Firm Leaders Predicting Profit Growth in 2014, Survey Shows

, The Legal Intelligencer

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Managing Partners Predict Profit

Ryan said he is confident 2014 will be even better, though he wouldn't expect demand to rise more than 10 percent. He said he is careful to be too optimistic, however, when it comes to a rebound in the middle-market transaction and real estate work. Ryan said increases in hours per lawyer, rather than rate increases, is how he expects to see revenue grow in 2014.

Profit Projections

Another positive sign for profit growth is that the confidence index for discounting rates has remained unchanged from the third to fourth quarter, which Rusanow said means the pressure to discount rates, while still prevalent, is stabilizing. Nearly half of the respondents said rate discounting will remain unchanged while an equal 49 percent said it would increase modestly, according to the survey.

There is more firms can be doing to manage expenses, Rusanow said. She pointed to the rise in nonequity attorneys. More firms than last quarter are expecting to see a rise in that tier of attorneys, which Rusanow said includes non-partner track associates, income partners and counsel. Associates, whose numbers are also expected to increase, are not included in the nonequity category.

Rusanow said the rise of the nonequity group would be a good thing if it included only the lower-cost staff associates. She said the productivity numbers for those more senior nonequity and counsel attorneys falls short of associates.

"Their productivity lags associates and their profitability, the contribution per lawyer number, can often be low or negative," Rusanow said.

Firms could look to trim that category, she said. Rusanow also predicted a continued effort to trim staff headcount. The confidence index shows firms are starting to look at trimming the partner ranks. Confidence levels in equity partner hiring fell three index points to 112, according to the survey, with 24 percent of respondents reporting they expected a decrease of less than 3 percent in their equity partner ranks and another 38 percent predicting that tier will remain stable. But while no respondents predicted a decrease of more than 3 percent, 10 percent of respondents expected the equity tier to grow by more than 3 percent, according to the survey.

Confidence in the economy at large increased by four index points to 116. The majority, or 57 percent, of respondents said they expected the economy to remain the same over the next six months with 35 percent predicting it would get somewhat better. Seven percent said things would get somewhat worse and 1 percent said the economy would get considerably better.

Confidence in the business conditions of the legal profession were slightly different. The majority, or 61 percent, predicted things will stay the same, while 23 percent said the legal business will get somewhat better and 1 percent said it would get considerably better. On the other hand, 15 percent said the legal business would get somewhat worse, according to the survey.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.

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