Many law firm owners and managers want to grow or scale their firms. If they can increase their firm, they can pay themselves and their employees more. With more income, law firms can do other great things, like buy new equipment, obtain better benefits, and maybe even expand their law firm. It can even allow a law firm manager or owner to retire sooner.

What’s the Average Growth Rate?

Many law firm owners and managers have no idea what the average growth rate of a law firm is when trying to grow it. Knowing the average growth rate can allow a law firm to have reasonable expectations. By having realistic expectations, law firms can budget and plan accordingly.

According to a recent American Bar Association article, the first half of 2024 was relatively strong for law firms, with an average growth rate of 11.4 percent. In 2023, the average growth rate was less than half at 4.4 percent.

The article says: “The rate growth was highest—at 10%—for firms among the nation’s top 50 for gross revenues. Those firms also had the highest revenue growth, with a 13.8% increase.”

What Do These Numbers Mean for Your Firm?

Average growth rates do not necessarily mean a lot for every law firm. Some law firms exceed national averages, while others fall below them. However, knowing the averages can be a good guide for budgeting and planning as a starting point.

If a law firm plans to exceed these averages, it will likely have to be aggressive. Being aggressive likely means opening new satellite locations, increasing the advertising budget, and hiring attorneys and staff to handle the increased workload. Scaling a law firm can be a risky endeavor. A law firm owner or manager may be in a tough spot if it does not work. But if it works, the reward can be significant.

It is often true that it can be easier to grow a law firm out of the gates quickly, but that growth can slow down the larger the law firm because the firm can become hard to manage. For example, a law firm that can double its income in its early stages will find that almost impossible to replicate once the firm reaches seven or eight figures.

There are law firms that exceed these expectations each year and receive awards from organizations such as Law Firm 500. However, it can be hard to exceed national averages if a law firm does not open new locations, advertise, hire with a degree of speed, and have the proper infrastructure.

Some law firm managers and owners may try to scale their firms unsuccessfully. Many do not succeed because they lack a solid marketing plan, do not budget carefully, or do not have a process for making good hires.

Rising Costs Are Also an Issue

Rising costs and inflationary factors can also impact law firms. Even if a law firm increases its gross revenues, the cost of just about everything increases for law firms. Increasing costs include insurance, rent, taxes, salaries, and advertising. Thus, to scale a law firm successfully, the growth rate does have to exceed inflationary factors.

However, when a law firm’s revenue numbers become static or even decrease, with increasing costs, many law firms can shrink when considering rising prices. Thus, many law firms will want to aspire for some growth to maintain the status quo.