Clio Unveils New 2024 Report: Legal Trends for Mid-Sized Law Firms

Mid-sized law firms demonstrate increased productivity alongside challenges in timely invoice collection, while small firm counterparts size up the AI opportunities ahead

• Clio offers mid-sized law firms unique analyses to benchmark their business performance against other mid-sized firms and smaller firms in the broader legal services market
• Mid-sized firms excel at converting their efforts into revenue, yet struggle to receive timely payments, particularly when compared to smaller firms
• Mid-sized firms share cautious attitudes with small firms when it comes to AI in the legal profession, however small firms may have the competitive advantage should perceptions change

NEW YORK, Jan. 30, 2024 /PRNewswire/ - Clio, the world's leading provider of cloud-based legal technology, unveiled its 2024 Legal Trends for Mid- Sized Law Firms report at the Legalweek New York conference. The report highlights crucial areas impacting mid-sized law firms, defined as firms with 20 or more employees. It encompasses financial performance, the impact of legal technology, and—new this year—includes perceptions of artificial intelligence in legal practice.

The 2024 Legal Trends for Mid-Sized Law Firms report reveals that the average lawyer in a mid-sized law firm is earning more than ever before, but still has significant billing and collection hurdles. Lockup, a new cash flow metric introduced this year, underscores a collection issue among mid-size law firms that if left unsolved, could create liabilities for firms. Getting paid faster is a key theme in this year's report, with smaller law firms outpacing their mid-sized firm counterparts in adoption of online payments. The report also covers AI trends throughout the legal sector, unpacking how mid-sized law firms differ in their approach from smaller firms, and in some cases, even their clients.

"With the advent of AI, we have entered a new era of technology education and adoption across the legal sector, and we know that firms who find a way to leverage the technology are going to have a competitive advantage," said Jack Newton, CEO and Founder of Clio. "This report uncovers an essential overview of how mid-sized firms are keeping up with the pace of rapid innovation, something that becomes increasingly difficult with larger business infrastructures and staff. And let's be clear, AI is not the only piece of the puzzle—tech adoption, particularly in collections and payments, is still lagging behind in certain workflows among the mid-sized firm segment. I encourage legal professionals to leverage this rich data to see where the competitive advantages lie among firms who make their technology work harder for the overall health of the firm."

Insights from the report highlight a remarkable shift in mid-sized law firms, with a massive increase in billable hours compared to 2016, indicating heightened productivity across the segment. Individual lawyers are now billing substantially more and collecting more revenue, underscoring the significant financial and operational success of mid-sized law firms in the evolving legal landscape.

• Compared to 2016, mid-sized law firms have experienced tremendous growth in the number of billable hours captured by their employees, capturing nearly 60% more billable hours than they did in 2016
• Mid-sized law firms have experienced tremendous growth in the number of billable hours captured by their employees – at nearly 60% more billable hours than in 2016
• The average lawyer in a mid-sized law firm is also earning more for their firm than ever before, billing 140% more and collecting nearly 180% more than in 2016

Law firms should closely monitor the speed and consistency of payment collection to avoid revenue being held in lockup, which encompasses unbilled and uncollected revenue. Mid-sized law firms, on average, demonstrate a proactive approach in generating invoices but struggle with the collection process. Features such as online payments, bulk billing, and client-facing apps like Clio for Clients are associated with significant reductions in lockup periods, providing valuable insights for firms seeking to streamline their financial processes.

• Mid-sized law firms exhibit a median realization lockup of 36 days, with the top 25% achieving a median lockup of 20 days, highlighting variations in billing efficiency
• The median collection lockup for mid-sized firms is 52 days, emphasizing the need for improvement in the timely collection of outstanding payments
• Clio Payments usage by mid-sized firms results in a two-day reduction in realization lockup, a six-day reduction in collection lockup, and a 13-day reduction in total lockup, enhancing overall financial liquidity

Lawyers in mid-sized and smaller law firms are approaching the integration of AI cautiously. While there is recognition of AI's growing importance in legal practices, some legal professionals remain skeptical about its current level of advancement and reliability. This cautious stance, however, does not fully align with the adoption of AI technologies in the sector, as reported by legal professionals:

• A majority of lawyers in mid-sized and smaller firms express reservations about the reliability of AI, yet they acknowledge its potential benefits, suggesting a balanced perspective on technology adoption
• AI is already making significant inroads in legal practices, with 19% of lawyers self-reporting use of AI for marketing activities. Its application extends to critical legal tasks such as legal research at 14%, document drafting at 13%, and litigation discovery at 9%
• Future aspirations for AI use include document management, calendaring, and document signing

These findings highlight a gap between the current application of AI in legal practices and the expectations of clients, especially in the context of mid-sized firms. There is a pressing need for law firms to more closely align their technology strategies with client preferences. Embracing AI in ways that meet client expectations is a matter of staying current with technological trends, and a strategic imperative for maintaining competitiveness and client satisfaction.

The report also points out a potential competitive advantage for small firms in the adoption of AI. For smaller firms with fewer resources, AI presents tremendous potential to scale their businesses and, effectively, punch above their own weight.

"Technological advancements have not only empowered solo practitioners to compete effectively with larger firms but have also streamlined decision-making processes for smaller players in the legaltech field. To maintain a competitive edge, it is imperative that mid-sized law firms adapt and prioritize the adoption of cutting-edge legal technology. The data is clear—these are the necessary tools to operate and excel in today's dynamically evolving landscape," said Clio's Lawyer-in-Residence, Joshua Lenon.

With a commitment to supporting the growth of mid-sized law firms, Clio has increased investment and developed services specifically tailored for the mid market segment. Today, over 1,000 mid-sized law firms use Clio to power their law firms, highlighting the company's dominant presence across this segment of the legal market.

Clio's unparalleled, data-science backed reports on the legal sector have provided timely and actionable insights for legal professionals since 2016. This year's mid-sized firm report leverages aggregated and anonymized data from tens of thousands of legal professionals to benchmark significant trends in law firm business performance. It also identifies key factors for improvement for mid-sized firms. Download Clio's second edition of the Legal Trends for Mid-Sized Law Firms report at clio.com/enterprise/ltr

Clio is transforming the legal experience for all by creating the world's leading cloud-based technologies for law firms—to keep lawyers and their clients better connected throughout the legal process. Firms of all sizes and practice areas use Clio products to manage firm operations, streamline billing and payments, automate legal documents, and improve client experiences. Following its US$250M Series D funding, led by TCV and JMI Equity, and its US$110M Series E investment, led by T. Rowe Price Associates, Inc. and OMERS Growth Equity, Clio has made history by becoming the first legal practice management unicorn in the world, and the first legal practice management company to be recognized by all 50 state bar associations. Learn more at clio.com.

SOURCE Clio