Every year, Thomson Reuters and the Georgetown Law Center on Ethics and the Legal Profession come with a report on the State of the Legal Market. I have written about the reports before; I find them enlightening and generally well done. The 2024 Report is based on data from some 179 U.S. law firms developed by Thomson Reuters’ Financial Insights platform. Data came from 48 AmLaw 100 firms, 49 AmLaw second 100 firms, and 82 midsize firms.
The 2024 Report came out in early January this year and, as usual, is chock full of interesting findings. The Report used the historical demise of Pan Am Airlines as an example to drive home a point. Law firms may be facing a tipping point, a point at which they need to refine how they do business to survive.
While I always take predictions like that with a grain of salt—let’s face it: the demise of the law firm business model has been predicted before. While there have been some changes in how law firms and lawyers actually work, the fundamental business model remains the same. Bill more hours, find more matters, and leverage the hell out of them. But Thomson Reuters raises a valid question based on some findings discussed in the Report.
The Findings
Rates. Law firms were able to increase their rates on new matters by more than 6% in 2023. We have not seen increases like that since before the Great Recession.
Collections. While rates went up, collections didn’t keep pace. As a result, profitability took a hit.
Transfer of Work. According to the Report, clients are transferring more work to lower cost small to midsize firms to control costs. Indeed, midsize firms saw the most substantial increases in demand. Litigation matters, in particular, were ripe to