September 13, 2006
Top Five Practice Areas for Midsized Law Firms
I reported on the results of health care survey questions a few days ago. The same survey asks about practice classes.
The top five practice areas were litigation, insurance defense, corporate non-litigation, real estate, and trust & estates. Collectively, the top five practice areas constitute approximately 64 percent of fees for survey participants. The top two, litigation and insurance defense, accounted for 38 percent of fees.
What I found interesting was the segmenting of practice types by firm size and then partner income. The most profitable firms, the top quartile, had a heavy weighting to litigation at 33 percent of billings, while the least profitable firms were most heavily weighted to insurance defense at 26 percent of billings.
Before you conclude that insurance defense is not profitable, the top performing quartile of firms indicated insurance defense as their second most significant practice area at 11 percent of fees.
What I conclude from this data (along with other survey data) is that insurance defense is still lucrative and growing, but rates are constrained by both competition and pressure from clients. In addition to requiring lower rates, insurance firms are generally slow to pay and frequently adjust bills unilaterally and/or reject line items or entire bills.
Insurance defense can be profitable. A number of insurance defense firms are doing exceptionally well. But matching the profits of other practice areas requires a greater management discipline. Insurance defense firms must focus on leverage. They must eliminate mistakes and delays in billings that are fodder for client adjustments that bring down realization. To that end, some of the higher end business systems, like Juris, now offer software that will audit time and expense entries in real time against insurance client billing rules and instantly notify the fee earner when an entry as proposed would run afoul of their clients’ engagement rules. Bill rejects are eliminated and adjustments are reduced.
The complete survey concerning practice class as well as financial metrics for 2005 can be found in the Juris Law Firm Economic Survey of midsized U. S. law firms. The 55-page survey publication includes results as well as analysis and recommendations for improving law firm performance and increasing per-partner income. The annual Juris survey is provided to survey participants without charge. Others can purchase the survey for $375
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
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Filed under Blog by Tom Collins