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Law firms—especially small and midsize ones—faced a tough economic landscape in 2015, with sliding revenue and stagnant partner compensation, according to the latest survey of firm finances by ALM Legal Intelligence.
Revenue per partner averaged $468,511 at the 574 firms that responded to this year’s Survey of Law Firm Economics, down from $491,729 in 2014. That 4.7 percent decline is the largest since ALM’s research arm began tracking revenue per partner in 1985.
Even though firms slashed their expenses per lawyer by an average of $8,681 per lawyer during that same period, equity partner compensation rose by less than 1 percent, from a median of $302,260 to $299,999.
“Partner compensation appears to be relatively flat, and that’s consistent with what we’ve been seeing,” said Eric Seeger, a principal of the legal consulting agency Altman Weil. “Demand is soft. Quite a few firms still have more lawyers than work for them.”
This year’s report included sole practitioners for the first time, and Seeger said a survey population that included more small firms this year could partly account for the drop in revenue per partner. Of the 574 firms that participated, 461 had at least 76 lawyers, but only 207 firms had more than 150 lawyers.
Peter Zeughauser of the Zeughauser Group noted that Am Law 100 firms, which struggled during the recession, have bounced back. Smaller firms that could offer lower rates attracted clients more successfully during that time, and now it’s the smaller firms that aren’t doing as well.
Partners at firms with one to nine lawyers—a category that included just two firms—actually fared best in the survey, receiving an average compensation of $483,882. But partners at firms with 10 to 24 lawyers received the lowest median compensation, $278,501. Partners at firms with more than 150 lawyers received a median of $317,303.
Average firm income per lawyer was highest in the South Atlantic and Mid-Atlantic regions—a swath of the East Coast stretching from New York to Florida, plus West Virginia. It was lowest in the East North Central region, which comprises Wisconsin, Michigan, Illinois, Indiana and Ohio.
The lackluster financial climate may have had some impact on lawyers’ ambivalence about the question, “Looking ahead to next year, with respect to your law firm, you are … ” 80 percent responded, “ I don’t know.” But of the few that did choose to prognosticate, more than three-quarters said they were optimistic.
Respondents were similarly cagey about predicting which practice areas would see the most revenue growth in 2016; 79 percent said they didn’t know. Litigation and corporate law were popular choices among those who did venture a guess.
Contact Rebecca Cohen at email@example.com. On Twitter: @rebeccatcohen