Cracking the acorn theory: do small clients grow to be big clients?

• Author: Paquette, Ron

Many law firms have a theory. Winning a small amount of work from a desirable client can be a good way to bring that client into the firm's fold and begin a new relationship. Over time, the theory goes, if this client is nurtured properly, it can be coaxed to provide increasing amounts of work and eventually become a major client.

It's called the acorn theory--from a tiny seed of work in one legal area can grow a mature oak of a client, which provides work across many practices. Nice theory. But how often does it happen in practice?

At our organization, we thought this theory was largely a myth. Our professionals have long assisted leading law and other professional services firms in undergoing sophisticated business analysis. We've observed that regardless of the firm involved, most large clients appeared to have retained the firm for significant matters from the start of the relationship.

While we had observed this trend on an anecdotal basis, we wondered whether the acorn theory would be supported by a quantitative study. Our researchers decided to conduct analysis on one firm to see what they'd find, and spark wider conversation on the topic.

Because we wanted to look at how client relationships developed over time, we needed a firm that was able--and willing--to provide statistics on clients for several decades. Because many firms have changed internal platforms and merged with other firms several times in recent years, this was no easy task.

We identified an AmLaw 100 firm that could provide us with information concerning clients that stemmed back 23 years. The firm is an international law firm with multiple offices and approximately 700 lawyers. We have decided not to name the firm to protect client relationships, since the study involved tracking these relationships.

We focused on the top 5 percent of the firm's current clients, based on billable hours provided. We then eliminated the clients from that group that had a relationship with the firm that dated back further than 23 years, because this was the longest period of time for which the firm could provide detail. We also eliminated clients for which there had been a two-year gap or more in the work they provided the firm, because it would be hard to judge whether to treat them as new or old clients when they resumed retaining the firm.

Hence, we began with a universe of 183 clients, eliminated 24 clients for which there were gaps in work and 10 more because their relationships...