Every year, NatWest Bank produces a legal sector benchmarking survey, which is prepared using data from their law firm clients across the country. At our WK Law seminar on 22 June, attendees had a chance to look at the findings of the report in more detail.
The data is provided by 269 UK law firms, and is based on their financial year end accounts for 2016. The report also contained firms’ predictions for the year ahead which were particularly interesting, given that since last year’s survey, business and consumer confidence have been affected post-Brexit.
Usually, SME law firm performance is very closely aligned with the economy as a whole and the survey has revealed a high average growth rate over the previous two years. This is encouraging, and perhaps not surprising – but that doesn’t mean that law firms can rest on their laurels.
Performance was one of the topics of discussion during the WK Law seminar – quarterly sessions that are held at a number of Wilkins Kennedy’s office locations. The format of our seminars allows delegates to network over breakfast, before listening to presentations covering topics which are relevant to law firms. At the latest WK Law event in Guildford, we were fortunate to welcome Steve Arundale, who is the Commercial Head of Professional Services at NatWest.
Steve covered the whole survey, but highlighted three particularly important elements in his presentation – profitability, cash flow, and financial stability. Even though revenue growth by volume has paved the way for increased profit per equity partner, which averaged £120,000 in 2016, predictions for the global and domestic economic landscape in 2017, and beyond, could cause a few bumps in the road.
If this happens, the survey outlines a few areas to monitor should the revenue growth not continue at its current pace – one of which was improving efficiency. As Steve highlighted as part of his presentation, 113 days for lockup is longer than at any time in the last five years. Without a flow of new business and paid fees, firms could potentially run out of cash after 40 days, on average. Focus on overheads, lock up and profitability should always be a priority, even if the business is in good shape financially, but this should be even more apparent as we enter into what could be a period of uncertainty.
Wilkins Kennedy offers a professional business advisory service and tax advice to those working in the legal sector. Our series of WK Law seminars is just one of the advantages that we offer both clients and contacts alike, and if you are interested in joining us for a future seminar, or you would like some further information about how we could help either your law firm or similar contact, then please contact your local Wilkins Kennedy representative.