Archive for the ‘Law firm finance’ Category

Revenue growth

February 21st, 2012 by Altman Weil

Check out The Legal Intelligencer’s latest article on law firm revenue trends.  Experts agree that it’s extremely challenging to grow revenues - not to mention profitability - in the current no-growth economy.  Altman Weil principal Ward Bower was interviewed for the story:

“Ward Bower of Altman Weil said the best way to increase revenue is always through increasing a firm’s share of existing clients’ wallets. That, however, has become competitive in a way it never was before with a booming economy providing a seemingly endless demand for legal work, he said.

And on top of low demand is increased competition, with firms from overseas looking to open offices in the United States, he said.

“I think firms really have to concentrate on their existing clients,” Bower said. “Somebody’s bird-dogging your clients all the time in a no-growth market. You can’t pay lip service to client service. You have to get out there and demonstrate and do it.”

Firms have to be alert to cross-selling opportunities, which is something Bower said firms have talked a lot about but have not always been successful in executing. For that reason, he said, it’s important to have someone other than the relationship partner solicit client feedback and find opportunities for other lawyers in the firm to do work for that client.

To get work from new clients in a slow-growth market is to steal it, Bower said, and that most often means hiring laterals. He said that is what is behind the growing number of lateral moves seen recently.”

Also included is a link to The Legal’s blog with six tips from Bower on connecting with clients to develop new business

Read it at The Legal Intelligencer

Law firm financial performance 2011

February 13th, 2012 by Altman Weil

Citi Private Bank is out with its preliminary report on how law firms fared in 2011.  Their results are based on data from 178 firms, including 81 AmLaw 100 firms, 47 AmLaw 200 firms, and 50 other firms.

“For law firms, 2011 was a tale of two years. The strong demand momentum coming into 2011, which continued through the first six months, caused many law firm leaders to believe that a degree of certainty had been attained. The second half of the year was a rude awakening as demand, particularly in transactional work, withered away and has yet to bloom again.

So, while revenue growth in 2011 exceeded the prior year, even greater expense growth squeezed margins and resulted in a PPEP (profits per equity partner) increase of just 3.3 percent  vs. 7.4 percent in 2010. In 2010, the industry was rebounding from a weak 2009 which made higher year-over-year increases easier to attain—not so in 2011.

Revenue growth of 4.1 percent in 2011 was due to moderate rate increases, a modest shortening in the collection cycle and a slight increase in demand. With low year-end inventory growth, the industry might be in for a slow start to collections in 2012, and if tepid demand growth continues into the year, it will create a challenging revenue environment.”

Read it at the AmLaw Daily

Law firm billing rates

December 20th, 2011 by Altman Weil

The National Law Journal has released in 2011 Billing Rate Survey. 

“For the third year in a row, law firms showed restraint with hourly rate increases, inching up at a rate only slightly higher than inflation in many cases.

The average firmwide billing rate, which combines partner and associate rates, increased by 4.4 percent during 2011, according to The National Law Journal’s annual Billing survey. That followed on the heels of a 2.7 percent increase in 2010 and a2.5 percent increase in 2009 — all of which paled in comparison to the go-go, pre­recession days when firms could charge between 6 and 8 percent more each year.

“Before the recession, I think we had a seller’s market,” said Altman Weil consultant Ward Bower. “There was so much demand that law firms were in the driver’s seat and could get what they wanted. Clients are in the driver’s seat now, and they aren’t going to pay those increases. They’re exerting much more control over pricing, strategy and staffing decisions.”

Read it at the National Law Journal

3rd Quarter financial snapshot

November 18th, 2011 by Altman Weil

Citi Bank’s Law Firm Group has published third quarter results for a sample of 183 firms (70% AmLaw firms and 30% other firms).  Some highlights from the report:

  • Revenue is up 5.2% across the industry for the first three quarters of 2011
  • Collections were very strong in the 3rd quarter
  • Growth in demand is at 1.5% so far this year, slowing in the 3rd quarter in response to market volatility
  • Expenses are up 5% for the year to date

Their forecast for the rest of the year:

“…low– to mid-single-digit growth in PPEP for the industry in 2011, which will fall a bit shy of 2010’s 7.5 percent increase. And if we’re right about the continued slowdown in the fourth quarter, it will mean a rocky start to 2012.”

