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
Jan 3, 2025 - Law Firms Accelerate Exit from China
- Amid uncertainty facing foreign firms, large US law firms increasingly exited their China operations in 2024, according to Reuters. Challenges - including tepid deal activity, rising geopolitical tensions, and China’s ramped-up pressures on foreign companies -contributed to at least 11 US law firms closing or announcing future shuttering of their offices in Beijing, Shanghai, and Hong Kong in 2024. A California-based legal consultant speaking to Reuters said he expects more law firms to pull out of China in 2025, but departures may have peaked last year. However, President-elect Donald Trump’s plans to impose a tough tariff regime on Chinese imports could further sour US-China relations.
- So-called “nuclear verdicts” - jury awards of more than $10 million - are increasingly common, according to the Wall Street Journal. Consumer advocates suggest large verdicts protect victims, but the business community argues that such awards drive up insurance costs, which are passed on to consumers through higher prices. Some industry observers suggest that absent reforms – including tort reform – insurance could become much more expensive in some regions or unavailable.
- 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.
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