFAs in law firms — reflects the growing expectation of value and transparency. Small businesses should take note of this trend. Offering transparent pricing structures, service guarantees, or customised solutions tailored to client needs can build trust and foster stronger customer relationships.
Adapting to economic challenges with flexibility and innovation
Law firms have demonstrated flexibility by adjusting their pricing models, adopting new technology, and implementing agile strategies to stay resilient during economic downturns. The integration of AI into legal workflows has proven to be a game changer, enabling firms to offer more value-driven, predictable services while reducing costs. This shift away from the traditional billable hour model to AFAs is reshaping the industry and allowing law firms to maintain profitability while providing greater value to clients.
Small businesses can apply similar strategies to remain adaptable during economic volatility. By embracing technology, such as AI-powered tools that automate routine tasks, small businesses can operate more efficiently, without increasing headcount. This allows them to maintain profitability while offering enhanced services to their clients.
Additionally, experimenting with new business models or diversifying revenue streams can help small businesses stay resilient and maintain financial stability during uncertain times.
Lessons from law firms
While law firms and small businesses may operate in different sectors, the lessons from law firms’ adaptability during economic volatility are highly relevant to the broader business landscape. By focusing on value-driven pricing, leveraging technology for greater efficiency, and embracing flexible business models, small businesses can position themselves for growth even in challenging economic times.
In an unpredictable economic environment, businesses that prioritise efficiency, customer value, and innovation will be better equipped to navigate market fluctuations and thrive. Whether it’s adopting AI-driven tools, streamlining operations, or reevaluating pricing strategies, the principles driving law firms forward can help small businesses succeed and maintain a competitive edge.
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