Many of the country’s biggest law firms got a bit of good news in the first half of 2011. Building on the positive signs we started to see during the first quarter of the year, demand and billing rate increases were even stronger at the midyear point, while revenue (cash collections) held steady throughout the first six months.
While this is a promising outcome, we have seen expenses grow so quickly that they are now increasing at a faster rate than revenue—resulting in a squeeze on profit margins. Even before the current market uncertainty, firms told us that they were planning for slow growth. It is hard to forecast what the impact of today’s conditions will be on law firms, but we believe it could disrupt law firm work pipelines and deal flow, at least in the short term.
