Legal Services
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Industry Overview
The US legal industry includes around 165,000 law offices that generate annual revenue of $180 billion. Large firms include Baker & McKenzie, DLA Piper, Jones Day, and White & Case. The industry is highly fragmented: the 50 largest firms hold less than 15 percent of the market. About 150 law firms have annual revenue over $100 million.
Competitive Landscape
Demand for services depends on the volume of economic transactions, which changes with the economy. The profitability of individual firms depends on the reputation of its partners. Large firms have advantages in serving corporate customers with a wide range of needs. Small firms can compete successfully by providing specialized expertise or operating in a very local market. Although the industry is labor-intensive, the value of the labor is very high: average annual revenue per employee is about $300,000.
Products, Operations & Technology
The operations of law firms revolve around providing legal advice and other services such as litigation, document production, and legal filings. Activity is divided into two large fields: transactional matters, such as commercial and private activities that require the preparation of contracts or filings with various government authorities; and litigation matters, such as civil (commercial disputes, personal and property damage) or criminal (law violations) matters. While document preparation is the major activity for most legal firms, firms also provide opinions and advice to clients and may become deeply involved in business operations and strategy.
Because of the complexity and multiplicity of federal, state, and local laws and regulations, lawyers generally specialize in a particular area of law, such as commercial, mergers and acquisitions, antitrust, bankruptcy, intellectual property, international, real estate, labor, securities, estate, tort, tax, or criminal matters. They may also develop an expertise in a heavily regulated industry, such as telecommunications, banking, or transportation. Large law firms may offer expertise in many of these areas, while small firms may specialize in just one or two. Specialization includes knowing the relevant laws, the court interpretations of those laws, and the operations of particular law courts.
Most law firms use nonlegal staff to handle administrative functions, client service issues, and related functions such as title searches and document preparation. For litigation lawyers, a paralegal may facilitate depositions and look up court records. Law offices also may employ legal assistants who perform multiple administrative functions. Large law firms employ office managers to handle banking, billing, payables, and day-to-day operations.
Computer and communications technology have become essential for many law firms to handle administrative functions and conduct legal research, and, in some cases, to file documents with courts.