Law Firms
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 159,000 law practices in the US provide advocacy and advisory services to businesses, non-profit organizations, individuals, and government agencies. The practice of civil law accounts for 94% of the legal industry’s revenue, while criminal law accounts for only 4%.
Client Cost Cutting
Businesses have cut their legal budgets, resulting in reduced spending on outside legal services.
Alternative Fee Arrangements
Driven by client demands for cost containment, firms are offering alternatives to the traditional billable hour model.
Industry size & Structure
The average law firm operates a single location, has 6-7 employees and generates $2 million in annual revenue.
- There are about 159,000 law firms in the US with over 1 million employees and generating about $343 billion in annual revenue.
- Another 290,300 lawyers practice solo.
- The industry is highly fragmented with the 20 largest law firms representing less than 10% of revenue.
- The largest US law firms by revenues are Baker McKenzie; Skadden, Arps, Slate, Meagher & Flom; Latham & Watkins; Jones Day; and Kirkland & Ellis.
Industry Forecast
Law Firms Industry Growth
Recent Developments
Nov 4, 2024 - Corporate Clients Push Back on Rising Legal Fess
- Large corporate legal clients are starting to push back amid rising hourly rates charged by some of the largest and most prestigious law firms, according to The Wall Street Journal. The hourly rates charged by law firms rose 9% in the first half of 2024 after growing more than 8% in 2023, according to the legal specialty group of Wells Fargo. Rates are increasing as only a fraction of law firms are adept in key services such as regulatory compliance, merger counseling, and tax and private equity. To reduce their costs for outside legal advice, some firms are bringing more work in-house, turning to smaller boutique firms, or pitting law firms against each other to get more competitive bids.
- The role of “non-equity partner” is gaining popularity in some larger law firms, according to Reuters. Non-equity partners are paid a salary rather than sharing in a firm’s profits, and they typically have no input about the firm’s management decisions. Increasingly, an equity partner is expected to manage a firm’s teams and client relationships, while attracting enough new business to cover their salaries and the labor costs of the lawyers below them. Some firms use the non-equity partner role as a springboard for lawyers to learn the relationship building skills needed to become a full equity partner. According to a Reuters estimate, about 86% of the largest US law firms by revenue have non-equity partner positions.
- Some large law firms are hiring executive-level artificial intelligence (AI) leaders to help them develop strategies for how to leverage AI, according to Reuters. Law firms have not typically been early adopters in technology, but client expectations and a growing awareness of AI’s potential to shake up the legal industry are prompting some firms to invest in AI executive talent. Firms are exploring how AI can be used to speed up research, aid in drafting legal briefs, and reduce administrative labor, all while navigating the potential risks of AI adoption. A key task for executive AI leaders is to determine when to purchase solutions or seek an internal development model. Another is determining which AI tools to deploy for the practice’s various departments.
- In a recent survey of more than 6,000 lawyers by the Illinois Supreme Court Commission on Professionalism, nearly a quarter of respondents said they had experienced bullying on the job, according to Reuters. Rates for bullying tended to run even higher among women, younger lawyers, racial minorities, and LGTBQ+ lawyers. Of lawyers who reported being bullied, one-third said the bullying came from a lawyer outside of their employer, 31% said the bullying stemmed from a senior lawyer at their organization, and 14% reported being bullied by a judge. The survey defined bullying as “improper exercise of power by one person over another and takes the form of aggressive acts or comments meant to intimidate, humiliate, embarrass, or control another person.”
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