PwC launches new report for law firms

Eighty five percent of Irish law firms see growth in the domestic market as being a core driver for firm and market expansion, according to PricewaterhouseCoopers’ first Irish Law Firm survey, a new business management report for Irish law firms, launched today.

Launching the Report, Ken Murphy, Director General, The Law Society of Ireland said:

“For a firm of solicitors to deliver legal services of a consistently high standard it must be managed to a consistently high standard. Those who manage law firms in Ireland will gain real information and insights from this survey”.

Speaking at the launch, PwC Advisory Partner Billy O’Riordan said “As partnerships, law firms are not obliged to publish their financial results. As a result, the management of these firms have limited information available to them against which to benchmark their own management practices, operating processes or financial performance. This PwC report provides a useful set of comparative benchmarks for Irish law firms in areas such as: Managing growth; Controlling the cost base; Managing working capital; Reporting financial performance; Managing risk; and Developing and rewarding talent.”

Commenting on the report, PwC Tax Partner Teresa McColgan noted “Law firms face the same commercial challenges as any other business. They must actively drive and manage their growth, while continually developing their core resource, their people. They must also ensure that they are operating from a stable financial platform, one which provides finance for their day-to-day activities, as well as presenting an appropriate and tax efficient financial reward to the business owners – while facilitating Partner admissions and exits.”

The survey reveals that increasing the number of fee-earning professionals (legal executives and above) is by far the most fundamental element to continued expansion. For example, some 60% of survey respondents indicated that increasing the number of fee-earning professionals was fundamental to their growth strategy while only one third said that increasing equity and salaried partners was fundamental for growth. This may be an indication that the traditional law firm is investing in its future through embracing the full strength of its workforce to be at the competitive edge in the long run.

However, with over a quarter (26%) of respondents seeing merger/acquisition activity as a growth route, the indication may be that law firms will also consider joining forces with their competitors to consolidate their offering thereby further increasing their market share.

The survey further reveals strong growth in profitability amongst Irish law firms. This is not surprising as the demand for professional legal services has grown in line with the Irish economy. Furthermore, the increased sophistication of the market and the greater awareness of the depth of professional support that law firms can provide has also facilitated growth in this sector.

Other key findings in the survey included:

• Staff costs compared to fee income was in the region of 31-40% for over one third (37%) of law firms;
• 21% of law firms had professional Business Development managers;
• Nearly half (46%) of respondents said that the progression period from a non-equity to equity Partner was 5 years; Over a quarter (27%) said this was 10 years plus.

The survey was carried out from November 2006 to January 2007. The respondents ranged across the broad spectrum of large to small law firms across Ireland.

Key Findings – Irish Law Firm Survey 2007