The business models of big and mid-size law firms

hummingbirdDr. George Beaton has reservations about PwC’s recent survey of large British law firms, which reported a “Return to Growth.” He says a return to growth for law firms is a “mirage.”

I’m not following the fortunes of British firms particularly closely, but Beaton sets out problematic aspects of “the BigLaw business model” that have implications for mid-size firms, too. Quoth Dr. Beaton:

The BigLaw business model is characterised by:

+ A partnership-based structure with little or no real business balance sheet strength

+ A human capital pyramid that is treated as a fixed cost

+ The productivity of lawyers being measured by hours recovered from clients

+ Tight restriction of equity to maximise profit per point of equity

+ The major price structure is (still) based on the billable hour

+ A mind-set of top-line growth is good

+ Equity partners’ rewards (largely) linked to revenues introduced and managed.

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Mid-size firms must to steer among these same rocks. But we have more choices, easier alternatives and better opportunities for change.

Think nimble. Be agile. Today though, it takes up-front money –  and it’s got to be about more than revenues.


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