Read it at The AmLaw Daily

Law firm financial performance update

September 23rd, 2011 by Altman Weil

Citi Bank has released its mid-year numbers on law firm financial performance:

“For the first half of 2011, revenue was up 3.7 percent across the industry. The increase was driven by strong inventory levels coming into 2011, increased rates, a 1.8 percent growth in demand and likely improvement in realization. These results are based on a sample of 178 firms—80 Am Law 100 firms, 54 Second Hundred firms, and 44 other firms.”

“Countering the positive impact of the uptick in revenue, rates, and demand is growth in expenses—at a 4.7 percent increase, expenses grew more than revenue, squeezing profit margins.”

Read more at the AmLaw Daily

Law firm leaders are confident in face of changing marketplace

May 25th, 2011 by Altman Weil

The newly released Altman Weil Law Firms in Transition Survey 2011 finds confidence high among US law firm leaders in firms of all sizes.

Overall economic performance is rebounding, with two thirds of all firms surveyed reporting increases in gross revenue in 2010 and nearly three quarters reporting increases in revenue per lawyer and profits per equity partner.  Standard hourly billing rates are up significantly this year, with firms reporting or planning a median 4.0% increase in billing rates for 2011.  Continued reductions in overhead costs and the strategic shrinking of firms’ ownership ranks are contributing to profitability.

“If firms are finding their feet again post-recession, it is on new ground with a number of new factors in play,” said Altman Weil principal Tom Clay.  “And although most firm leaders seem to recognize the changes, it’s not yet clear whether they will be able to manage them effectively.”

Following are some selected highlights:

  • 67% of law firms reported an increase in gross revenue in 2010; revenue per lawyer was up in 73% of all firms; and profits per equity partner rose in 73% of firms.
  • Overhead costs were down in 53% of firms in 2010.
  • The amount of non-hourly billing in 2010, measured as a percentage of revenue, increased in 58% of all firms and in 81% of firms with 250 or more lawyers. 
  • Only 12% of firms report that alternative fee arrangements are more profitable than hourly billing. 
  • 27% of law firms de-equitized partners in 2010 and 16% will do so in 2011.  32% of firms made fewer partnership offers in 2010 and 18% will do so in 2011.  Larger firms are more likely to take these actions than smaller firms.  
  • 92% of all law firms plan to acquire laterals partners in 2011. 
  • 87% of law firms are planning to add associates to their ranks in 2011.   Only 18% of firms plan to remove associates this year, down from 42% in 2010.  
  • Only 18% of those surveyed think that reduced associate salaries will be a permanent trend, down from 32% who thought that last year.
  • 60% of firm leaders expect that the increased use of contract lawyers will be a permanent trend, up from 52% last year.
  • 41% of all firms believe that outsourcing legal work will be a permanent part of the new legal market. 
  • 47% of all firms are concerned that they are not prepared to deal with the retirement and succession of Baby Boom lawyers – the top concern identified.
  • 94% of law firms believe that the focus on practice efficiency is a permanent change in the profession - the number one trend identified.
  • Other top trends include more price competition (90%), fewer support staff (88%), more commoditized legal work (81%), more non-hourly billing (75%), and fewer equity partners (68%).
  • Only 16% of firm leaders expect permanently lower profits per partner.   
  • Leaders score their confidence as an “8” on a zero to ten scale when asked about their firms’ ability to keep pace with change.

Conducted in April and May 2011, the survey polled Managing Partners and Chairs at 805 US law firms with 50 or more lawyers.  Completed surveys were received from 240 firms (30%), including 38% of the 250 largest US law firms.

