There is plenty of interesting data in HW Fisher’s latest benchmarking survey of SME law firms in London, the South and South East of England.
The London chartered accountants,
who specialise in legal practices, conducted interviews with over 75 SME firms whose turnover figures are in the £5 million to £35 million range, with the aim of painting an accurate profile of the average firm, covering such aspects as risk management, sources of business and financial statistics.
It would appear at first blush as though the typical legal practice in this turnover range is better at looking after its clients’ welfare than its own!
For instance, when it comes to retirement, 56% of firms do not provide any form of retirement planning for partners, this following on from last year’s survey which showed that only 20 % of firms provide any annuities or goodwill payments to retiring staff.
Similarly, while they might spend considerable time and effort sorting out crises that befall their clients, their own preparations for disaster recovery appear to be wafer thin with, for example, a staggering 41% not having key man insurance in place to cover fee - earning partners who might incur a long term illness or become permanently incapacitated.
When it comes to other aspects of practice management, it seems that little has changed from the 2011 survey which showed that three quarters of SME legal firms have yet to set up a service company for their overhead and staff costs and obtain the tax and working capital benefits that subsequently accrue.
However, one promising development is the trend towards increased use of outsourcing as a way of cutting costs in today’s challenging economic environment.
The survey revealed that many non-core activities are now outsourced with 41 % of respondent firms currently outsourcing their business travel requirements. The next most popular processes to be outsourced are IT infrastructure ( 33 % ) and HR & Payroll ( 30 % ). What is particularly interesting is that several respondents have adopted outsourcing for administration and secretarial operations with basic typing being carried out all over the World using technology such as digital dictation and voice recognition systems.
The only department which seems to have escaped the outsourcing blizzard is finance with only 7% either already subcontracting this function or planning to in the future. One can only assume that this is either because of an unduly possessive attitude to this aspect of the business or because the alternatives have not been properly investigated.
Turning to the recent trading experience of this section of the law firm spectrum, it is clear that the predictable consequences of the recession are plainly in evidence with property work accounting for only 15 % of total turnover compared with 21 % last year. At the same time, litigation has rocketed from 28% of the total workload to a staggering 38 % this year.
Overall though, it appears that total business levels amongst SME legal practices have been displaying steady growth but those larger firms in the £20-£35 million turnover bracket enjoyed particularly robust growth and have expanded staffing levels by 26 % over the 2 year period to cope with demand. This is primarily attributed to client migration away from even larger firms in response to a “shopping around” approach by businesses affected by recession.
