Last year, we launched the inaugural Legal Trends Report. It was a watershed moment for an industry that had long suffered from a lack of informed data insights. Using billions of data points we were able to synthesize crucial insights to help firms make better business decisions.
This year’s report, in looking at aggregated and anonymized from more than 60,000 Clio users, digs deep into how well firms are doing in terms of key performance indicators. We’ve also expanded our analysis of key benchmark trends to include survey data from nearly 3,000 legal professionals and more than 2,000 consumers.
Read on for the highlights.
Lawyers still bill only 2.3 hours per day
Last year, the Legal Trends Report introduced three key performance indicators—utilization, realization, and collection rates—to measure how much of a lawyer’s workday contributes to actual earnings. As a quick refresher:
- The utilization rate refers to the amount of billable hours recorded compared to the total hours worked in a day.
- The realization rate refers to the number of hours actually billed compared to the number of billable hours recorded.
- The collection rate refers to the number of billable hours collected on compared to the number of hours billed.
As with last year, the most critical finding in this report is that lawyers spend only 2.3 hours (29% of an eight-hour workday) on billable tasks. When factoring in realization and collection rates, firms only collect an average of 1.6 hours of billable time per day, leaving us with the question: What happens to the remaining six hours?
To learn more about why lawyers aren’t able to dedicate more of their day to billable work, Clio conducted a deeper investigation into how lawyers spend their time, surveying nearly 3,000 legal professionals. The survey results indicated:
- Office administration, generating and sending bills, configuring technology, and collecting payments are all tasks that, combined, eat away 48% of time that could otherwise be spent on billable tasks.
- Law firms also dedicate 33% of non-billable time to business development, which suggests earning new clients is a constant concern for most law firms.
In other words, if you find there aren’t enough hours in a day, or if you want to dedicate more time towards billable work, these are the areas you should look to either spend less time on, or to find ways to be more efficient.
How do consumers find and select a lawyer?
Since law firms dedicate so much time to finding clients, we surveyed more than 2,000 consumers to learn more about how lawyers can better attract potential clients and appeal to what they’re looking for.
According to our survey results:
- When looking for a lawyer, 62% of respondents indicated that they sought referrals from friends or family while 31% sought referrals from other lawyers. Online search (37%) and directory listings (28%) were also common. Meanwhile, TV ads (13%), online ads (13%), radio ads (7%), and billboard ads (6%) had a much lower influence.
- When determining who to hire, respondents indicated that responding to phone calls or emails right away (67%), offering free initial consultations (64%), billing via fixed fees (47%), accepting credit cards (28%), and displaying a willingness to exchange text messages (27%) were most important to them. Having a great-looking website was only important to 19% of respondents when choosing to hire a lawyer.
What’s interesting is that while having a great website might be key for helping potential clients find you via search, it may not be the most important factor for making them choose you over another lawyer. Providing a great customer experience and building valuable relationships might serve you better.
An expanded look at the legal industry
In addition to providing average hourly billing rates for individual states and the US as a whole, the 2017 Legal Trends Report includes unique insights on law firms, lawyers, and non-lawyers. The most recent (as of May 2017) average hourly rates were:
- Law firms: $240
- Lawyers: $260
- Non-lawyers: $149
This year’s report also includes year-over-year comparisons between legal professionals working in urban and rural locations, as well as average rates for the 10 largest US metropolitan areas:
- New York City: $344
- Los Angeles: $323
- Chicago: $312
- Miami: $310
- Washington DC: $304
- Dallas: $300
- Atlanta: $293
- Boston: $287
- Houston: $276
- Philadelphia: $245
Measuring case value based on practice area
Based on survey data, many law firms don’t have set targets for how much they plan to make in a given year, or on a case-by-case basis.
- Only 54% of legal professionals can estimate their annual billings for 2017.
- Only 40% of firms that track time have hourly billing targets.
- Only 50% of legal professionals can bill a case based on a set budget.
How can firms set better targets for themselves? Knowing how much an average case should be worth to your firm can be the first step in setting targets for your firm. To get a sense of the broader trends in the industry, we’ve put together a list of average case values based on practice area.
For each practice area, we looked at the total value of individual cases that had closed within the year of 2016. When we divided the total value of cases by the number of cases in the sample set, we got an average case value for each practice area. We can also look at the distribution of case values, which is shown by the percentiles, or P-values, in the graphic below.
For example, for Criminal Law, 10% of all case values analyzed in the report fall below the P10 value ($150), half of all Family Law cases fall below the P50 (or median) value ($750), and 90% of Family Law cases fall below the P90 value ($3,500).
Average case value by practice area
Again, these are just a few highlights from this year’s Legal Trends Report. The full report includes many more insights that you can use to help your firm thrive, so be sure to read the whole thing.
With the right data, you can make better decisions for your law firm. For more insights on data aggregated from the Clio platform—and survey information from nearly 3,000 legal professionals and over 2,000 consumers—read the full 2017 Legal Trends Report.