Size mattered in the first-quarter 2017 industry results, with stronger top-line results and greater expense pressure for larger firms. Industry demand growth was tepid, though billing rate increases were stronger than usual and collections were faster, driving moderate revenue growth. However, expense growth outpaced revenue gains, driven by lawyer compensation increases. And while faster collections aided revenue growth, they also drove inventory growth to its lowest level since the first quarter of 2013, setting up a challenging second quarter. Behind the industry averages, we saw pronounced differences between the performance of firms based on size. Demand and revenue results were strong for large firms, in contrast to a challenging start to 2017 for Second Hundred firms. On the other hand, strong revenue growth wasn’t enough to counter the expense pressure caused by lawyer compensation increases, felt most acutely by large firms.
These results are based on a sample of 180 firms (76 Am Law 100 firms, 52 Second Hundred firms and 52 niche/boutique firms). Thirty-two of these firms fit our definition of either “international” (less than 25 percent but more than 10 percent of lawyers based outside the United States) or “global” (at least 25 percent of lawyers based outside the United States). Citi Private Bank provides financial services to more than 600 U.S. and U.K. law firms and more than 35,000 individual lawyers. Each quarter, the Law Firm Group confidentially surveys firms in The Am Law 100 and the Second Hundred, along with smaller firms. In addition, we conduct a more detailed annual survey and produce the Law Firm Leaders Confidence Index semiannually. These reports, together with extensive discussions with law firm leaders, provide a comprehensive overview of current financial trends in the industry as well as forward-looking insight.
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