Understanding Average Law Firm Revenue: Key Insights and Benchmarks for Growth

Revenue is key to the sustainability and success of any business. It’s also an important metric for law firm owners to track—especially if you want to grow your firm and improve your profitability.

Positive revenue is obviously a good sign. But how do you know if your law firm’s revenue is enough to grow and scale your business? And how does your firm’s revenue stack up against the average law firm revenue?

In this blog post, we’ll cover what you need to know about law firm revenue.

You’ll learn the average amount of compensation that solicitors bring in, key factors affecting law firm revenue, and ways you can increase revenue at your firm. Use the guide to help measure your firm’s success, increase its revenue, and set revenue goals more accurately.

Curious who are some of the top law firms in the United Kingdom and beyond? Check out this post.

---

Book a Demo

See exactly how Clio can help grow your firm revenue by giving you more time back for billable work.

See Clio in Action

---

What is the average law firm revenue?

The concept of “average law firm revenue” is, by nature, somewhat ambiguous. Your firm’s revenue ultimately depends on your unique situation (more on revenue-contributing factors later). However, to gain insight into the average revenue for solo and small law firms, we can look at how these solicitors get compensated.

Discover the highlights from our 2024 Legal Trends for Solo and Small Law Firms Report for additional insights.

How much revenue do sole practitioners and small law firms make in the UK?

The average law firm revenue in the UK varies significantly depending on the size and structure of the firm, particularly between sole practitioners and small law firms.

Revenue Insights for Sole Practitioners

Sole practitioners in the UK have demonstrated strong financial performance, with recent data showing an increase in profit per equity partner (PEP) from 12% to 23%. Additionally, sole practitioners have enjoyed a 12% growth in fee income, largely due to lower overhead costs and the ability to swiftly adapt to market changes. This agility allows them to maintain a competitive edge in a challenging market environment.

Revenue Insights for Small Law Firms

Small law firms (defined for our purposes as those with two to four partners), have faced a more complex financial landscape, with a reported 2% decrease in fee income. However, firms with five to ten partners fared better, reporting a 9% increase in fee income. These statistics highlight that a firm’s size and operational structure can significantly influence its financial outcomes. A survey revealed that the median annual fees for small to medium-sized firms across England, Wales, and Scotland are around £5 million, with these firms seeing an 8% revenue growth in 2022.

2024 Revenue Trends

The 2024 Legal Trends for Solo and Small Law Firms report highlights key insights for sole practitioners and small firms, including modest gains in billable hours despite an increase in clients and revenue. The report also shows that these firms are improving in invoicing and collection but still lag behind larger firms in some areas. Online payments were revealed as a way to help reduce payment wait times.

What affects law firm revenue?

When assessing average law firm revenue, consider factors like practice area, location, client type, and more. While each situation is unique, the following factors and lawyer statistics commonly impact the average law firm revenue:

Location

As a result of factors like cost of living, certain states demand higher rates for solicitors. Higher rates mean that lawyers in certain areas can bring in more revenue than others.

Practice area

Even within the same region, the potential revenue a law firm can bring in depends heavily on the practice area. The legal practice area that charges the most in the UK is corporate law, particularly in sectors involving mergers and acquisitions (M&A) and finance law

Client type

A law firm’s client base directly impacts the potential income a lawyer can earn, and the firm’s potential revenue. A firm’s clients could be mainly consumers, businesses, or a combination of the two.

Billing structure

UK law firms predominantly use hourly billing, with top partners at large law firms charging as much as £1,100 per hour. However, there’s a growing trend towards alternative fee arrangements, which offer clients greater cost predictability and transparency.

Law firms’ billing structures could be a contributing factor in determining the average revenue for sole practitioners and small law firms.

How much do the largest law firms earn on average?

The largest UK law firms generate substantial revenue, with the average revenue per lawyer reaching £397,800 in 2023. Profitability in these firms remains robust, with the average net profit per equity partner rising to £159,000 in 2020, marking a 5% increase from 2019.

Learn more about Golden Circle law firms in our blog. 

