Law Firms Reported a 4.3 Percent Increase in Profits for 2012
Law firms reported a 4.3 percent increase in profits in 2012, according to an article dated February 6, 2013 at the Am Law Daily. Apparently, a strong fourth quarter made the increase stronger than predicted. This increase was driven by law firms placing more focus on collections and shortening of the collection cycle.
The number was arrived at by taking a survey of a combination of large firms, Second Hand firms, as well as additional firms. They also conducted dialogue with law firms in order to collect information on trends in the industry.
According to the article, this may have been a short-term trend. Firms have said they fear that demand levels may return to the trend they saw during the first three quarters of 2012. This 4.3 increase in profits in 2012 was derived from a sample, and it warns to keep survivor-ship bias in mind when reviewing the results.
Another factor contributing to this analysis of a 4.3 increase in profits in 2012 is that the industry also grew expenses at a slower pace than revenue. This helped the overall 4.3 increase in profits in 2012. Also, many firms are suspected of electing not to pre-pay expenses for 2013.
Head count, according to the sampling, increased modestly at 0.7 percent for the year due to a slowdown that occurred in the fourth quarter. Equity partner head count was up by 0.1 percent, due to increases at smaller firms. Head count growth exceeded demand in growth there was a noticed productivity decline of 0.6 across the industry.
This study according to the writers, may implicate that due to the combination of the above statistics, many firms may have to take a serious look at their pricing going forward. After all, it all comes down to supply and demand in any industry.
This article offers a glimmer of hope for law firms going into 2013 on one hand, and the ever hovering over their heads return to 2011 trends as well.
Here is an interactive infographic of the data.