Slow growth in legal industry expected to continue in 2017

By Benton Alexander Smith BridgeTower Media Newswires Demand for law firm services grew little in 2016, 0.3 percent. Low expectations for growth in 2017 mean law firms will have to get more creative if they are going to increase their revenues in the coming year. A Citi Private Bank 2017 Client Advisory said law firms will have to focus on improving how they price work and how they manage collections to counteract limits on a growth in clients. The law industry saw revenues rise 3.7 percent in 2016, largely due to rate increases totaling 3.2 percent. That pattern has been the norm for several years, according to Citi. The Client Advisory predicts demand for services will increase slightly next year, but firms will feel pressure from increasing expenses due to increased associate salaries and investments in technology and cybersecurity. These growth patterns have been consistent since the Great Recession. Citi studied the most profitable firms between 2010 and 2015 to advise law firms on what they should do in 2017 to increase revenues. The bank concluded that the most important move firms can make is to increase rates. Because clients resist rate increases, this tactic will be most successful with large firms with a proven track record and strong brand image, the Citi report said. Other firms should find more creative ways to increase revenue, such as playing with leverage ratios to increase lawyers' productivity, and looking into alternative fee arrangements for clients, the report said. Many successful firms have improved profit margins during these low-growth years by lowering employee expenditures. These firms use a high number of associates, contract lawyers and permanent non-partner-track lawyers instead of traditional partners, Citi said. Law firms that can change business leverage and partnership models will experience more success in 2017 and beyond as the law industry continues to see slow growth and volatility, according to the client advisory. Published: Wed, Dec 28, 2016