Legal trends for mid-sized firms in 2024
Mid-sized firms excel at converting their efforts into revenue yet struggle to receive timely payments, finds legal technology provider Clio in its latest report
The average lawyer in a mid-sized firm (defined as 20 or more employees) is earning more than ever before in 2024 — but still has significant billing and collection hurdles, especially compared to smaller firms.
Leading cloud-based legal technology provider Clio’s reports have provided timely and actionable insights for legal professionals since 2016. Its latest 2024 Legal Trends for Mid- Sized Law Firms report highlights crucial areas impacting these businesses — encompassing financial performance, the impact of legal technology, and (new this year) perceptions of artificial intelligence (AI) in legal practice — and identifies key areas for improvement in this market segment.
Lockup, a new cash flow metric introduced this year, underscores a collection issue among such firms that if left unsolved, could create liabilities for firms. Getting paid faster is a key theme in this year’s report, with smaller firms outpacing their mid-sized firm counterparts in adoption of online payments.
The report also covers AI trends throughout the legal sector, unpacking how mid-sized firms differ in their approach from smaller firms, and in some cases, even their clients.
Clio CEO and founder Jack Newton says: “With the advent of AI, we have entered a new era of technology education and adoption across the legal sector, and we know that firms who find a way to leverage the technology are going to have a competitive advantage.”
A substantial increase in billable work signals heightened productivity and financial success
Insights from the report highlight a remarkable shift in mid-sized firms, with a massive increase in billable hours compared to 2016, indicating heightened productivity across the segment. Individual lawyers are now billing substantially more and collecting more revenue, underscoring the significant financial and operational success of mid-sized firms in the evolving legal landscape.
- Mid-sized firms have experienced tremendous growth in the number of billable hours captured by their employees — at nearly 60% more billable hours than in 2016.
- The average lawyer in a mid-sized firm is also earning more for their firm than ever before, billing 140% more and collecting nearly 180% more than in 2016.
Mid-sized firms lead in billing speed — but lag behind smaller firms in payment collection
Law firms should closely monitor the speed and consistency of payment collection to avoid revenue being held in lockup, which encompasses unbilled and uncollected revenue. Mid-sized firms, on average, demonstrate a proactive approach in generating invoices but struggle with the collection process. Features such as online payments, bulk billing and client-facing apps like Clio for Clients are associated with significant reductions in lockup periods, providing valuable insights for firms seeking to streamline their financial processes.
- Mid-sized firms exhibit a median realisation lockup of 36 days, with the top 25% achieving a median lockup of 20 days, highlighting variations in billing efficiency.
- The median collection lockup for mid-sized firms is 52 days, emphasising the need for improvement in the timely collection of outstanding payments.
- Clio Payments usage by mid-sized firms results in a two-day reduction in realisation lockup, a six-day reduction in collection lockup, and a 13-day reduction in total lockup, enhancing overall financial liquidity.
Lawyers across SME firms have similar attitudes towards AI use in legal — but smaller firms may have more to gain
Lawyers in mid-sized and smaller law firms are approaching the integration of AI cautiously. While there is recognition of AI’s growing importance in legal practices, some legal professionals remain sceptical about its current level of advancement and reliability. This cautious stance, however, does not fully align with the adoption of AI technologies in the sector, as reported by legal professionals:
- A majority of lawyers in mid-sized and smaller firms express reservations about the reliability of AI, yet they acknowledge its potential benefits, suggesting a balanced perspective on technology adoption.
- AI is already making significant inroads in legal practices, with 19% of lawyers self-reporting use of AI for marketing activities. Its application extends to critical legal tasks such as legal research at 14%, document drafting at 13% and litigation discovery at 9%.
- Future aspirations for AI use include document management, calendaring and document signing.
These findings highlight a gap between the current application of AI in legal practices and the expectations of clients, especially in the context of mid-sized firms.
There is a pressing need for firms to align their technology strategies more closely with client preferences. Embracing AI in ways that meet client expectations is a matter of staying current with technological trends, and a strategic imperative for maintaining competitiveness and client satisfaction.
The report also points out a potential competitive advantage for small firms in the adoption of AI. For smaller firms with fewer resources, AI presents tremendous potential to scale their businesses and to effectively punch above their own weight.
“Technological advancements have not only empowered solo practitioners to compete effectively with larger firms but have also streamlined decision-making processes for smaller players in the legal tech field,” says Clio lawyer-in-residence Joshua Lenon.
He concludes: “To maintain a competitive edge, it is imperative that mid-sized law firms adapt and prioritise the adoption of cutting-edge legal technology. The data is clear — these are the necessary tools to operate and excel in today’s dynamically evolving landscape.”
To read the full report, download 2024 Legal Trends for Mid-Sized Law Firms today.
