- October 25, 2012
- Posted by: admin
- Category: News
Growth in revenue is the single most important goal for law firms in the coming year in the midst of a minimally growing pool of outside legal spend, a recent BTI Consulting Group survey showed.
BTI principal Marcie L. Borgal Shunk said that if firms want to increase market share above the 1.6 percent compound annual growth rate in outside legal spend, they have to steal work from other firms. And offering reduced rates is not the best way to do it, she said.
In talking to a group of Philadelphia-area law firm marketers at the Delaware Valley Law Firm Marketing Group on Tuesday, Shunk said that for the first time in the 10 years BTI has tracked this information, the country’s largest corporations are saying value is their top goal going into 2013. For the previous five years, clients were most concerned with controlling legal costs.
“That’s not really the game anymore,” Shunk said of discounted rates.
Rather, in this time of economic and political uncertainty, clients want more than ever before strategic advice from their lawyers, Shunk said.
Firms that have an understanding of their clients’ businesses, are client focused, are committed to helping clients and provide value for the dollars spent on their work have a 7 percent rate premium over other firms, Shunk said.
An example of that sort of superior service, which Shunk admits is a very subjective thing to measure, is a firm that provides a client with a free-of-charge session on mapping out just how that client can combat and plan for changes resulting from the America Invents Act, for example. Simply sending a generic eight-page memo on the new law is fine, but not enough to capture new work, Shunk said.
http://saint-saviour.org/wp-json/wp/v2/pages/48 FOLLOW THE LEADER
BTI interviews thousands of clients, business leaders and law firms each year to offer benchmarking of where firms stand. The top 30 firms as ranked by clients are awarded the best-in-class honor. Locally,Morgan, Lewis & Bockius has been on the list every year, including this year. Reed Smith was also on the top 30 list this year.
As part of BTI’s benchmarking, the consulting firm has undertaken a competitive analysis of the financial performance of the country’s 200 largest law firms. It looked at the compound annual growth rate of gross revenue and average attorney profits from 2000 to 2010.
Firms with above-average gross revenue and above-average profits are considered either leaders or leaders-to-be. Firms with above-average profits but below-average gross revenue are considered harvesters because they take profits and divvy them up among partners rather than reinvest in the firm. The firms with above-average revenue but below-average profits are growth engines or investors because they are using the profits to reinvest in the firms’ growth. And finally firms with both below-average profits and revenue are either followers or harvesters-to-be.
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Of the firms that participated in BTI’s research, 17.6 percent were leaders, showing the strongest financial performance and gaining market share from competitors. This solid financial footing gives those firms flexibility in making strategic decisions, Shunk said. Challenges for the “leaders” category include avoiding complacency and keeping up with clients’ changing needs.
BTI identified 28 of the country’s largest law firms that it considers leaders. Dechert was the only area firm to make that list. Other firms included Latham & Watkins, Willkie Farr & Gallagher, O’Melveny & Myers, Mayer Brown, Sullivan & Cromwell, Wiley Rein and Covington & Burling.
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The 26.4 percent of firms that are investors are gaining market share from competitors and paying for it with profits through lower profits per attorney. BTI said this group includes many regional players with national aspirations. The “investors” group is also a breeding ground for merger candidates, the consulting firm said in its report issued this week.
There were a number of Pennsylvania-based firms in this category, both from the Am Law 100 and Am Law 200. Ballard Spahr, Cozen O’Connor, Duane Morris, Fox Rothschild and Reed Smith are all considered “investors.” Other firms on that list include Greenberg Traurig, DLA Piper, McCarter & English, Alston & Bird, Hogan Lovells and Nixon Peabody.
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The 16.4 percent of firms deemed “growth engines” are gaining market share from competitors but have below-average profits per attorney. These firms are investing in a competitive advantage and winning clients and billings from other firms. Their strategic challenges include accelerating market share gains to overcome the investors and leveraging that market share gain into higher profits per attorney. These firms should scrap investments with little or no impact on revenue growth and institutionalize a client-centric approach, BTI said.
Area firms deemed “growth engines” are Drinker Biddle & Reath, K&L Gates, Morgan Lewis and Pepper Hamilton. Other firms on that list include Baker & McKenzie, Crowell & Moring, McGuireWoods,Seyfarth Shaw, Jones Day and Venable.
Just more than 15 percent of firms were deemed “harvesters” by BTI. The group has better-than-average profits per attorney but is giving up market share to competitors. This group may be positioning itself for the most complex matters. BTI said they could be the most dangerous competitors because they can be highly focused and bring vast resources.
While harvesters have greater strategic freedom because of higher profits, they are at risk of losing clients to the “leaders” who are gaining market share and credibility for high-end matters. Harvesters also have to continuously show why they are worth the price they charge.
There were no Pennsylvania firms on the “harvesters” list, but Blank Rome, Buchanan Ingersoll & Rooney and Saul Ewing were all named “harvesters-to-be.” That group is giving up market share and has below-average-profits, but has grown profits actively since 2008, BTI said.
The 18 firms deemed “followers” are giving up market share and have below-average profits. They need high-impact strategies to reclaim market share and have to leverage extraordinary client service into new business, BTI said.
There were no Pennsylvania firms labeled “followers.” Some of the firms on that list included Epstein Becker & Green, Hunton & Williams, Quarles & Brady and Wilson, Elser, Moskowitz, Edelman & Dicker.
Shunk said the firms that are handling the highest priced work on the broadest array of matters are those that are client-focused in terms of selling what the client needs as opposed to selling what the market needs or what the firm has.
PRACTICES OF THE FUTURE
There were 13 practice areas that BTI identified as specific, targeted growth opportunities beyond 2012.
Practice areas that provided the most opportunity in terms of number of matters and the highest fees were big-ticket intellectual property litigation, data security and genetically modified organisms. The last of that group provides opportunities for class actions and mass tort cases, predatory business practices and IP litigation, regulatory issues and M&A work, BTI said.
Those matters that might not be quite as prevalent but bring in high fees included white-collar defense, antitrust, chemical exposure mass torts, mining M&A, biotech mass torts and oil and gas work.
Other matters that are growth targets beyond this year include patent monetization, clean technology, trade secrets and global regulatory work, according to the report.
Shunk said mergers and acquisitions work was going to be hot because, while deals aren’t currently happening in great numbers, clients said they are planning for them in the near future. Class action, regulatory, securities and IP litigation are also strong practices, she said.
Litigation is one practice that is not expected to grow above the growth rate in outside legal spend, Shunk said. She said clients are “focusing maniacally” on resolutions and how to get those matters off their books. Clients are conducting more data analysis to see what type of resolution makes the most financial sense for the company.