Mid-Sized Law Firms Demonstrate Increased Productivity
Clio’s recently released “Legal Trends for Mid-Sized Law Firms” report highlights crucial areas impacting mid-sized law firms, defined as firms with 20 or more employees. It encompasses financial performance, the impact of legal technology and – new this year – includes perceptions of artificial intelligence in legal practice.
The 2024 Legal Trends for Mid-Sized Law Firms report reveals that the average lawyer in a mid-sized law firm is earning more than ever before but still has significant billing and collection hurdles. Lockup, a new cash flow metric introduced this year, underscores a collection issue among mid-size law firms that if left unsolved, could create liabilities for firms. Getting paid faster is a key theme in this year’s report, with smaller law firms outpacing their mid-sized firm counterparts in the adoption of online payments. The report also covers AI trends throughout the legal sector, unpacking how mid-sized law firms differ in their approach from smaller firms, and in some cases, even their clients.
“With the advent of AI, we have entered a new era of technology education and adoption across the legal sector, and we know that firms who find a way to leverage the technology are going to have a competitive advantage,” said Jack Newton, CEO and founder of Clio. “This report uncovers an essential overview of how mid-sized firms are keeping up with the pace of rapid innovation, something that becomes increasingly difficult with larger business infrastructures and staff. And let’s be clear, AI is not the only piece of the puzzle – tech adoption, particularly in collections and payments, is still lagging in certain workflows among the mid-sized firm segment. I encourage legal professionals to leverage this rich data to see where the competitive advantages lie among firms who make their technology work harder for the overall health of the firm.”
A substantial increase in billable work signals heightened productivity and financial success
Insights from the report highlight a remarkable shift in mid-sized law firms, with a massive increase in billable hours compared to 2016, indicating heightened productivity across the segment. Individual lawyers are now billing substantially more and collecting more revenue, underscoring the significant financial and operational success of mid-sized law firms in the evolving legal landscape.
- Compared to 2016, mid-sized law firms in 2024 have experienced tremendous growth in the number of billable hours captured by their employees, capturing nearly 60% more than they did in 2016.
- Mid-sized law firms have experienced tremendous growth in the number of billable hours captured by their employees – at nearly 60% more than in 2016.
- The average lawyer in a mid-sized law firm is also earning more for their firm than ever before, billing 140% more and collecting nearly 180% more than in 2016.Mid-sized law firms lead in billing speed but lag behind smaller law firms in payment collection.
Law firms should closely monitor the speed and consistency of payment collection to avoid revenue being held in lockup, which encompasses unbilled and uncollected revenue. Mid-sized law firms, on average, demonstrate a proactive approach to generating invoices but struggle with the collection process.
• Mid-sized law firms exhibit a median realization lockup of 36 days, with the top 25% achieving a median lockup of 20 days, highlighting variations in billing efficiency.• The median collection lockup for midsized firms is 52 days, emphasizing the need for improvement in the timely collection of outstanding payments.Lawyers in mid-sized and smaller firms have similar attitudes toward AI use in the legal profession – but smaller firms may have more to gain
Lawyers in mid-sized and smaller law firms are approaching the integration of AI cautiously. While there is recognition of AI’s growing importance in legal practices, some legal professionals remain skeptical about its current level of advancement and reliability.