find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Firms more profitable, but at a price

Firms more profitable, but at a price

Andrew Barnes ALPMA president

An industry study has found that law firm profitability increased by 5 per cent last year as many Australian firms continued to slash their costs.

The average profitability of law firms increased to 15 per cent in 2014, compared with 10 per cent in 2013 and 9.4 per cent in 2012, according to the ALPMA/Crowe Horwath Financial Performance Benchmarking Study of Australian Law Firms.

Firms raking in more than $20 million in revenue were the most profitable, averaging close to 19 per cent. However, these firms also recorded a decline in average revenue per partner, along with most other respondents to the survey.

Revenue declined by around 6 per cent to an average of $1.2 million per partner in 2014, except in firms in the $5 million to $10 million range, where it increased to an average $1.3 million.

These figures sit alongside findings that firms are making substantial cost cuts, with an average 36 per cent reduction in overhead costs (excluding rent).

Speaking with Lawyers Weekly, ALPMA president Andrew Barnes (pictured) admitted that the profit figures have come at a price to firms.

He added, however, that market conditions over the past few years have placed significant pressure on revenue and firms have managed well under the circumstances.

Rather than cost-cutting across the board, which was the trend in the wake of the GFC, firms are now taking a more targeted approach, he explained.

“Firms are identifying those parts of the business that are successful and those that aren’t.

“There is an assessment of … individual work groups and their ability to contribute relative to their costs to exist.”

But Mr Barnes warned that firms are no longer in a position to cut costs, targeted or not.

“There’s really only so far you can cut costs before you start hitting bone,” he said, adding that firms must turn their attention to growing revenue.

He nominated marketing and business development activities, and focusing on lateral recruitment, as areas that could increase firm revenue in 2015.


Better billing

The study also found that firms have become more efficient in how they generate revenue from capital.

The findings have brought to the fore the argument that alternative fee arrangements promote efficiency within law firms.

While a majority of firms’ revenue (70 per cent) is still based on the billable hour, the other 30 per cent of firms use a different method, such as fixed or value pricing.

“I expect this number will increase over time as clients continue to demand value from their legal spend and firms reinvent the way they practise or mimic the way their competitors do,” said Mr Barnes.

Ninety-nine firms participated in this year’s study.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Firms more profitable, but at a price
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...