Law Firms

Billing Rates Projected to Increase 3.2% in 2010

BigLaw firms are shrinking and so are associate salaries. But billing rates are expected to go up next year.

In the latest survey from the law firm consultancy Altman Weil, firms reported they project an average overall increase in rates of 3.2 percent in 2010.

“Although these results may seem to contradict some expectations for rate freezes in 2010, this is a relatively conservative rate increase by law firms that are struggling to balance their own business perspective with the needs of their clients.” Altman Weil principal Tom Clay said in a release about the survey. “Most firms are making careful, considered increases—often client by client or lawyer by lawyer—unlike prior years when across-the-board increases were typical.”

Key findings in the survey include:

• Larger firms plan higher increases in rates than smaller firms. Firms with more than 1,000 lawyers put the increase at 4 percent. Firms with 50-99 lawyers projected 3 percent.

• Less than 1 percent plan rate decreases, though 8.5 percent say they will not increase rates.

The survey indicates that most firms won’t seek an across-the-board rate increase. It’s a strategy praised by Altman Weil’s Clay.

“A law firm that takes a more granular approach to billing rate decisions will be in a better position to demonstrate a rationale for the increases that’s linked to value,” Clay said. “Because their clients will be pushing back on rate increases, they will need to have a compelling story to tell.”

Law firms report that they don’t expect all clients will be keen on rate increases. Indeed, in one survey comment, a firm noted that it “will be selective in the clients we approach for rate increases.”

Others noted that they’ve already reduced or held back on increases for more than a year.

One law firm respondent said, “We froze our rates moving from 2008 into 2009. I hear managing partners speaking of freezing rates moving into 2010. We can’t sit out two years without changing, so we are going to do so, hoping that client goodwill from last year will cushion us at this year’s hike.”

Data came from 288 firms that responded to the survey, which was sent to 688 firms with 50 or more lawyers. Download the full survey here.

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