Coming off the heels of the record performance seen in 2021, law firms experienced a very different year in 2022. Declining demand, a longer collection cycle and a drop in accrual realization drove modest average industry revenue growth. Meanwhile, the cost of operating law firms continued to rise, with expense growth outpacing revenue gains. As a result, profitability declined for the majority of law firms – a sharp contrast to the extraordinary results of 2021. That said, the past three years since the onset of the pandemic have been highly unusual and we believe that it’s worth looking at average annual performance since the last of the more “normal” years – 2019. On that measure, the law firm industry has reported very strong average annual performance over the course of these past three unusual years.
These results are based on a sample of 191 firms (79 Am Law 100 firms, 50 Second Hundred firms and 62 niche/boutique firms). Forty-four of these firms fit our definition of either international (less than 25% but more than 10% of lawyers based outside the United States) or global (at least 25% of lawyers based outside the United States). Citi Global Wealth at Work’s Law Firm Group provides financial services to more than 900 law firms around the world and approximately 50,000 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 financial trends in the industry as well as forward-looking insight.
