It’s the middle of the week, so let’s talk about mid-sized firms, shall we?
Like a lot of middle children, the mid-sized and regional firm can get neglected in the news. Attention-seeking Biglaw is out there working the biggest cases, closing the biggest deals, paying the highest salaries, recruiting the top students, and engaging in the most ridiculous screw-ups. Small law is an impossibly broad category, but there are so many elite boutiques and hard-charging entrepreneurs pulling off the David/Goliath narrative.
But mid-sized and regional firm news can be slow. They tend to put their heads down and serve their loyal clients. It’s not uncommon that mid-sized firms only hit our radar… because they’ve gotten soaked up into a bigger firm.
Which is a shame because there’s an argument that mid-sized firms are doing most of the actual lawyering in this country. According to the US Census County Business Patterns Report, there are over 9,000 mid-sized law firms in the country, which is roughly 80 times more than firms in the Biglaw range. When you consider the number of full-time employees between the two segments, there are over 400,000 employed in mid-sized small firms.
And at this past Legalweek, it seemed like the mid-sized firms got a lot more attention than normal. Perhaps another reason Legalweek chose Bryan Cranston to deliver its opening keynote was to highlight a “Legalweek in the Middle” theme.
Anyway, what’s going on with this sector? According to Clio’s 2024 Legal Trends Report for Mid-Sized Firms, there’s a lot of good news for the mid-sized firm attorney:
The average lawyer in a mid-sized law firm is also earning more for their firm than ever before, billing nearly 160% more and collecting 200% more than in 2016. Even when controlling for increases in hourly rates, the average lawyer in a mid-sized firm still bills over 100% more and collects nearly 140% more for their firm than they did in 2016. And, based on projections, this tremendous growth is on track to continue into 2024.
Mid-sized firms are outpacing smaller firms in billable growth too, with billable hours up 59% since 2016 while small firms are only up around 30 percent.
But, as they would say on Behind the Music, storm clouds were on the horizon…
So what we’re looking at here is that for all the success mid-sized firms enjoy billing more work, they’re lagging behind on actually getting that money in their pockets.
Which really shouldn’t be! As Clio’s Joshua Lenon explained, this is somewhat paradoxical because “they have the headcount to tackle these problems. Collections and realization should not be a problem if you’ve got non-time-keeper employees. Employees whose job is to get the bills out the door and collect them.” This is an especially big problem for mid-sized firms versus small firms because they have a lot more overhead.
“And their lockup, which is that new metric, is actually higher than smaller law firms as well,” Lenon explained. Lockup is the metric Clio started closely following last year. A concept borrowed from the accounting world, lockup means a few different things based on context, but generally it’s the money firms are owed, and that they’ll eventually get, but that’s sitting out of their hands for an extended period. The time that lawyers spend without money in their pockets is in a real sense money they’re losing.
The problem might be cultural, of course. Regional firms enjoy long-standing relationships with clients in the area and may be a little less willing to push and a little more willing to trust that the client is good for it. But it’s a stretch to assume that’s responsible for all of this.
“We know that they fall into this really interesting place where their utilization rate has just always been higher and has grown faster than what we see for smaller law firms,” Lenon said. “But at the same time, they’re not leveraging technology the way that they could be. And so we see their realization rate and their collection rate lagging smaller law firms.”
Another place where mid-sized firms have slipped between the cracks. Biglaw invests in technology to stay atop the heap. Leveraging tech is existential to small law. But mid-sized firms have been able to sort of… get by.
Alas, getting by isn’t good enough when Biglaw is creeping into smaller markets and it’s so easy to get that money on the table.
That might be why Legalweek seemed to have more mid-sized participation than in the past. And the firms that weren’t there need to be getting in on the tech game before it’s too late.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.