Smaller law firms find cutting costs a challenge as recession reduces their business

Now, with a weak economy, closing volume at the firm headed by Clara Fryer is about half that, and she has 15 employees. Another two attorneys who had their own firms shuttered their businesses, laid off staff and now work as affiliates of Fryer's practice.

"In June we had our biggest-volume month since August 2007," Fryer said. "But we did that with two-thirds fewer people than we did in August of 2007."

Faced with a slowdown in business, some of metro Atlanta's small and medium-sized law firms have had to reduce staff. Others have shut down completely, their attorneys going to work for rival firms.

Among the strategies for smaller firms: diversify services to attract new business, or, as a few firms have found, seek out more clients in those few areas that have increased in volume.

To be sure, the economic malaise has hit the big diversified firms, too. But big firms have the flexibility to move lawyers from now-slow areas such as mergers and acquisitions to booming ones such as bankruptcy.

The small- and medium-sized firms, which generally operate with a staff of 50 or fewer, typically focus on one practice area and aren't as pliable.

"When you're very specialized it can be a problem when the economy hits your particular practice," said Glenn M. Lyon, a principal of MacGregor Lyon in Atlanta and immediate past chairman of the Atlanta Bar Association's Sole Practitioner/Small Firm section.

Lyon said the hardest-hit lawyers have been those whose practices, like Fryer's, focused on real estate.

There are signs of a thaw, lawyers say. Low interest rates created a wave of homeowner refinancing earlier this year. New federal and Georgia tax breaks for first-time home buyers also helped spur sales volume.

The recent uptick in business, though, hasn't fully replaced what was lost from the peak of just two years ago, some lawyers say.

So the firms have been looking at other costs, besides labor, to cut out of operations. Fryer, for example, cut expenses related to copy machines and other office equipment by 30 percent.

Small firms often see their size as giving them an advantage in a bad economy. For one thing, being focused on one practice builds a reputation of expertise. And they don't generally have huge overhead costs.

"You need to focus on what you have. If you start adding offices, that adds a whole other layer of administrative work," said Carter L. Stout, a commercial real estate and corporate transactions attorney and principal in Stout Walling Atwood in Atlanta. "There's a massive amount of overhead that has to be fed every month in order to survive."

Other firms, such as Partnership Title Co. were already lean on staff —- the Atlanta firm has two attorneys and four support staff —- so they looked to expand on the core practice area.

"Back in the heyday it was good and almost overwhelming for us," Kirsten Miller Howard, who heads the company, said of the volume of residential real estate closings. "But when it started to close down we picked up the commercial real estate. One or two commercial deals can help your month."

In the past 18 months, the company also has opened an office in Pensacola, Fla., to tap into business in Florida and Alabama. Howard and her fellow attorney are doing a lot more of the document preparation that used to be done by support staff.

When the economy was hot, venture capital and private equity deals kept Michael R. Siavage busy at his business law-oriented practice, Siavage Law Group in Atlanta.

"Our practice, unlike some of the biggies, is busy as heck," Siavage, who is managing partner, wrote in an e-mail.

"But the character of the work has changed fairly dramatically —- many more disputes, companies winding down, bottom dwellers seeking to buy companies at a bargain-basement price and executives seeking counsel related to their termination."

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