Several articles and surveys that have come out recently suggest a looming donnybrook in 2023 between law firms and business clients. The law firms want to aggressively raise rates but their business clients claim to be outraged by such efforts. These clients also say they plan to resist such efforts aggressively.
Pardon me, but I have heard this before. Law firms annually raise rates—albeit not as much as they plan in 2023. And many clients claim outrage before swallowing hard and accepting the increases. But there is some evidence 2023 may be different.
More importantly, though, any blanket conclusions about what clients will or will not do are misplaced. As I have previously discussed, the legal marketplace is so stratified and segmented depending on who and what is involved that across the board predictions are hard. So some firms will get away with rate increases, and some will not get increases but may actually be facing rate decreases.
The easiest way to try to maintain record profits is just to raise rates. And since many clients have in the past routinely accepted increases, it’s tempting.
First, the articles and surveys. Andrew Maloney recently reported on a Wells Fargo Survey. This Survey concluded that almost 98 % of the firms surveyed plan on increasing rates in 2023 by some 7-8%. As I have discussed, the efforts to raise rates are not surprising. Law firms are facing siginifanct increased costs due to inflation and perhaps reduced revenues in 2023. The easiest way to try to maintain record profits is just to raise rates. And since many clients have in the past routinely accepted increases (or haven’t even noticed them), it’s tempting.
A Thomson Reuters Study confirms the financial pressure law firms will be under. The Study suggests
