Law firms doing well financially from stronger demand and higher rates felt less pressure last year to make changes in the way they do business, a survey from legal industry consultancy Altman Weil shows.
The survey of 326 law firms showed that booming business shored up firm expectations about their long-term outlook.
Seventy-eight percent of firms surveyed reported higher gross revenue in 2018 compared to the year-ago period. A nearly equal percentage of firms reported increased revenue per lawyer and 72 percent reported gains in profit per equity partner.
“Strong 2018 performance is great news, but it can also fuel complacency,” said Eric Seeger, a principal at Altman Weil and co-author of the 2019 Law Firms in Transition survey.
Despite the rosy scenario, Seeger warned that “regardless of short-term economic fluctuations, clients will continue to demand increased value from their service providers.”
While there can be stiff resistance from partners, Seeger said firm leaders need “to make the case for change and set the firm’s sights on longer-term goals.”
Part of the firms’ good fortune comes from widespread increases in billing rates. Sixty-one percent reported raising their rates more aggressively than in previous years, the survey found.
Some 49 percent of firms reporting said the demand for legal services had increased in each of the last three years. Only 40 percent reported that a year ago.
On productivity, nearly two-thirds of firms reporting said their equity partners were sufficiently busy in 2018. That was the first time in six years that the number exceeded 50 percent.
Sixty percent reported that they met or exceeded their billable hour targets last year—compared to 51 percent in 2017.
The biggest worry is that an economic recession will cause a decline in business. Other concerns included competition from larger firms, new technologies and alternative legal service providers.
While managing partners and other firm leaders gave themselves points for personal relationships with clients and client service, they scored themselves lower on delivering services efficiently, flexible lawyer staffing, predictable pricing and technology sophistication.
To improve efficiency, staffing and pricing strategies, firms reported that they were pursuing relatively few efforts and their efforts had changed little in 2018.
Sixty-six percent of law firms say they are not more active in these areas because they are not feeling sufficient economic pain.
Looking to the future, only 37 percent of firms set long-term goals over a period of five or more years, the survey found.
“As has been the case for years, law firms’ success will be driven by their ability to meet the changing requirements of the marketplace,” said Tom Clay, an Altman Weil principal and survey co-author.
The survey was conducted in March and April 2019, polling managing partners and chairs at 810 U.S. law firms with 50 or more partners. Forty-six percent of firms responding were among the largest 200 law firms.