Most NZ law firms expect revenue growth in 2017

by Sol Dolor07 Dec 2016
Most New Zealand law firms expect revenue growth in the next fiscal year, with more respondents in this year’s Australasian Legal Practice Management Association / Crowe Horwath survey reporting positive revenue outlook compared to last year.
The average revenue growth expected by law firms in fiscal year 2017 is 5%, the survey reveals, with 74% of respondents saying they expect top line increase. This is a marked increase from the 53.3% which reported expectations of revenue growth in the same survey last year.
Meanwhile, 10 best-performing partners are reported to have averaged $1,308,000 in revenue each, a massive increased from the $1,017,000 average in 2015. The bottom ten averaged $422,800 per partner.
On the whole, average revenue generated per partner is $803,172, up 12% from last year’s survey. According to the study, the average revenue generated per fee earner is $368,206 which is up slightly on the 2015 average of $351,622.
New Zealand law firms were also reported to remain profitable with operating profit margins averaging nearly 38%. Gross profit margins were an average of 78.7%.
Per equity partner, operating profit before interest and taxes averaged $369,000 per equity partner. Average operating profit for the ten best performers was $659,000 per partner and the median operating profit per partner was $596,000.
Nonetheless, non-equity partners’ salaries averaged $171,000, a 12% slump from last year’s survey.
The study reports 932 firms in New Zealand with more than one lawyer participated in the survey, with 59% of responding firms in the North Island and 41% in the South Island.
“It’s pleasing to see the sector is still anticipating strong growth in revenue going forward. However, this is creating some challenges of capacity both in terms of staff and capital," says Glen Gernhoefer.
“Hiring expectations are very strong to help balance this with 94% of respondents expecting to hire new fee earning staff in the next year,” the Crowe Horwath Business Advisory Principal says.
“The survey results clearly indicate the legal sector is in good health and it is encouraging to see the increase in areas such as operating profit and growth in revenue per partner since the 2015 survey,” adds Gernhoefer.
“It is clear that the outlook for growth remains high, and with operating margins of more than 38 percent, an increase of 8 per cent from last year’s survey, that’s great news for the legal sector,” ALPMA NZ Chair and General Manager at Lowndes Jordan, Sheryll Carey says.
“Macro-economic factors remain the biggest concern for law firms (41 per cent), however access and retention of staff has increased in the past year increasing from 10 per cent in 2015 to 22 per cent in 2016,” Carey says.

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