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
Dec 4, 2024 - Fearing Budget Cuts, Government Lawyers Jump to Private Sector
- Some legal recruiters report that President-elect Trump’s plans to trim the ranks of government workers are prompting some rank-and-file government lawyers to look for work in the private sector, according to Reuters. One recruiter speaking to Reuters said he’s seeing five times the typical post-election volume of lawyers seeking to leave government work. According to the US Office of Personnel Management, more than 44,000 licensed attorneys work for the federal government. Legal industry insiders suggest lower-level attorneys with narrow areas of expertise may have trouble finding new positions in the private sector.
- In trying to strike a balance in partner compensation transparency, some law firms are finding a ‘middle-ground’ approach is the best fit, according to Law.com. In completely transparent models, firms report the compensation of all partners, which can often lead to distractions and friction as partners scrutinize various metrics to compare themselves with peers. To avoid the possible pitfalls of full transparency, some firms take the opposite approach, sometimes called the ‘black box’ – where all compensation information is kept confidential. Amid the cultural pull toward transparency and the need for an amiable work environment, more firms are taking a ‘middle-ground' approach where partners can see where they stand on a compensation spectrum rather than the specific dollar amount of every partner at the firm.
- 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.
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