A lot has happened globally over the last two years, but law firm profitability in the US has remained stable. Even as the legal needs of clients shift and evolve in this new environment, legal buyers are primed to purchase, recognizing even more than ever the value of solid legal advice. They are also emerging from the pandemic-era zeroed in on belt tightening with a new focus on value and efficiency.
Whether it was increasing compensation or providing an optimum work culture, law firms in the US kept going in the face of a global pandemic. Learn what the most profitable law firms did and what they’re doing now to remain at the top of their field as reported in the Thomson Reuters 2022 Dynamic Law Firms reports.
What is a dynamic law firm?
For the purposes of the 2022 Dynamic Law Firms report, a Dynamic firm is one that is in the top quartile of firms in metrics such as revenue per lawyer, total profit, profit margin, and profits per equity partner (PPEP). Despite the challenges presented over the last two years, Dynamic law firms grew their total profit margin and PPEP at rate as fast (and in some cases faster) than they did in 2017-2020. Static firms, on the other hand, were actively reducing the number of equity partners in the firm while increasing the number of non-equity partners.
By the end of 2021, most Static firms had grown their PPEP nearly a full percentage point faster than Dynamic firms, a statistic which would cause 60% of those firms to be reclassified as Dynamic firms. With PPEP being a key driving success factor, the main difference between Dynamic and Static law firms is how they distribute firm profits to their lawyers.