How you can increase your law firm revenue

If improving your firm’s top-line growth (your firm’s revenue) is a goal for your firm, consider the following strategies:

1. Automate your processes with technology

One of the biggest pain points for law firms is that too much time goes into mundane tasks. The 2022 State of Small Law Firms study found that 80% of respondents saw the time they spent on administrative tasks as at least a moderate challenge in their firm.

Yet, it doesn’t have to be that way. Automating your law office makes it faster and easier for law firms to take care of non-billable tasks. This way, lawyers can focus more on billable and revenue-generating work. For example, you can use software like Clio Grow to automate your firm’s client intake process.

FidLaw’s Giuliana Antonelli can attest to exactly that. Understanding the potential for technology to drive greater efficiency and streamline processes, FidLaw’s revenue increased by 50% after adopting Clio.

Data from Clio’s 2022 Legal Trends Report further supports this—showing that firms that use cloud-based legal practice management software were 11% more likely to have strong revenue streams. In addition to enjoying higher profits, they have the resources to invest in new initiatives—further strengthening their competitive edge.

2. Make payments easier by accepting credit cards

It’s simple: The more convenient it is for clients to pay you, the more likely you’ll get paid. The more you get paid, the more revenue you’ll bring in.

But what’s the best way to make it easier for clients to pay you? Accept credit and debit cards and online payments.

According to our 2019 Legal Trends Report, law firms that accept electronic payments get paid faster. 57% of electronic payments get paid within the same day they are billed and 85% get paid within a week.

Learn how Clio Payments can help your law firm get paid faster and collect more, or you can also see Clio in action.

3. Track (and optimise) your law firm’s key metrics

Knowledge is power. If you want to increase your law firm’s revenue, you must identify key metrics that show how much your firm is actualising its revenue potential. Measure how much billable time your firm is tracking, billing, and collecting on. Note and optimise your firm’s:

• Utilisation rate: The number of billable hours worked divided by the number of hours in the workday.
• Realisation rate: The number of billable hours invoiced divided by the number of billable hours worked.
• Collection rate: The number of hours collected divided by the number of hours invoiced).

So how do these metrics tie in with your law firm’s revenue?

According to the 2022 Legal Trends Report, the average collection rate was 89% in 2021. This statistic means firms don’t collect on 11% of work completed and billed to clients. The average collection rate drops to 87% for sole practitioners.

Low collection rates strongly indicate you need to focus on improving your firm’s collections to increase revenue.
Low realisation rates indicate that your firm is losing revenue on hours already worked—but unbilled.
Low utilisation rates show you need to streamline non-billable work to generate more revenue.

Legal practice management software like Clio allows you to easily track key metrics with revenue reports that generate a detailed overview of unbilled, billed, and collected time and expense activities.

4. Put your clients first

Metrics are important, however, revenue is not just about hard numbers. If you want to increase your firm’s revenue over the long term, you need to prioritise your clients. As this episode of our Matters podcast discusses, client feedback is important.

By regularly collecting, analysing, and then using client feedback to improve your firm’s workflows and find new opportunities, you can grow your firm in a way that works for the people you serve. You’ll also likely enjoy increased revenue.

Law firm revenue vs profit

So we’ve covered ways to increase your law firm’s revenue. But what does that mean for your overall profit?

Your profit is your revenue less any overhead costs. Overhead includes marketing, office and technology costs, salaries, insurance etc.

In most cases, increasing your revenue will subsequently increase your profit.

Final thoughts on law firm revenue

Whether you’re a sole practitioner or you run a law firm with many solicitors, revenue is crucial for your firm to succeed. While the exact figure for average law firm revenue varies depending on many factors affecting your law firm’s revenue, you can still work towards a revenue goal.

Consider factors like your current revenue, comparable lawyer revenues and average hourly rates in your state and practice area to help create revenue goals. Then, consider steps you can take to improve your firm’s revenues and meet those goals.

By focusing on revenue and taking steps to improve it over time, you can set your firm up for success, growth, and, ultimately, increased profitability.

Note: This post is provided for informational purposes only. It does not constitute legal, business, or accounting advice.

---

Try Clio for Free

Clio works with your accounting software to help you manage your firm’s profitability, compensation, financial health, and more.

Get Started

---

We published this blog post in October 2024. Last updated: October 17, 2024.

Categorized in: Business