Biglaw Demand Still Flagging, But We Can Charge Clients Higher Rates So Let The Good Times Roll
Overall good news for firms. But don't get cocky.
As the economic recovery continues in full swing, law firms saw a much rosier outlook according to the recently released Q1 2024 Thomson Reuters Law Firm Financial Index. How good do law firms have it right now?
The LFFI is 59!
Which is a lot like telling someone the temperature in celsius. Is 31 hot? Because that seems like it should be cold. Have you considered a temperature scale that describes things in terms that matter to humans as opposed to water in a beaker?
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All right, so the specific LFFI number aside, conditions have improved for law firms, with revenue up like the Bronx and the expenses down like the Battery.
And there was much rejoicing. If you didn’t get that one, you’re apparently not alone.
Still, all the celebratory coverage glosses over the lagging demand figure for the Am Law 50 relative to Q1 2023. Every other sector is pulling the overall figure up.
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Don’t shed any tears for elite firms though. Demand could also be dragged down by the few flailing firms who’ve spent the last couple years looking around at everyone else rolling around on piles of money and asking, “but, guys, don’t you all want to do some layoffs?”
New also rates might have pushed some work outside and, if that’s the culprit, resetting rates to account for client growth and the impact of the recent inflation cycle have more than offset that demand hit. The “fees worked” figure is the pre-realization proxy for revenue growth and everyone is sitting pretty over there.
Now… will the firms collect on all those new year’s fees? Realization rates won’t be part of this equation until next quarter. So stay tuned.
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Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
