Business of Law
The 2019 Altman Weil report on Law Firms in Transition has been released and just like prior years it gives fascinating insight to emerging trends in the legal industry. If you aren’t familiar with this report, Altman Weil provides consulting services to law firms on law firm management and best practices. The 2019 report surveyed managing partners and chairs at 810 US law firms with 50 or more lawyers.
Now, I know many of you reading this may be solo attorneys or at small firms. Even though this Altman Weil report is a “big law” survey there are a lot of interesting trends we can pull and consider as they relate to solo attorneys and small firms.
Altman Weil sent the survey to 810 firms, 362 responded so the results are from those 362 firms. Overwhelmingly the firms surveyed reported higher profits in 2019. This is great news and certainly most of the attorneys I’ve talked to this year across the country are also having busy, profitable years.
What tools are the big firms implementing to help drive these revenues? What new approaches are they using to deliver legal services?
The report found that 78% of the firms reported higher gross revenue in 2018 than in 2017. This number grew significantly from 68% the year before. This could be thanks in part to the fact that 49% of the firms reported an increase in demand for their services, which is up from only 40% in 2018. Law firms and lawyers seem to be busier which is good news.
While revenues are going up, so is overhead. The report found that 59.3% of the firms say overhead is going up. Another concerning finding is that 22.4% of the firms say their associates are not sufficiently busy. Even with all this work and increased demand they still can’t get 100% of the associates busy 100% of the time?
These firms may be able to stomach the increased overhead and associates surfing the internet during these busy, profitable years but how will they change course if the work dries up? This naturally leads us to question the long-term viability of the big law firm model.
Solo attorneys and small firms have a huge advantage when it comes to managing overhead and responding to market fluctuations. The solo or small firm is typically able to operate with much lower overhead. This type of lean machine can often be much more competitive for certain types of clients and work.
Altman Weil also found that the use of contract lawyers is on the rise. The term “contract lawyer” could mean the traditional notion of a contract lawyer that you happen to know in your local community that you send work to from time to time. The term “contract lawyer” could also mean the more modern version which is sometimes referred to as a “freelance lawyer” who you could work with completely remotely.
Of the firms surveyed, 59.8% say the use of contract lawyers is a permanent trend. Of the 362 firms surveyed, 48% are currently using contract lawyers. Of the 48% currently using contract lawyers, 62.1% say the contract lawyers have delivered a significant improvement in their firm’s performance.
Now, it should come as no surprise to any of you reading this that we here at Team LAWCLERK love these stats as they relate to the rise and permanence of working with freelance lawyers. Big law is already working with contract lawyers and seeing benefits. Small law can too thanks to the nationwide network of freelance lawyers at LAWCLERK.
Perhaps you’ve been considering trying out LAWCLERK, but you just can’t seem to “pull the trigger” and give us a try. Well, that would be understandable considering that lawyers – by nature – tend to be slow to adopt change and give new things a try.
The Altman Weil report asked the big firms why they aren’t doing more to change the way they deliver legal services. 69% of the firms say partners resist most change efforts. 31% say other law firms like theirs aren’t changing, so why should they? This type of group think mentality is exactly what has held our industry back for decades.
Only 1.5% of the firms surveyed - yes, 1.5% - say they are “doing everything they can” to change their legal service delivery model to provide greater value to clients. Without a doubt there is a lot more administrative hassle for a large firm to implement new tools – especially tech tools – into their practices. Solos and small firms are at an advantage in this regard as they can be much nimbler and more flexible in implementing new ways to deliver legal services.
Legal is on the brink of massive evolution. The early adopters – those in the 1.5% - will certainly see rewards in the decades ahead.