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Law Firms See Big Drop in Revenue per Partner

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By Casey C. Sullivan, Esq. on November 18, 2016 2:57 PM

If your firm's revenue growth has been stagnant or even declined, you're not alone. Law firms experienced a sizable drop in revenue per partner last year, according to National Law Journal's annual 'Survey of Law Firm Economics.'

On average, revenue per partner dropped 4.7 percent in 2015, the biggest decline ever identified by the survey. What could be behind the dip?

Smallest Firms Shine, Others Struggle

The report surveyed 574 firms and found that average revenue per partner was $468,511 in 2015, down from $491,729 in 2014, or a loss of $23,218. Equity partner compensation made little gain, too. The average equity partner compensation went up to $302,260 from $299,999, an increase of less than one percent.

There were a few bright spots though. The survey included sole practitioners for the first time, along with an increased number of small firms. And the smallest firms performed the best. The firms with one to nine lawyers reported an average compensation of $483,882, the highest median. There were only two firms in that category, however. Firms with 10 to 24 lawyers reported $278,501, the lowest average, while those with more than 150 attorneys had a median of $317,303.

What's Behind the Slump?

As the economy has picked up in the last few years, partner revenue hasn't followed suit, it seems. There are several possible explanations for the dip in revenue per partner and low compensation growth.

One could simply be a shift in the survey's makeup. The inclusion of solo practitioners and more small firms could have reduced average revenue overall, Eric Seeger, a principal with Altman Weil, told the American Lawyer.

Another possibility is that smaller firms could be, ironically, suffering from an improved economy. When the economy tanked, small shops were able to attract clients with lower rates. Now that things are picking back up, those firms might not be doing as well. That, at least, is the theory Peter Zeughauser proposed to the American Lawyer's Rebecca Cohen.

But if the reasons for last year's slump are unsure, so too are attorneys' views of the future. When asked whether they were optimistic about the year ahead, 80 percent of respondents chose "I don't know."

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