Even the Best Small Law Firms May Not Survive the Next Five Years.
That’s the warning from John Uustal, founding partner of Kelley | Uustal, in a recent Law360 Pulse interview examining the forces reshaping the legal profession.
Uustal points to a widening gap between firms that are preparing for what’s ahead, and those that are only talking about it.
“I don’t want to be like Chicken Little,” Uustal told Law360 Pulse. “But I think it’s going to be potentially much more difficult for smaller and mid-sized firms, no matter how good they are, over the next five years.”
AI and Small Law Firms: Everyone Talks, Few Adapt
After speaking with prominent small firms across the country about their use of artificial intelligence, Uustal said what he heard raised serious concerns.
Most firms are discussing AI. Almost none are actually preparing for it.
“Everyone’s talking about AI, but how many people have hired specific people just as AI implementers or AI strategists?” Uustal said. “And none other than [our firm] have.”
According to Uustal, the gap isn’t just about adopting technology: it’s about building the internal expertise to integrate it thoughtfully and responsibly into legal work. Firms that fail to do so risk falling behind, while those that succeed could see dramatic improvements in advocacy and trial preparation.
“For 80% of people, AI can immediately improve their closing arguments, their opening statements, their witness prep,” he said. “I think that right now, AI is going to easily raise the level of lawyering from the bottom half of our profession.”
Managing Partner Manny Serra puts it more bluntly: “People who use AI are going to replace those who don’t, or in a legal setting, beat them.”
But technology alone won’t determine which firms survive. According to Uustal, a more fundamental threat is reshaping the profession and most small firms don’t see it coming.
The Walls Are Coming Down
For decades, the legal profession has operated as what Uustal calls a “walled garden,” protected from the competitive forces that reshape other industries.
That’s changing.
“The legal industry has been like a walled garden,” Uustal said. “The best businesses are really not good businesses outside the garden, in the real world. And so what has happened is the walls are coming down. And as other firms become better businesses, will the firms that see it as a profession and not a business survive?”
The threat comes from multiple directions: private equity investments, non-attorney ownership structures, and an influx of capital that could enable larger, better-resourced firms to dominate the market.
The result, according to Uustal, may not be the gradual consolidation the industry expects. Instead, it could be far more brutal.
“Consolidation is a very nice way of putting it, because Walmart put out of business lots and lots of other businesses. They didn’t acquire them,” he said. “I think what could be coming for smaller, mid-sized firms is a lot more brutal than that.”
Going to War for Talent
So, what can small firms do? Uustal’s answer is build teams that are impossible to replicate.
“One way for small firms to stand their ground amid a potential consolidation wave is by going to war for talent,” he said. “Not just talent on its own, but a collection of talent that other people look at and say, ‘Okay, that’s something special.'”
According to Uustal, firms that can assemble teams capable of doing things few others can, will be better positioned to withstand consolidation and remain independent in a rapidly changing profession. That means competing aggressively for elite attorneys, investing strategically in specialized expertise (like AI implementation) and building a reputation that attracts top talent even as larger firms chase the same people.
Serra also expressed the value of talent, not simply technology. Looking ahead, he envisions combining big data, AI, and efficient workflows with the firm’s elite trial talent.
For Uustal, the next five years will separate firms that adapt from those that don’t. The question isn’t whether change is coming, it’s whether small firms will be ready when it arrives.
