So how’s the law business? Not as great as you might think.
That’s one of the takeaways from a survey released this week by law services firm Altman Weil. The survey was conducted in March and April of this year and was made up of responses from about half of the managing partners and chairs at 801 U.S. law firms with more than 50 lawyers. One thing’s for sure: running a legal business has its challenges, even in a good economy.
Almost half of the firms reporting did say that their revenue per lawyer was up in each of the past three years. But an almost equal number reported ups and downs. One of ten law firms said revenue per partner dropped or was flat during this period. More concerning for managing partners is that 49 percent of their firms failed to meet their annual billable hour targets last year and a majority admitted that their equity (51 percent) and non-equity (59 percent) partners are underutilized.
Even with these current challenges, the study’s authors say that many law firms still aren’t preparing for the future. “Few law firms have a long-term, market-based strategy, or recognize that by proactively embracing new methodologies and technologies they will create the differentiators they need to compete effectively going forward,” Altman Weil principal and survey co-author Eric Seeger said in a news release.
Stiff competition seems like the biggest challenge for law firms today. According to the study, 70 percent of the firms are losing business to corporate law departments and 42 percent are losing work to technology and “alternate” legal service providers like accounting firms and consultants. Despite these challenges — and because of the strong economy — the majority of managing partners said they just weren’t feeling enough economic pain to motivate change.
Or maybe they just don’t want to: 69 percent of firms have partners that “resist most change efforts.”
“Unlike the recession and its aftermath, the threat to law firms in 2018 is broader and more nuanced,” co-author Tom Clay said. “It’s not just an economic threat. Now there are clear, systemic disruptors in play that pose a threat to the sustainability of the traditional law firm business model.”