The numbers for 2011 for law firms are dribbling out as they inevitably do at this time of year. The reports are fairly consistent all across the board: Gross revenues up at about 3 or 4%; net profits increased at double that rate. Expenses increased at rates at triple that rate. Law firms seem to be generally recovering relatively well from The Great Recession.
But some real cracks are surfacing. Partner free agency continues to be a boon to some law forms and a bane to others. Even some law firms that have attracted some real big hitters are groaning with the expense of paying for substantial books of business, Those firms that are losing producers are seeing a cash drain and some ominous publicity.
Law firms that saw their gross revenues increase did so by squeezing every possible cent out of their accounts receivable, leaving them with reduced inventories of A/R and weakened cash flow positions. Law firms that saw their net profits increase often did so by deferring accounts payable, leaving them with swollen accounts payable ledgers.
And the bill collector is at the front door for many of the steps taken by law firms in the last few years to escape the clutches of The Great Recession. The due bills are arriving for expansions.
The industry is at a cross roads as we all remain uncertain how this show will conclude. We are about to see the exciting finale – only, there remains great uncertainty as to what that last act will look like.
What are your thoughts as to what the next act will look like?
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