A new survey of law firms reported tepid growth between January and June of this year as compared to the same period last year. The survey conducted by Wells Fargo Private Bank’s Legal Specialty Group, incorporated responses from 120 firms, about half of which are from The Am Law 100.
Overall the results provided a mixed outlook, and while the reported growth, according to several reports, is “anemic” at least the survey didn’t find a contraction: tepid growth is still growth.
“This is a pretty typical report card in the ‘new normal,’” wrote Above the Law’s founder and managing editor, David Lat. “Up a little on this metric, down a little on that metric, and overall basically running in place.”
Here is a summary of the findings, as reported in the The Am Law Daily:
- Revenue rose 1.5 percent
- Average hours fell by 2.5 percent
- Blended rates across all levels were up 3.5 percent
- Expenses also rose 3.5 percent
- Compensation obligations rose 2.5 percent
- Average capital per equity partner is up 2 percent
The Am Law Daily reporter, Sara Randazzo, provided this analysis:
“I’m not surprised by what I see,” says Jeff Grossman, the senior director of banking for the legal specialty group, who shared the results of the Wells Fargo survey Thursday with The Am Law Daily.
As has been the case for the past few years, a small number of top performers significantly outpace the averages, Grossman says. One firm in the survey reported a nearly 35 percent revenue boost in the first half of the year, he says, with the least successful firm recording revenue down almost 20 percent.
“We continue to see the stratification, where the stronger firms continue to get stronger,” Grossman says, noting that about a dozen firms reported a revenue increase of 10 percent.
“It’s a little too early to tell, but the early signs based on inventory and collections to date suggestthe [rest of the] year will look very much like the first half of the year,” said Grossman.
Interestingly some of the performance spread seems to span geography, for example law firms are apparently recovering better in Philadelphia than in other cities around the country. Philadelphia Inquirer reporter, Chris Modics writes:
Mary Ashenbrenner, regional director of Wells Fargo’s legal specialty group, said firms in Philadelphia saw revenue increases of 3 percent over the same period last year while firms nationally saw growth of only 1.5 percent.
One reason Philadelphia firms outperformed competitors is that hourly charges tend to be lower than those of firms in New York and Washington, and clients are more cost-sensitive than ever, Ashenbrenner said.
Gross revenue for firms in New York was up 1 percent, while in Washington, it had declined 2 percent, she said. Revenue for firms in Southern California was up 3 percent, while revenue for firms in the San Francisco region was flat.
At the tail end of 2012, Wells Fargo reported large law firm revenue was up 5 percent overall.
Do these numbers reflect what you are seeing in the market?
Photo credit: Wiki Commons.
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