Profits Up By 16% At Slater & Gordon

The Lawyer reports that Australia?s Slater & Gordon has posted a 21 per cent jump in turnover to Aus$124.7m (?71.8m) for the 2009-10 financial year.

We also learn from the report that profit at the firm grew 16 per cent to Aus$19.8m (?11.4m).

These results follow the firm?s Aus$57m acquisition of Queensland personal injury firm Trilby Misso ? one of six mergers by the firm this year.

Read the full report at? http://www.thelawyer.com/aussie-firm-slater-and-gordon-posts-turnover-rise-after-acquisitive-year/1005338.article

Meanwhile over at Australia’s? FirmSpy site they’ve discovered a report suggesting that “Revenue in the(Australian) legal services industry is expected to increase by 20.6% to $26.3 billion over the five years to 2014-15, which will represent an average increase of 3.8% per annum.”

Here’s the report and a link? http://firmspy.com/spy-hq/3410/australian-legal-industry-growth-forecast-of-38-per-year-for-next-5-years

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Over the weekend, a number of Firm Spies were talking about the forthcoming BRW Top 500 Report, due out in a couple of weeks. We think it is going to make some excellent reading; revenue statistics are probably the most important metric we can use when assessing corporate behaviour (or, more particularly for our purposes, misbehaviour).

We then stumbled onto an excellent report compiled by Smart Company (using information from IBISWorld) on the Australian legal services industry. The report predicts that the legal services industry will grow by just 3.5% in 2009/2010 to $21.8 billion. The report explains that the Big 6 Australian law firms – Mallesons Stephen Jaques; Freehills; Minter Ellison; Clayton Utz; Allens Arthur Robinson; and Blake Dawson – account for over 13% of industry revenue. The report noted:

Revenue in the legal services industry is expected to increase by 20.6% to $26.3 billion over the five years to 2014-15, which will represent an average increase of 3.8% per annum. Unlike the 1980s and 1990s when firms enjoyed strong demand for services as a result of financial deregulation and micro-economic reform, there does not seem to be any policy or law reform of that scale on the agenda in the coming five years. Environmental laws, particularly those relating to climate change, along with financial regulation in the wake of the global financial crisis may represent the most significant area of reform over the coming five years.

These growth forecasts will no doubt come as a rude shock to firms that in recent (pre-GFC) years have enjoyed double-digit revenue growth. But with partnership salaries that are already so overinflated, was this just another bubble that had to burst?

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  • According to IBISWorld, the success of law firms over the next 3-4 years will be based on the following factors:
  • Proximity to key markets: being in a highly visible location conveys a sense of prestige and expertise.
  • Having a well-defined strategy/goal: having a marketing plan to generate new clients; focusing on servicing a small number of large clients, or a large number of small clients.
  • Access to quality personnel management: having a maximum ratio of around one partner to four staff; offering competitive remuneration to attract quality partners.
  • Provision of development programs for personnel: having a structured training program for all staff.
  • Ability to effectively manage risk: having adequate professional indemnity insurance coverage.
  • Well developed internal processes: having professional management practice systems, which includes cashflow management, the introduction of appropriate time management systems, a job costing system, etc.
  • Access to niche markets: specialising in growing areas of the law rather that offering services covering all areas of the law.
  • Automation – reduces costs, particularly those associated with labour: using new technology to assist labour productivity.

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How leveraged is your firm? Our guess is that the absolute ceiling of four staff to one partner is greatly exceeded. So if you look at your colleagues beside you, who will stay and who will go? Is it going to be a case of Darwinian ?survival of the fittest??