Citi Private Bank Law Firm Group and Hildebrandt Consulting Issue 2020 Citi Hildebrandt Client Advisory

Citi Private Bank Law Firm Group and Hildebrandt Consulting today released their 2020 Citi Hildebrandt Client Advisory, which establishes the broad landscape for the law firm industry, how firms are responding to industry challenges and their best opportunities for growth in the year ahead.

The Client Advisory finds that 2019 was a good year for the law firm industry, with an expected revenue growth of 5.5 to 6.5 percent by year-end, and projects that the industry will grow in the range of five to six percent in 2020.

In the first nine months of 2019, billing rates had the highest growth rate since before the recession and were the primary driver of revenue growth for firms, growing by an average of 4.7 percent. By contrast, demand grew far less than in 2018 at a rate of 0.9 percent. The most significant impact on revenue growth was the continued trend of a lengthening of the collection cycle, which was largely driven by clients delaying payment of their bills.

An additional key finding from this year’s Client Advisory is the increasing anticipation of a recession among law firm leaders. Although Citi Private Bank does not anticipate a recession in 2020, a small majority of the industry’s leaders predict a recession will occur by 2020 and a larger majority predict a recession by 2021.

“Although 2020 is expected to be a positive year for the law firm industry, it is an opportunity for firms to ensure they are well-positioned should there be a downturn in the market,” said Gretta Rusanow, Head of Advisory Services for the Law Firm Group at Citi Private Bank. “Despite the ongoing macroeconomic uncertainty and volatility, and a challenging talent market, we expect the most successful firms will continue to expand and innovate in 2020. For those firms, expansion will be closely aligned to the firm’s business strategy – more so than pursuing opportunistic growth.”

Another defining trend in 2019 was an active lateral recruitment market. This trend remains the primary driver of consolidation in the U.S. legal industry and is expected to continue in 2020, in addition to dispersion across and within market segments and market volatility. Additionally, the average industry profit per equity partner growth is expected to be in the mid-single digit range.

“As we expect to see further consolidation of the law firm industry in 2020, we are advising firms to look for growth opportunities,“ explained Brad Hildebrandt, Chairman of Hildebrandt Consulting. “For many firms, this means taking steps to do more with existing clients; broaden their client base; focus on growth practices, industries and regions; and introduce further efficiencies in the way they deliver legal services.”