Law Firms Will Raise Rates in 2010, New Survey Reports

Newtown Square, PA, December 1, 2009 – The newly released Altman Weil Flash Survey on 2010 Billing Rates reports that US law firms project an average overall increase in rates of 3.2% for 2010.  Most law firms will make rate change decisions based on specific variables including timekeeper class, practice, client or individual timekeeper. 

“Although these results may seem to contradict some expectations for rate freezes in 2010, this is a relatively conservative rate increase by law firms that are struggling to balance their own business perspective with the needs of their clients.” said Altman Weil principal Tom Clay.  “Most firms are making careful, considered increases – often client by client or lawyer by lawyer – unlike prior years when across the board increases were typical.”

“Law firms know that this is a buyers market.” 

Conducted in November 2009, the survey polled 688 US law firms with 50 or more lawyers.  Completed surveys were received from 288 firms (a 42% response rate), including 45% of the 250 largest US law firms.

2010 Billing Rates
On average for all law firms, billing rates will increase 3.2% in 2010 according to the survey. Larger firms anticipate a slightly higher average increase than smaller firms, with 1,000+ lawyer firms reporting an average 4% increase, while firms with 50-99 lawyers will raise rates just 3%.  In firms that plan an across-the-board increase, the average rate change will be 4.1%.

Less than 1% of all law firms surveyed plan to decrease rates in 2010, but 8.5% will make no increase.  In addition, 7.8% of law firms will increase rates 1%; 19.9% plan a 2% increase; 21.6% will increase rates by 3%; 14.9% will up rates 4%; 19.9% anticipate a 5% increase; 2.1% of firms will raise rates 6%; and 4.6% of law firms will increase their billing rates by 7% or more. 

“In 2009, law firms faced a constant stream of requests from clients for discounts, and that will not change in 2010.  The reality is that most rates are negotiable,” observed Clay.   

The Decision-Making Process
Law firms were asked to indicate the primary method they would use to adjust billing rates for 2010.   Thirty percent of law firms indicated they would adjust their rates by timekeeper class.  Other decision-making variables reported were practice or specialty (18.3%), client (12.8%) and individual timekeeper (11.1%).  An additional 13.1% of law firms will make an across-the-board decision on their 2010 billing rates.

“A law firm that takes a more granular approach to billing rate decisions will be in a better position to demonstrate a rationale for the increases that’s linked to value,” commented Clay.  “Because their clients will be pushing back on rate increases, they will need to have a compelling story to tell.”  

Rate Changes by Timekeeper Class
Firms that made their billing rate decision based on timekeeper class were asked to estimate their rate change within ranges for equity partners, non-equity partners, associates, counsel, contract lawyers and paralegals.  The largest increase, according to the survey, will be in associate billing rates with 45.5% of firms making an increase in the 4%-6% range and 11.4% making an increase of 7% or more.   This was true for all firm size categories except law firms with 1,000 or more lawyers.

“Many firms feel the need to cover their associate costs with rate increases,’ explains Clay.  “And because associate rates are lower, increases there may attract less comment from clients than increases at the partner level.”

What Are They Thinking?
The Survey asked for comments from participating law firms regarding 2010 billing rates.  Most firms acknowledged the pressure they are under from clients to hold the line on billing rates.  But they also expressed a number of reasons why rate increases were necessary or justified in their firms, including: the need to raise rates after a freeze of up to 2 years, increases for specific practices that are under-priced compared to the market, and increases for associates and junior partners to reflect their increased experience.  

Some firms also commented on the move toward alternative fees that is making hourly rates increasingly irrelevant.  Those firms are looking to create greater efficiencies in service delivery as a way to improve their bottom line.  As one firm noted:  “The key to 2010 and beyond will be to manage the margins.”

The Full Survey
The complete survey, including selected comments from participants, is available to download online at www.altmanweil.com/2010BillingRates.

About Altman Weil
Founded in 1970, Altman Weil, Inc. is dedicated exclusively to the legal profession.  It provides management consulting services to law firms, law departments and legal vendors worldwide.   The firm is independently owned by its professional consultants, who have backgrounds in law, industry, finance, marketing, administration and government.   More information on Altman Weil can be found at www.altmanweil.com.

Contact Information

Thomas S. Clay
Altman Weil, Inc.
(610) 886-2015
tsclay@altmanweil.com

Download the full survey.

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