2018 Legal Benchmarking Report
Our Legal Benchmarking Report 2018 reveals the need for firms to focus on organic growth, improving efficiency and billing processes as the sector faces the end of a three-year period of sustained growth.
- 2017 heralds the end of a three-year run of income and profitability growth
- The gap between the smallest and largest practices continues to widen
- Average lock up levels jump up by 3 to 17 days for many firms
- Cultural change in staffing and ownership structures in firms
- Continuing fall in return on capital for firms across the board
The full Legal Benchmarking Report 2018 is now available.
Karen Hain, Head of the Professional Practices sector at MHA explains:
“2017 was a year of change for the legal sector and our research paints a challenging picture for many firms. A combination of factors, including fewer mergers and acquisitions, the impact of the fixed fee regime, increased competition from more cost effective and price-driven business models, succession planning issues and the inevitable political and economic uncertainty have created a shift in the operating environment for firms of all sizes. After three years of growth, the drops in income and profitability could lead to criticism that firms took their collective eye off the ball in 2017.
The UK legal sector needs to adapt to a ‘new normal’ putting a direct emphasis on having a better understanding of profitability and margins on work undertaken and improved financial controls. Efficiency needs to be a key theme for 2018 and beyond. Firm’s that focus on ensuring the right level of work is carried out by appropriately experienced and costed staff will see improved profitable performance. In addition, firms need to ensure they have a full understanding of the value of their services they provide and increase their use of technology to maximise access to financial data, to ensure they are accurately pricing work with appropriate levels of profit built in.
Achieving profitable performance is also about maximising recoverability of fees. Firms should be adopting practical and more proactive fee billing and collection practices. This can include more active billing strategies with frequent billing rather than event-based on completion of work, agreeing advance billing with clients on complex or larger workload cases and maximising the fee generation opportunities by focusing on cross-selling of services to existing clients.”
If you would like to discuss any of the issues raised in the report in more detail or if you would like to speak with a member of our team, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Professional Practices team.