Law Firm Articles

Law Firms in Transition 2019: An Executive Summary

The 2019 edition of Altman Weil’s Law Firms in Transition Survey – our annual assessment of the profession’s most compelling trends and opportunities – finds more US law firms enjoying improved financial performance and reports greater confidence among law firm leaders. A clearer picture of ‘what works’ is taking shape as we continue to explore what firms are doing and how successful they’ve been in the critical areas of pricing, staffing, efficiency, profitability, practice group leadership, leading change and long-term sustainability.

Financial Gains Posted by Most Firms

Of the 362 firms participating in this year’s survey, more than 78% reported higher gross revenue in 2018 compared to 2017, up sharply from 68% the previous year. Similarly, 77% of firms reported increased revenue per lawyer (up from 66% the prior year) and 72% of firms reported gains in profit per equity partner (up from 61% the prior year). Financially, it was a good year overall for law firms and a dramatic improvement over the previous six years when the number of firms reporting revenue gains varied between 59% and 69%.

Forty-nine percent of firms reported demand for their services was up in each of the last three years, compared to only 40% a year ago. Lawyers are busier. Firms raised their rates more aggressively than in previous years and clients paid the increases.

Buoyed by positive financial results, many law firm leaders scaled back their skepticism regarding the long-term outlook for legal services. This year’s survey saw an unprecedented decline in the number of firm leaders who expect to see persistent ongoing commoditization of legal work (down 5 percentage points from last year), the erosion of demand for law firm services (down 7 points), decreased realization rates (down 11 points), smaller annual billing rate increases (down 5 points) and slowdown in profit per partner growth (down 7 points).

Law firm leaders have long recognized a host of permanent trends that have reshaped the legal landscape. There has been near-universal agreement in our past surveys that the pace of change will remain high or even accelerate. Yet only 54% of managing partners said their firms’ urgency to change is higher now than it was two years ago. Success can bring about a tendency to relax.

Topping the list of managing partners’ concerns in 2019 is the prospect of a broad economic recession – although they rated it only at a 6.0 on a scale of 0 (not at all concerned) to 10 (existential threat). Three things are certain about the next recession. First, there will be one. Second, no one knows for sure when it will occur or how disruptive it will be. Third, some firms will fare better than others. It behooves law firms to take steps now to put themselves on the best possible footing to withstand a downturn and be in position to capture more work from unsettled clients.

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