Shutterstock.com

Editor's Note: This story is adapted from ALM's Mid-Market Report. For more business of law coverage exclusively geared toward midsize firms, sign up for a free trial subscription to ALM's new weekly newsletter, The Mid-Market Report.

Eugene Pak was handling intellectual property and transactional work at DLA Piper eight or nine years ago when he found his niche. While representing a Northern California brewery in a dispute, he quickly grew fond of the craft beer industry—the beer itself was pretty good, too—so when his client suggested he focus more attention on the burgeoning market, he hopped in.

For Pak, shifting to a newly specialized practice meant finding a new firm, one that offered the right platform for someone catering to startup and small breweries with major needs and minimal funds. He followed a friend to 65-lawyer, Oakland, California-based Wendel Rosen Black & Dean, a firm with billing rates that suited his new clients, as well as attorneys who could help them with all their legal needs—IP, corporate, real estate or anything else.

“It was a little bit of a struggle to say I'm going to focus on this one industry and put most of my eggs in one basket,” Pak said, “but I found that that is what you have to do to stand out.”

And in many cases, a midsize firm is the best place to do that. For attorneys and firms, niche practices offer a way to differentiate from the competition and bring in business at the same time.

In the late 1980s, 203-lawyer Greenspoon Marder got in on the ground floor of a new industry and carved out what can only be described as a niche: a timeshare and resort practice. At the time, there were hardly any regulations governing timeshares, according to Rebecca Bratter, the firm's deputy managing partner, and Greenspoon Marder's attorneys helped to create the laws.

As the industry grew, so did the firm. Its clients needed advice on land use, real estate, creating corporate structures, labor and employment and, as can be expected in any growing market, litigation.

“This was a brand new practice and Greenspoon Marder really helped that industry grow, and the industry helped the firm grow,” Bratter said. “Our entire regulatory practice grew out of the timeshare industry.”

Practices like the firm's timeshare work—or its separate focuses on entertainment, alcohol and beverage, and now cannabis—can help a midsize firm survive and grow, Bratter said. They've played an “integral role” as a complement to the firm's bread-and-butter corporate work. In many cases, as Greenspoon Marder found with its timeshare work, a sturdy niche can be a reliable client's gateway into a firm.

“Once you've proven through your niche practice that you can compete—that your lawyers are as good, if not better than any others—now you can bring them in to the rest of your firm,” Bratter said. “And then [clients see] the rates are more competitive, there's less bureaucracy, we're more nimble.”

As Pak pointed out, smaller firms or solo practitioners can't offer clients the same kind of “one-stop shop,” so midsize firms sit in a pocket that can help niche practices flourish.

Rob Reedy, the managing partner of Porter Hedges, said niche practices offer a clear path for midsize firms to better compete with their peers. His firm's energy practice has a particular strength in operational oil and gas and midstream work, in addition to the usual transactional work that gets most of the attention. Many of the firm's clients, he said, turn to Porter Hedges for things like gas contracts, participation agreements and joint ventures.

“These deals are nuts and bolts,” he said. “They don't end up being splashy.”

But the true value of many companies lies within such work, making it a profitable niche for the firm.

Building up a niche practice takes careful planning, though, to ensure it can deliver a return on investment.

“Something that's a specialized niche today is a commodity tomorrow,” Michael Kim of 92-lawyer Kobre & Kim said. “Nothing stands still. Some firms say they have a niche or specialized practice, but at one point patent prosecution was specialized, and now they're a commodity; at one point white-collar crime was specialized and now it's a commodity.”

Kim's firm developed what he called “a niche within a niche,” serving as conflict counsel on complex, international litigation and investigations—work that nearly no other firm can do because it typically requires the size and resources of a large, full-service firm, but those firms need to refer it out because of their reliance on repeat clients. Kim said his firm handles “way over half” of the matters that fall into its niche.

For firms seeking to target a niche, he said, it's important that there be a barrier of entry. If other firms are able to rush in and begin doing the work, it can quickly become a commodity, negating the benefits of focusing on the work in the first place. He said Kobre & Kim also maintains a culture of constant change to avoid getting caught in a not-quite-niche. As examples of the risk of inertia, he pointed to airline regulation boutiques in the 1970s that went out of business upon deregulation, and intellectual property boutiques in the 1990s that were eventually forced to merge with bigger firms.

Operating a truly successful niche practice takes a level of self-assessment, he said.

“If you have a practice that you think is niche, but it's being priced at or below prevailing market prices for generic legal services in that area, you really don't have a niche practice,” he said. “You have a narrow practice.”

Done right, though, a niche practice can make all the difference.

“If a midsize firm has a niche practice that is premium priced—the clients are willing to pay a premium for them—that firm can focus on those core specialties, and if they're disciplined can propel themselves to a higher level,” Kim said. “It can lift the firm overall in the client's eyes.”