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As legal industry leaders grow increasingly cognizant of the business—not only the practice—of law, more law firms and branch offices in New Jersey are growing revenue than are growing attorney head counts, the Law Journal's annual Top 40 project has found for the second straight year.

That means gains in gross revenue are generally more owing to improved generation on a per-lawyer basis than growth in sheer firm size, according to the list, which is ordered by fiscal 2018 gross revenue derived from New Jersey offices. (See the editor's note below for more information, including methodology).

Just eight firms and offices significantly increased their New Jersey attorney head counts in 2018, while nearly four times that many firms either decreased their head counts or were essentially flat—the latter meaning a net change of two or fewer lawyers year over year.

Meanwhile, nearly half of the listed firms improved their New Jersey-based revenue year over year in 2018, and most of those did so without significantly growing attorney head count. That indicates widespread improvement in revenue per lawyer—held by some to be the key metric by which to measure a firm's fiscal health.

There has been a bit of turnover in the NJ Top 40. Both Budd Larner and LeClairRyan, which folded this year, have been removed from the list. And two firms were added: Red Bank-based Giordano Halleran & Ciesla (No. 31), and the Florham Park office of Wilson Elser Moskowitz Edelman & Dicker (No. 36).

Revenue per law (RPL) may be a good barometer, but gross revenue and attorney head count still matter. Some firms saw growth in all three categories.

One such firm is Brach Eichler of Roseland.

"I focus on that quite a bit," managing partner John Fanburg said of RPL, and the firm's improvement in that metric (to $627,000 from $566,000, a 10.8% jump) helped bring about a 12.8% year-over-year increase in New Jersey-based revenue in 2018, and vaulted the firm into the top half of the list. Its $43.1 million in New Jersey-based revenue ranks it No. 18.

The firm grew by attorney head count, but more modestly. It had a net gain of two lawyers, for a total of 69.

According to Fanburg, the firm was up to 73 full-time equivalents through August of this year. Though, he said, "we don't want to grow too fast." Outside of the addition of a four-lawyer personal injury group in mid-2016, the firm has added laterals by ones and twos, he added.

Rapid growth by acquisition "has the potential for changing the culture," Fanburg said. "Cultures evolve … but we want to be gradual and do it on our own."

Head count growth also affects overhead, and overhead is something Brach Eichler has been careful about, he said—noting that head count has the potential to mount, with additional hires creating expenses that are addressed by hiring more laterals to bill more time.

"You can have [strong] RPL but low profitability because your overhead's out of control," Fanburg said.

Fanburg said his firm's lawyers have billed more, and have been increasing rates incrementally each January, and he credited litigation, real estate, health care and corporate/tax practice groups with strong revenue generation.

Roseland-based Connell Foley also grew in gross revenue, revenue per lawyer and attorney head count last year. The firm (ranked No. 12) had an 11.6% year-over-year increase in gross revenue, to $57.7 million. It also had a 2% increase in RPL, to $451,000. Finally, the firm grew its New Jersey-based attorney head count by 9.4%, to 128, in 2018.

"The numbers do tell the tale—we are growing nicely," managing partner Philip McGovern Jr. said.

Recent hires, he added, should continue to have a positive impact for the firm. "When you bring any lawyer into the firm, there's typically a long time from when they start working and billing to when you actually start collecting on the time."

McGovern, like Fanburg, talked about managing overhead.

At some firms, that has meant cutting staff, via buyouts or other means, but McGovern said Connell Foley has taken no such measures. Still, the firm's staff has stayed essentially the same size even as the firm has added attorneys, he said: "Existing staff have absorbed more attorneys."

Asked what it takes for a New Jersey-homegrown firm to succeed in the current market, McGovern said, "You have to be out there. You have to be a known commodity in the business world."

"The first file might be some referral from a friend," McGovern added, "but you're not going to get the second one unless you do a really good job on the first one."

*Editor's note on methodology: The Law Journal ranks firms based on gross revenue derived from New Jersey offices. For firmwide attorney head count and gross revenue for each firm ranked, please see the chart's two righthand columns. Information is gathered from law firm surveys, ALM Legal Intelligence, documents, news coverage, on-background interviews with sources, and other sources. Figures are rounded. Estimates are utilized where necessary based on information gathered by the Law Journal.