The November edition of The American Lawyer includes an interesting article by Aric Press titled “Big Law’s Reality Check”. The article has implications for law firms of all sizes.

Press provides much fodder for thought; but these points, in particular, struck me as telling:

  • Since 2007, revenue per lawyer has been dropping for the average AMLAW 200 firm when adjusted for inflation;
  • However, not everyone in the AMLAW 200 is experiencing this inflation-adjusted drop. Those possessing a respected brand in distinct areas have seen a material uptick in their relative top line.
  • Legal spending by American business has been, and continues to be down.

It seems clear that the business consumer of legal services continues to redefine our marketplace. And there doesn’t appear to be a change in the offing anytime soon. Strategic purchasing combined with increasing the amount of work kept in-house, demanding discounts and alternative fee structures are forcing disruptive change inside firms.

A Few Take-Aways For Your Consideration

As the absolute volume of demand for outside law firms continues to shrink, the strongest firms will continue to adapt, and move “downstream” — infringing on market share once the purview of smaller firms.

Inflation adjusted costs for law firms (as is the case in almost any business) continue to increase at a slow but steady pace.

At the same time, alternative service providers continue to take a growing slice of what was the legal service pie.

The combined result of the above is that the pressure will continue to grow on all but the most valued, established and strategically managed law firms among us.

Without respect to successes of the past, the market is sending clear signals to any law firm not following a strategic path: it is time to stop and reassess how your firm fits into the competitive landscape — and tune-up appropriately.