A Deeper Dive into PracticePanther's 2024 Small & Midsized Law Firm Report
PracticePanther's Colin Li and Mayowa Oyebadejo summarize the key findings from the company's 2024 Small & Midsized Law Firm Report.
About the Report:
The groundbreaking report presents a comprehensive overview of the evolving market trends shaping the small and midsized law firm landscape and how firms are navigating them to prepare for a successful 2024.
Despite broader economic uncertainties, the report highlights a prevailing optimism among small and midsized law firms. Over 75% of them have increased or maintained their budgets, especially in technology, marketing, and labor costs. We dive into the heavy investments in technology, the challenges presented by the labor market, and the strategies firms are adopting to improve operations, reduce workloads, and enhance profitability.
Tune in to gain a deeper understanding of how legal professionals are leveraging technology to succeed in a rapidly changing market. Visit www.practicepanther.com/law-firm-reports to access the full report.
Bob Ambrogi (00:01.623) Welcome to Law Next PR, the podcast where we put a spotlight on the latest news coming out of the legal tech industry. This is Bob Ambroci and our topic today is the 2024 small and mid-sized law firm report, hot off the presses from the practice management company, Practice Panther. Joining me today from Practice Panther to tell us more about it are Mayuah Oye-Batajow,
Bob Ambrogi (00:30.967) Chief Financial Officer and Chief Revenue Officer. My own Colin, welcome to the podcast.
Mayowa Oyebadejo (00:38.606) Thanks for having us, Bob.
Colin Li (00:38.931) Great to see you, Bob. Thanks for having us. It's been a while.
Bob Ambrogi (00:43.595) It's been a while. I know it. Well, thanks for doing it. Well, let's dive right into this. Tell us about what this report is and why it matters to law firms now.
Mayowa Oyebadejo (00:55.562) Yeah, I can kick it off and open it up to Colin as well. So this report, what we're truly excited about, I think it provides a really comprehensive look at some of the most important trends in packing law firms today, right? In the playbook that we're seeing really successful law firms leverage as they navigate some of those trends heading into the new year.
There's been so much change across the last year from macro economic client expectations, competition, hiring. It's just really important for law firms to be able to take a step back and understand how these shifts are impacting not just their current day to day, but also how they think about and plan for 2024.
Colin Li (01:39.147) It's a really pivotal moment in, like when I was said, in the economy, but also for legal because it's impacted a little bit differently. And similar to when the pandemic happened, you know, everyone's very kind of confused and trying to figure out is what I'm doing right. And for us, a big thing with our customers and kind of like the larger community is to say, hey, if you're like this, you're not the only ones going through it.
And here are some things that can help you navigate this.
Bob Ambrogi (02:11.895) Yeah. Well, as you say, it is a pivotal moment in the economy. And as we're heading into 2024, what is this report? What is the research that you did tell us about what the outlook is for law firms and what law firms outlook is themselves on the future?
Mayowa Oyebadejo (02:32.182) Yeah, so this report, you know, I think when I think about our, the,
the seat that we sit in here at Paradigm, where we're very privileged in that we sit at an intersection where we're constantly getting to interact with firms across practice areas, sizes, and we get to hear the questions that are constantly top of mind for them, right? And I think like any of us, when there's a lot of change happening, professionally, personally, we look to those around us to understand, well, how should we feel about it, right? Like, how should we be making sense of it? And I think law firms are no different. They wanna know, how are other firms responding? How are they reacting?
can I glean from that? And so for us, it was really important to let me look at that and democratize the access to that information that we sit with, add some more rigor and data to it. We pulled in practice panther data, leverage surveys of tens of thousands of professionals, really to inform both our customer base and the market more broadly. I think we see some very interesting things in the data, especially as you think about the outlook going into next year.
If I had to sum it up, I would say law firms are vigilant. They're interested to see where the economy is gonna head. Are we headed into a recession? Are we in a recession? I think every couple of weeks you see some news about another major company in some layoffs, and that's kind of hard to ignore. But I think law firms, unlike many other industries, aren't necessarily adopting this fiscal contraction. I think the legal industry is poised for a lot of growth, and I think law firms understand that.
more relevantly, they feel it in their day to day, right? And so there's a lot of optimism that comes with that, Bob. And I think you see it in the report where there's some stats and they really compelling graphs in there and encourage everyone to read it, but 75% of law firms are increasing or maintaining their budgets across major spend categories. I think travel probably being the one exception. And when you delve into the specific areas where their firms are most commonly investing the most, it's clear that they're positioning themselves
Mayowa Oyebadejo (04:33.592) growth, right? It's 39% of firms increasing their budgets or increasing budgets in, you know, technology and software, about 40% in salaries, another third in marketing. And so I think law firms are clear 24 percent an opportunity for increased growth and there's optimism that's backing that up in terms of how they're spending their $3.
Bob Ambrogi (04:55.927) Yeah, and of course, I'm always interested in the spending on technology. But Colin, what did you get out of this in terms of that?
