Members of the Law Society's Law Management Section (LMS) report growth despite the challenging climate, new research reveals.
The LMS annual Financial Benchmarking Survey, which is sponsored by Lloyds TSB Commercial, shows that median practice fee income increased by 3.6 per cent in 2012 as firms continued to adapt to challenges in the legal marketplace. Growth was more modest in 2011, with practice fee income climbing 1 per cent.
The survey of LMS members and other firms also revealed solid growth in median net profit per equity partner, which increased 3.6 per cent from £116,432 in 2011 to £120,677.
Lucy Scott-Moncrieff, president of the Law Society, said:
'The Law Management Section helps firms to share good practice and advice, playing a key role in helping law firms steer their way through challenging economic conditions.
'There's no one-size-fits-all approach that will help firms emerge from the recession or adapt to tough market conditions facing the sector, but for many law firms, a robust management system underpins their success. The LMS survey provides an invaluable insight into management structures.'
Chris Marston, head of professional practices at Lloyds TSB Commercial, said:
'This year's survey results demonstrate once again the remarkable resilience of the solicitors' profession. In difficult economic conditions, it's really impressive to see median income grow by 3.6 per cent, and a similar percentage growth in median net profit per equity partner. But the measure I like best is the profit after deducting a realistic notional partner salary and notional interest on partners' capital. The resulting 'super profit' (or, to be blunt, real profit) has grown to almost 8 per cent of fee income, from last year's 4.5 per cent.
'Partners tend to have three roles in their business – as investors, managers and practitioners – and the challenge is to do justice to each role. This important annual survey provides detailed and valuable data to allow them to look at their firm's financial performance objectively and make the right investment and management decisions. Without those, it really doesn't matter how great a practitioner you are.'
The LMS survey is widely regarded as the annual financial health check, particularly for the smaller end of the legal profession. Now in its 13th year, it is produced in association with Hazlewoods LLP, a medium-sized, niche accountancy practice specialising in advising the legal profession.
Other key findings from the survey were:
- the number of support staff per fee earner remained steady at 0.61
- the 166 firms that responded to the survey recruited 824 new staff, incurring total recruitment costs of £7.65 million
- the median spend on non-salary overheads per fee-earner was £37,992 compared with £37,831 in 2011, an increase of 0.4 per cent.
Ends
About the Law Management Section
The Law Society's Law Management Section (LMS) has approximately 1,200 members, representing a total of 1,200 law practices up and down the country.
The section focuses on the full range of practice management disciplines, including HR, finance, marketing, IT, business development, client care, quality and risk. Other section benefits include a quarterly magazine, Managing for Success; regular e-alerts; six free toolkits on key areas of law firm management, written by leading experts in their fields; discounts off a range of events and publications; and access to a members-only website, featuring a discussion forum and access to section resources.
More information about the Law Management Section
About the Law Society
The Law Society is the independent professional body, established for solicitors in 1825, that works globally to support and represent its members, promoting the highest professional standards and the rule of law.
Press contact: Emma Alatalo, The Law Society, +44 (0)20 7316 5592