The full survey is available online to download at: www.altmanweil.com/LFiT2011.

AmLaw 100 preview: PPP up 8.4% in 2010

April 27th, 2011 by Altman Weil

The New York Times is previewing the new AmLaw 100 numbers - and the news is good…

“The Big Law profit machine is revving up again.

The American Lawyer magazine’s annual list of profit and revenue at the nation’s top 100 law firms, to be published on Thursday, will show that both increased last year.

The most closely watched measure, profit per partner, rose 8.4 percent in 2010, to an average of $1.36 million. That was a sharp improvement from 2008, when profit per partner fell 4.3 percent, and 2009, when it edged up just 0.3 percent. “

Here are the 2010 highlights:

  • Profits per partner up 8.4%
  • Gross revenue up 4%
  • Lawyer headcount down 2.7%

Read it at New York Times Deal Book

Self-insurance for law firm medical benefits

March 14th, 2011 by Altman Weil

AmLaw firm Stevens & Lee has adopted a self-insurance model for its medical benefits according to The Legal Intelligencer.  The switch has given the firm ”the ability to offer the same level of coverage and actually gain more control over the plans it could offer while saving the firm money at the same time.”  In addition the firm has invested in “stop-loss insurance” to cover any sudden upswing in claims.

“If a law firm has the right demographic, this is a fantastic idea to save money,” [Altman Weil’s Bill] Brennan said. ”It’s a huge savings, plus a huge deferral of expense that doesn’t ultimately reverse until the firm stops self-funding.”

Read it at The Legal Intelligencer

Legal market making a comeback

March 11th, 2011 by Altman Weil

Two stories today ring notes of guarded optimism about the legal market.  Most law firms are on a stronger footing in 2011, but experts agree that the market has changed and those changes may be permanent.

“After three recession-racked years in which layoffs, salary cuts, and hiring freezes ravaged the legal marketplace, law firms in Philadelphia and around the country are starting to slowly recover….  Yet there also are signs that the Great Recession, which brought with it the steepest downturn in the legal marketplace in more than a generation, may have wrought fundamental changes in the business model of Big Law.

While hiring has started to recover, it is not nearly as robust as it was at the peak of the last cycle in 2006 and 2007.  Facing rate pressure from clients along with an overall decline in demand, firms are outsourcing work to contract lawyers or even to a burgeoning law-firm services industry in India. They are relying increasingly on sophisticated data-mining software for simple discovery tasks that lawyers once handled.”

Read it at the Philadelphia Inquirer

The folks at CitiBank who monitor the legal marketplace have released some new data on 2010 results.

“Law firm profits and lawyer productivity rebounded in 2010–good signs that the market has turned a corner. However, demand was flat and revenues were up modestly compared to a weak 2009. Translation: The increase in profitability was largely driven by expense cuts, which … have gone as far as they can. To maintain these profit gains in 2011, firms will need to find ways to increase top-line revenue.”

Read it at the AmLaw Daily

Billing rates up 2.7% in 2010

December 6th, 2010 by Altman Weil

The National Law Journal has issued its annual law firm billing rate survey…   

“Billing rates continued to climb in 2010 — but by only a fraction of the rate they grew during the boom years of the mid-2000s.

The average firmwide billing rate — a combination of associate and partner rates — increased by 2.7% in 2010, according to The National Law Journal’s annual survey of hourly billing rates. It’s the second straight year of growth rates less than 3%, which is a far cry from the standard 6% to 8% increases from 2004 until 2008 and just slightly higher than the rate of inflation.

“Firms are still very cautious and thoughtful about trying to push through rate increases,” said Altman Weil consultant Tom Clay, whose own research has confirmed similarly modest billing-rate growth. “Our best guess is that the next three years are going to be about the same. I give it a 50% chance that this is the new reality. That could change if there is a major economic boom, but it’s very hard to picture clients agreeing to those kinds of rate increases again.”"

Read it at National Law Journal (requires subscription)