Looking at 2014 “we see evidence of some recovery in the financial performance of law firms and a degree of confidence is returning to the sector as a whole”, says David Snell, head of the PwC law firms’ advisory group.
PwC’s 2014 Annual Law Firm Survey has revealed that:
- The number of UK firms increasing UK fee income is higher than any time since 2008: 70% (2013: 43%) of all firms increased UK fee income above inflation.
- Increases in net profit margins have been achieved mainly through reduced fee earner numbers and increased chargeable hours.
- All bandings of firms have seen fee income per chargeable hour fall. This, linked with increases in chargeable hours to near 2008 levels, suggests firms are busier, but pricing pressures remain acute.
- Improving profitability appears to have been a key focus for a number of firms: 58% (2013: 45%) of all firms recorded profit increases at a higher rate than the increase in fee income and the number of firms reporting both fee income and profit reduction is just 7% this year (2013: 25%).
So, amid intense price competition how can firms improve fee income per chargeable hour in 2015?
David Snell continues: “Pricing is a complex area and firms need to think carefully about whether they have the right management information to make good pricing decisions.”
According to Martin MacDuff, managing director of Redbrick Solutions, having management information is only the first step on the way to delivering strong pricing strategies for future growth – ensuring your data is accurate, easy to interpret and delivered at the click of a button is key.
He comments: “We meet law firms of all shapes and sizes, and find that many of them are unable to answer questions such as ‘how much does it cost you to offer that conveyancing service?’ or ‘which department generates the most profit for the firm?’ Without a sound understanding of key measures of cost and profitability it is very difficult for firms to put in place realistic pricing strategies for growth”.
Martin goes on to say, “most firms do have financial information available, but accessing it can be time consuming, and the data can be of questionable quality. Clients using our Business Intelligence solution have found that having this sort of powerful business information available at the click of a button in an easy to read format has made a world of difference to the way they view their business. They can now easily understand costs, profit and productivity across either the whole business or targeted areas and are using that information to drive steady growth.”
Making good use of technology is going to be key in 2015. Reports in Redbrick Business Intelligence can be set up to run automatically and show, for example: how much time is recorded as billable and unbillable so that you can maximize your billable time, a detailed list of activities per fee earner per day, so that you can ensure you have the right people doing the right tasks and fee target progress, which enables proactive management of productivity.
If you would like to understand more about legal technology solutions and the benefits they could bring to your business, Redbrick Solutions offer no obligation, one to one consultations. To book, please call 0845 166 2629, or visit www.redbricksolutions.co.uk.