This year, law firm participants in the 2015 Financial Performance Benchmarking Study of Australian Law Firms were provided the opportunity to rank, assess and rate their financial performance against peers using Crowe Horwath’s online proprietary tool, Open Measures.
The study, which was conducted by Crowe Horwath in conjunction with the Australasian Legal Practice Management Association (ALPMA), demonstrates the way in which law firms can both improve their financial position through revenue growth and ensure a profitable, sustainable future.
Based on the findings, it is apparent that there are several key and comparable characteristics of profitable firms.
Here’s what the top 10 performing firms are doing:
- Hiring for growth: One in two firms are hiring for growth — not for replacement of staff — being the predominant reason for hiring new full time fee earners across all participants.
- Retaining staff: Top performing firms recognise that success is achieved through having the right staff and retaining them.
- Hourly-based pricing: Top performing firms implemented a pricing method primarily being based on hourly rates, with most intending not to change.
- Debtor management: Debtor management was exceptional in top performing firms, with debtors over 90+ days accounting for only 17% of total debtors; the average across the study being 30%.
- Low interest expense: Top performing firms demonstrated low interest expense, with the average in the top 10 being lower than the rest of the firms.
- Internal appointments: Five of the 10 top performing firms appointed partners internally, with three of the five appointing female partners.
Additionally, and moving forward, here’s what profitable firms are looking out for:
- Talented lawyers to attract and retain.
- Marketing opportunities through social media.
- Under-performing fee earners.
- Having excess office space.
The results of the study also revealed that of the top 10 most profitable firms, six held a traditional partnership structure, while the remaining four were incorporated.
Recurring participants of the study will be able to visually track how they rank against the most profitable firms and how they have improved over the years, proving to be an invaluable tool to examine trends and revise their business strategy for future financial success.