Colin Li (05:03.271) One thing I wanted to point out too is that we talk about law firms in this context, we're really focusing on the small to medium size side of the market. Whereas, like in big law, you may see some more kind of contraction where their customers are more of the enterprise customers to begin with. Whereas we've seen a lot of our practice areas within our customer base, they work in more
counter recession Types of practice errors like bankruptcy or personal injury So a lot of their practices are actually thriving from the top from a business perspective However, you know, you never know right so a lot of that double down and technology Is is actually a good thing for the sort of the bottom line?
Bob Ambrogi (05:55.835) Yeah. You know, Mayo, you talked about the fact that there's optimism among small and medium-sized firms evidenced in this report, but it also finds challenges that law firms are facing on a number of fronts. How are firms kind of balancing that optimism and those challenges, and how are they meeting those challenges?
Mayowa Oyebadejo (06:18.986) Yeah, I think there's a lot of great ways that we see firms adapting and we call out a couple takeaways that firms, really successful firms are starting to think about.
but also across the board all firms should be paying caution to. And I think one of the really central points that we call out throughout the report is really around just how small and mid-size law firms can be increasing that the cash return on their staff's hours, right? Which is as important in this market as it's ever been. Right? And so how do you actually realize the cash profits from all the work that their law firm is doing? And so there's a couple of pieces that inform that we see law firms thinking a lot.
about. Utilization rates is one of those billing realization collections. I think the former and the latter being a really salient place that law firms are really harping on to really improve efficiency. I think one of the big things that we also call out is specifically for utilization. We make this distinction that I think is really important for law firms to think about related to traditional utilization versus true utilization. And I think traditional utilization
The industry has long thought about law firm productivity, right? You take the number of hours that an attorney logs and a given standard work week and call it 40 hours. You divide it by that and get a percentage of the billable hours that an attorney is actually getting for an eight hour day. And that is up, right? And that number was 34% in 2022 and it's up to 36% this year. We're on pace to hit that, I should say. And that's exciting. That's some of the great work that we've all been doing.
in this industry for a long time.
Mayowa Oyebadejo (08:00.93) you know, ongoing adoption of practice management software, functionality that allows law firms to reduce a lot of the time spent on those, you know, non-billable tasks. But I think the thing about traditional utilization rate is that lawyers aren't just working, you know, eight hours a day. Bob, you're still a, you know, practicing attorney, you know that, you know, better than most. Like, that's just not the case, right? And so, you know, especially in this market, there's data in the report about the fact that, you know, 60% of law firms are saying their workloads
are up year over year, 60%. And that's huge, right? And I think the point there is that as the overall number of hours worked increases, the potential true utilization goes down because you're no longer cutting it just by an eight hour workday.
And so that's really important. So I think it means that the work isn't done, right? And so as law firms continue to adopt practice management software, it's not enough to just use it for billing or invoicing. There's so many features that I think at all in one practice management platform, like Practice Panther can be leveraged to improve and create optimizations and efficiencies across processes of law firms. And we see just a lot of really well positioned law firms looking at the whole gamut of process errors
Bob Ambrogi (09:20.001) Yeah. Colin, anything to add to that?
Colin Li (09:22.575) I was going to say, Bob, you might, Bob might work 40 hours a day. Uh, utilization is out of control.
Bob Ambrogi (09:26.615) Ha ha ha.
Mayowa Oyebadejo (09:26.774) You're right.
Bob Ambrogi (09:30.503) My utilization rate is not, my true utilization rate is not good. But, I mean, let's talk about, I mean, one of the things that you do in this report is kind of lay out a playbook of ways that firms can.
Colin Li (09:34.015) Thank you.
Bob Ambrogi (09:47.603) work towards achieving, sustain success in their practices and some of the tips around not just practices they should employ but tools they should use in order to do that. So could you elaborate a little bit more on that?
Mayowa Oyebadejo (10:01.462) Yeah, I think there's a lot that we cover in the report. I'd say when we think about the growth opportunity for firms in 2024, I'd say there's two dimensions that we really think a lot about, which is how firms are positioning themselves from a market standpoint. So responding to a lot of the increasing competition, client demands, then also too, the scalability piece of looking at their operational processes and how those can be increasingly efficient in a ways that allow them to realize
but also increase those labor to cash returns that we talked about. I think that latter piece is really where we see Practice Panther having an outsized impact on the firms that we work with. And so what we kind of do in the report is ask law firms to really have a frank look and assessment at key process areas in their practice. And if they had to plot them on a spectrum from highly manual to highly automated, where do they sit on that spectrum? And any opportunity to shift things
right towards automated can create real material impacts to you know utilization rates that we talked about billing realization and collections and right and so we lay out five areas that we think practice panther and our customers are seeing a lot of success at right and client intake especially critical for some of those more high volume you know
practice areas and we talk about some of the features that we have that are really helping firms do this, you know, related to custom client intake forms and where you place those and how they sync with your CRM. You know, two, looking at document management, you know, how we limit the amount of time firms are spending on that, which we know hampers utilization and looking at, you know, how customizable templates can actually help firms improve efficiencies. You know, time and billing and a lot of robust features there.
