As we all dither around whether or not Western economies are in recession or merely suffering a downturn, the US-based law firm management consultancy Hildebrandt has just published a report looking at the impact of the current financial crisis/credit crunch/whatever could have on law firms and makes some suggestions as to how firms should be reacting. (Albeit with a strong slant on the US legal market.) The full report is attached below however here are a couple of extracts…

“The current downturn has brought to an abrupt end the six-year period of unprecedented revenue and profit growth that law firms have enjoyed since 2001. Far from the annual double-digit growth in profits per equity partner that law firms experienced (and came to expect) over the past half decade, we believe that, across the profession, profits per partner in 2008 will on average be flat to a minus 10 percent, as compared to profit levels in 2007. For firms with significant capital markets practices, we expect the decline will be more significant – on average from minus 5 to 15 percent, with a few firms seeing even steeper declines. These results will put a severe strain on many firms and will require steady and level-headed management to calm the inevitable anxieties of partners and others.”

“take a close look at the expense side of your firm’s income statement. In the present environment, you need to look at your expense structure to be sure excess expenses are trimmed, while being careful to preserve items that are strategically important. Firms that take a “slash and burn” approach to expenses will be seriously disadvantaged when the economic recovery occurs (and remember that recovery in the legal market typically leads recovery in the general economy). You should also review your firm’s procurement process, as well as your relationships with existing vendors, to make certain that you are getting the best prices for the goods and services that you purchase. The consultants in our strategic sourcing practice tell us that, in most firms, such a review can result in cost savings in the neighborhood of 25 or 30 percent with little or no adverse impact on operations.”