Dynamic Law Firms Report: Strategies Top-Performing Firms Use to Fuel Growth
Law firms that invest in technology and innovation earn higher revenues. This is among the key takeaways of the 2023 Dynamic Law Firms Report, which examines a 10-year stretch of data to identify the strategies law firms are using to ensure long-term success and growth.
The report found that when clients perceive a firm they work with as innovative, they give a greater share of their budget to that firm than a less innovative firm. Clients are also more likely to recommend the firm to their peers, thus further increasing the potential revenue for the firm. Legal Current shares top takeaways from the report to identify factors that distinguish top-performing firms – “Dynamic” firms – from those that are struggling to grow, or “Static” firms.
- Technology investment leads to higher revenues. Top-performing firms have consistently grown their investment in critical areas – such as technology and marketing & business development – while also increasing expenditures on support staff. These investments have paid off with higher revenues for Dynamic firms, while the report found that demand for Static firms’ services remained largely unchanged for the past 10 years. While Static firms saw flat demand, the average top-performing firm enjoyed a demand compound annual growth rate (CAGR) of 1.7%.
- Both Dynamic and Static firms continue to grow their technology spend. Top-performing firms continue investing as part of their ongoing efforts to provide infrastructure that supports operations and to further grow their market share. Dynamic firms spend more per lawyer on technology, although Static firms are growing their tech spend at a faster rate than Dynamic firms – likely to try closing the spend gap and avoid falling further behind in revenues. The report notes, “For Static firms, it is vital that they place a long-term focus on acquiring and deploying the correct types of tech that will move their businesses forward in a strategic direction.”
- With clients insisting on efficiency and value, Static firms need to do more to close the technology gap. In the past 10 years, Static firms have made progress on closing the technology investment gap between themselves and top-performing law firms – but more needs to be done. Efficiency is critical as clients look “for cost-effective, value-driven outside counsel to serve their changing needs,” according to the report. Dynamic firms saw only small productivity losses despite strong headcount growth in the past decade, while Static firms saw significant productivity declines. To improve productivity, Static firms need to achieve competitive tech stacks and make sure their lawyers are proficient in using technology to better serve their clients.
- Transactional practices are becoming more prominent. Both top-performing firms and those struggling to grow are shifting away from litigation towards transactional practices. Of note, Dynamic firms outpaced the overall market in transactional growth, while Static firms lagged behind. Though litigation is slowly contracting overall, Dynamic firms still managed to grow their litigation practices in seven of the past 10 years. The report noted, “Dynamic law firms remain generally attractive options for clients in need of litigation counsel.”
- Top-performing law firms do not necessarily fit a particular profile. High-growth firms of the past decade have not always been the largest firms. The population of high-growth law firms is relatively diverse. The report’s examination of the past 10 years showed that firms of any size, geography, and practice mix can be high-growth firms – with the right strategies in place.
For more insight on strategies that firms can use to improve their prospects for growth, download the 2023 Dynamic Law Firms Report.