Majority of small US firms optimistic about growth outlook, Thomson Reuters study finds
Almost six in 10 firms expect revenues and profits per lawyer to rise over next 12 months
Small law firms in the US are more optimistic about their future growth prospects than they were at this point last year, according to a new report from Thomson Reuters Institute.
Nearly six in 10 lawyers at small US firms said they expect growth over the next 12 months across areas including revenues per lawyer, billable hours and profits per lawyer, according to the 2022 Report on the State of US Small Law Firms. By contrast, fewer than half of lawyers in last year’s report thought billable hours or profits per lawyer would grow over the following 12 months.
Small firm lawyers are even more optimistic over a longer time horizon. More than six in 10 small firm lawyers believe revenues per lawyer, billable hours and profits per lawyer will grow over the next three years.
Mark Haddad, general manager of Thomson Reuters’ small law firm business, said: “Small law firms… have emerged from the difficulties of the last few years stronger than ever. They are also aware that significant challenges remain, as market conditions are fluid and dynamic. But many of those challenges may also present opportunities for small firms to win additional market share from larger firms as they emphasise their cost-effectiveness and ability to provide high-quality legal services affordably, paired with excellent client service.”
The number one challenge for small law firm lawyers is the time they spend on admin tasks that takes time away from practising law, with 24% flagging it as a significant challenge and 56% marking it as a moderate challenge. Lawyers say they spend only a little more than half of their day (56%) actually practising law, down from 58% in 2020. That two percentage point drop is equivalent to 12 minutes less billing a day, or an hour lost each week.
Other key challenges included acquiring new client business, controlling costs and keeping up with local competition. Small firm lawyers consider firms of similar size to be their primary competition as opposed to larger firms.
However, small law firm lawyers say their firms are doing well despite those challenges. As many as 90% of lawyers rate their firm as either successful (64%) or very successful (26%). Firms with between seven and 10 lawyers were most likely to describe their firm as very successful (35%, up from 29% three years ago).
The findings are in contrast to the results of the Thomson Reuters Q322 Law Firm Financial Index, which reported global law firm profitability falling for a third quarter in a row in the three months to the end of September.
Last week, Law.com reported that Kirkland & Ellis had let go of a number of corporate associates in Texas following performance reviews while Bloomberg Law reported this week that a Cooley spokesperson had confirmed that an unspecified number of associates had been let go as a result of the firm's mid-year associate performance review.