Small Firms Gained in 2007, but What Does the Future Hold?
As with their Am Law 100 counterparts, small firms ranging in size from two to 150 lawyers experienced a banner year of growth, reports a study by Incisive Legal Intelligence's survey group (Disclosure: Incisive Media is Legal Blog Watch's parent company). From the press release:
-- Average hourly billing rates for senior partners reached $352, a gain of almost five percent over the prior year, while billing rates for 5th year associates increased to $227, a three percent increase.
-- Average gross revenue per lawyer for respondents reached $430,483, an increase of four percent over the prior year, while overhead expenses increased by only two percent. Average law firm profitability increased this year by more than five percent to $260,120 per lawyer.
-- Equity partner/shareholder total compensation increased by three percent, from an average of $364,837 in 2007 to $374,049.
-- Starting salaries for new law school graduates rose to $85,000, a three percent increase from the prior year and a 22.3 percent increase over the past five years.
Whereas most generally assumed that the growth experienced by Am Law 100 firms would no longer be sustainable in 2008 and beyond, no such predictions have yet emerged for smaller firms. My own hunch is that these smaller firms may prosper in tough economic times, in large part because they provide a more affordable alternative. For example, while smaller firm billing rates rose by 5 percent to $352, that's a bargain compared to the $1,000/hour rates that some large firms charge. Moreover, based on the statistics, it appears that small firms have made an effort to keep overhead costs under control; in 2007, gross revenues increased by 4 percent, but overhead only went up by 2 percent.
Do you run or work for a small firm? How is 2008 stacking up so far and what are your predictions for the future?
Posted by Carolyn Elefant on September 25, 2008 at 04:24 PM | Permalink
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