Earnings down, overheads up, deals down

Earnings down, overheads up, deals down, partners out

Lawyers are facing tougher times in the recession. Earnings are dropping significantly among smaller and medium-sized firms with firms across the spectrum maintaining earnings by "releasing" partners.

A Lawfuel report shows that while the biggest firms in the country have dropped fifteen percent of their partners over the past 10 years, many have been released in the past two years to maintain partner equity in the practice and earnings.

However smaller firms are feeling a significant pinch also as overheads rise and firms seek to maintain earnings.

Auckland-based accountants Markham Partners, who carry out an annual small market survey, indicate that like their larger brethren many smaller firms are maintaining or at least propping up earnings by culling partners.

This reflects a major drop in transactional work for smaller firms and although litigation has obviously picked up, being paid on time has become a more pressing problem. Even barristers are feeling the pinch as fewer referrals are coming through from instructing solicitors, reflecting a more cautious approach towards embarking upon expensive litigation.

Funding requirements for many firms, including larger firms, is growing, which has required equity partners to compensate for large receivables and work in progress balances by helping to raise extra firm funding. “I smell trouble here,” said one senior accountant.

Also trending down are sole practitioners. One successful practitioner operating with two legal staff and and legal executive who earned $400,000 in 2008 has earned $225,000 in 2010. “Times are tough for lawyers like everyone else,” said another legal accountant.

ENDS

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