There have been numerous and significant financial and operational challenges for law firms at the SME level in recent times, including the pandemic and high inflation. Despite this, we can still reflect on the last three years as being the most financially successful we have seen in the last 25 years.

David Weaver, our head of Professional and Business Services, says: “It’s encouraging that despite the recent and ongoing challenges, the legal sector continues to show remarkable resilience, with many firms demonstrating record profitability in the last three years.

“The challenge in the current environment is finding the time to focus not just on the immediate now, but also on longer-term vision. Thinking about sustainability in its widest sense. Having a Future Fit or future proof mindset – which, ultimately, helps build better businesses as a result.”

Download your copy of our Legal Report 2023 for a deep dive into the key findings and valuable insights from legal professionals across the sector.

Our 2023 survey analyses the 2022 financial results of 68 firms.

• Fees per equity partner reported a median result of just over £1m compared with our 2021 survey result of £744,000.
• Fees per fee earner reported a median result of £141,000 – which typically falls between £120,000 and £160,000 for most firms outside the top 100.
• “Private client work” was cited as the most buoyant sector by law firms in 2023, while employment was noted as the most problematic at a fee income level in 2023.
• 53% of firms expected an increase in total payroll costs in 2023 of up to 5%, 46% anticipated costs rising by between 5% and 10%, while only 1% anticipated a rise in costs of over 10%.
• Median Profits per Equity Partner (PEP) reported in the survey for 2022 came in at £246,000.
• 46% of firms see the attraction and retention of talent as the key challenge they face.
• 41% of firms cited their practice management system as the biggest IT investment priority.
• 37% of firms have invested in renewable energy solutions in their business.

Firms that are already future proofing their business are adapting to a rapidly changing marketplace by taking a holistic approach and focusing on key issues.

We hope the tips in our report will give you a useful framework to help navigate challenges and leverage new opportunities to pivot, innovate and grow your business. Here’s a summary:

1. Attract and retain talent:

Making sure law firms are in tune with the opinions and needs of their employees is likely to be a key differentiator in the future.

2. Manage matters:

Firms must ensure their matters are being run by fee earners in an effective way.

3. Have a clear funding policy:

Firms should be clear about how their business is funded – including working capital, structured debt, and directly from partners.

4. Know where you make a profit:

Time recording isn’t about billing, it’s about costing. Time recording gives you information to understand what it costs you to undertake and deliver legal advice.

5. Be open to change:

Without some openness to change and an interest in considering the options, firms run the risk of falling behind the legal sector’s fast pace of change.