Mayowa Oyebadejo (11:50.736) especially in this market, Panther Payments is helping a lot of firms trend well in this right. When you think about those collection rates as one of the big metrics that are impacting the labor of cash return, there's interesting stats that we have in the report around what those numbers look like in terms of collection rates for firms that are using native e-payment software versus those that are not. And there's a bit of a different trend where the number is actually flat, but slightly going up for firms that are using payment software,
software versus firms that are not. And so that being a huge area, especially in this market where cash is king, that's another one followed by, I think, client communications, client portals, workflow automations that automates a lot of those communications. So a whole range of stuff, Bob, I won't rattle them all off, but I think a ton of robust information for firms to kind of glean a playbook for how they should be thinking about their firm's processes going into 2024.
Bob Ambrogi (12:46.667) Interesting information there. And one of the points that I picked up on that I thought was really interesting was this idea that some firms are so busy, so overextended really, that they're not following up on the collections. And that's where something like e-payments can really make a big difference in a firm. And that's a.
Colin Li (13:05.935) I think one thing just to add to that is when you're looking at your vendor, what you want is something that has everything in one. And that was a big idea, like our big concept in terms of how we built our products, in particular, Practice Panther. When we launched our Panther payments a couple years ago, we wanted to make sure all our new features came natively and all in one perspective. So you don't have to waste time kind of jumping back and forth.
you get the, if you have like an environment where you're using so many different integrations, something goes bust, you're making 15 support calls and you've given up on collecting that cash anyway. But for us, we want it to be one seamless process. And as Myla mentioned, our customers are reaping the benefits. Even in this environment, the collections rates are going up and going up big.
Mayowa Oyebadejo (13:44.45) Exactly.
Bob Ambrogi (13:59.263) Yeah, yeah. Well, you didn't mention this, but I mean, obviously one advantage to an all-in-one platform is you're paying one subscription as opposed to multiple subscriptions for multiple applications that you need to run your practice. What else from this report do you want to call out? I know our time is limited here today, but anything else that you want to bring out for listeners here?
Colin Li (14:12.135) That's right.
Mayowa Oyebadejo (14:26.99) Yeah, I think it's just a lot of really compelling cases. I think the report does really well is it shows the trends, right? Let's take workflows. We talked about how that's increasing, but it also codifies some of the impacts, some of the things in driving those impacts. And I think when you look at the workload piece, I would encourage...
listeners to go check out that stuff. I think there's interesting stats we said around what the workloads are looking like for law firms, but how, you know, talent shortages or the talent wars actually impacting a lot of that and what that may mean for their firms in terms of hiring and staffing, but also too, I think competition, right. Amongst large law firms, you know, coming down and competing for some of the smaller end of the market niche law firms. So I think there's a lot of great data that firms should be thinking about, you know, how we actually pulled into 2024.
A ton of it, I think we've covered a lot of the highlights, but I think a ton of useful things that firms can pull out.
Bob Ambrogi (15:21.615) People should definitely go and read it and download it. What's ahead for practice, Panther? What's next?
Colin Li (15:30.867) Yeah, we've got a lot of exciting things coming in the tail end Q4 and going into the new year. A lot of new exciting product things as well as things for our customer. We wanted, with this report, we wanted to really kind of help our customers as they go into budgeting season for 2024. And they'll be really ready for some of the things that we have ready in session four during that year.
and such, but it's going to be a nice ride and we're excited for it. I'm excited to share when times are ready.
Bob Ambrogi (16:13.347) We'll put the link in the show notes here, but where can people find this report?
Mayowa Oyebadejo (16:18.026) Yeah, the practice Panther website, you know, you go to resources, it's under our, you know, slew of guides. We have our industry report kind of anchored there. Um, it's certainly worthwhile. It's a great read. Doesn't all have to be read at once, but I think leverage it more of as a, as a playbook is you're planning for the new year versus a report that you read once, I think it could be referenced over, over time. And so, um, more excited about it. Um, I think firms are finding a lot of value from it and we've received some great response so far.
Bob Ambrogi (16:50.491) Colin, Myoha, thanks for coming on the show and filling us in on this new report of yours.
Colin Li (16:56.476) It's an honor Bob. Thanks for having us on your on your PR podcast Excited to see where you take it
Mayowa Oyebadejo (17:04.018) Super excited about the format. Thanks, Bob.
Bob Ambrogi (17:07.867) Thanks. That's it for today's episode. If you enjoyed it, please subscribe wherever you get your podcasts, or you can follow us on YouTube at LawNext underscore PR. This is Bob Ambrogi. Thanks for watching and or listening.