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Home > 2009 > April

April 2009

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April 10,2009
Introduction to Law Firms

Law Firms as Businesses - What Type of Companies Are They?

• The legal market is highly fragmented
• The top end of the market mainly serves corporate clients and is dominated by large firms which can offer a wide range of legal services.
• Small firms can compete successfully by providing specialised expertise or by operating locally.
• London and New York house the greatest concentration of law firms.
• These cities house the world's largest capital markets and companies everywhere want to tap into them.
• International business is therefore often conducted under English or American law regardless of the client company's own jurisdiction.
• Demand is dependent on the volume of economic transactions.
• Profitability depends largely on the reputation and contacts of the partners.
• Happily for lawyers, salaries are the major operating expense.
• Unlike most other industries, marketing is often aimed at other lawyers since a large amount of work is done through referrals.
• Referrals are mainly inter-jurisdictional but some are inter-specialisation.


• Serving corporate clients is both the most profitable and the largest slice of the market.

Partners not Shareholders - Law Firms are Different

• Margin not Profit
• Unlike limited companies which aim to maximise total profits for their shareholders, almost all law firms operate as partnerships or LLPs.
• With no shareholders to worry about, the profits are distributed across the partners. Therefore they are incentivised to maximise profits per equity partner (PEP).
... Read the full article