Law Firm Revenue Jumps 13% in 2024, Fueling a Profit Surge (1)

US law firm revenue grew nearly 13% last year in the industry’s second-best performance since the Great Financial Crisis, a bank survey found.

Net income, or the total pool of profits distributed to equity partners, rose 17%, according to Wells Fargo & Co.'s legal banking unit. Demand, as measured in billable hours logged, rose 3.5%, compared to just .7% in 2023.

“Very few people would have expected last year to be as good as it was,” said Les Starck, a senior consultant for the bank’s legal specialty group. Billing rates in 2024 rose 9.1% from the prior year, Wells Fargo said.

The country’s largest legal operations by revenue outperformed on virtually all metrics compared with 2023, the bank found in the survey of more than 130 law firms. Strong demand for lawyers’ time allowed firms to raise rates without sacrificing how much of their bills they collected.

Law firms only once since the Great Financial Crisis posted better year-over-year growth than last year, and that was 2021. Then, legal operations’ performance benefited from a comparison with 2020, when services dropped off due to the start of the pandemic.

Among the 50 largest firms, revenue grew nearly 14%, fueling a 19% rise in net income. Demand rose 3.9% at the large firms, which increased billing rates by 10%, Wells Fargo said.

Operations with a heavy mix of private equity and capital markets work outperformed their peers amid the largest firms, said Owen Burman, a senior consultant in Wells Fargo’s legal banking group. A small subset of the 50 largest firms characterized by high revenue per lawyer and profits per partner saw demand grow more than 7%, he said.

“What drives those firms is private equity and capital markets,” Burman said. “So when that side of the business is really doing well, that stands out.”

Inventory, or bills waiting to be collected, rose 11% at the end of the year, the report said. Firms are forecasting demand to grow above 3% again in 2025 while pursuing rate increases of around 9%, Starck said.

“If things go as planned, we wouldn’t be shocked to see low double-digit revenue growth,” he said. “There is a lot of positive momentum coming into the year.”