Law Firm Proposals on the Rise

Key findings about law firm proposals and RFPs, taken from a new LexisNexis survey on legal marketing and business development practices, are highlighted below:

• Overall, firms are responding to an average of 5 to 16 proposals each month. As expected, larger law firms are engaged in a higher volume of RFP activities than their counterparts in smaller firms. Although 68 percent of firms are handling an average of 10 or fewer RFPs every month, it’s a different story at the high end. 15 percent of respondents are juggling more than 21 activities each month, which equates to a run rate greater than 250 proposals a year.


• 42 percent of respondents saw an increase in RFP activity at their firms over the past 12 months. An identical 42 percent believe the volume of RFP activity has stayed the same.


• Responding to RFPs, pitches and proposals puts a strain on practice resources. While some 46 percent of RFP responses can be handled with fewer than 20 hours of effort, that total also means the majority of work takes even more time. The survey selections topped out at 40+ hours per RFP response, a category that still garnered 7 percent of the replies.


• Based on all the replies, the average hours-per-proposal figure increased with firm size … ranging from 19.6 to 25 hours. Interestingly, this question also earned a relatively high “don’t know” response rate of 22.6 percent. Although the survey audience could address volume and growth rate questions, they were unaware of the amount of effort required from the firm to handle that workflow.


• By combining average RFP volumes and average hours-per-proposal, it’s possible to assess the growing impact of these kinds of activities on legal firms. For smaller sized firms, the lower proposal count and hours required per response still adds up. On a yearly basis, it totals 1,175 hours of effort which is enough to fund more than half of a full-time equivalent (FTE) employee. For the largest firms, the average yearly total came to 4,800 hours, representing 2.3 FTEs.

About the Survey

The online “LexisNexis InterAction RFP Activity Survey” was conducted between July 23 and August 3, 2012, and included more than 350 total responses. Survey participants were asked to provide basic demographic information on the size and location of their law firm and to answer questions designed to quantify the time and resources dedicated to proposal generation efforts as well as any year-over-year change in law firm involvement in such efforts.

2013 Law Firm Revenue Outlook Slows

Law firms are seeing a "material decline in demand" in the second half of 2012, according to a Bloomberg Law interview with consultant Kent Zimmerman of Zeughauser Group that was posted today on JD Supra.

Reinforcing the recent Citi Mid Year outlook on law firm financials, Zimmerman predicts a continuing decline of law firm revenues and profits through the close of 2012 and most likely into 2013. Watch the interview below.



Citi cites three primary reasons for concern:

1. Demand growth slowed during the second quarter from an already tepid first-quarter level;
2. Inventory as of June 30 had grown little from the prior year; and
3. Realization is likely to decline again in 2012.

Slow job growth is at the heart of the problem, notes Zimmerman. The economy added only 96,000 jobs in August 2012, for example; well below expectations. Given the uncertainty surrounding the November presidential elections and the looming "fiscal cliff," employers are holding off on adding new workers.

Corporate Clients Put Pressure on Law Firm Pricing

One bright spot in the legal industry is the "LPO" sector, or legal process outsourcers. Low value (yet expensive) legal work like due diligence research and litigation discovery is increasingly being done by third parties, many of whom hire low cost contract attorneys on a contract basis.

Corporations are frequently driving this change, as they refuse to pay partner or even associate hourly rates for work that can be outsourced relatively easily with comparable quality levels. GCs are also increasingly choosing BigLaw firms for select bet-the-company transactions, while taking routine work to regional law firms or boutiques for lower rates.

Law Firms Advised to Lower Costs Now

"Get lean" is Zimmerman's advice to law firms. Proactive executive committee members who move rapidly to position themselves for more tough times ahead have the best chance of long term success, says Zimmerman. Depending on the depth of the decline, failures and/or strategic mergers are probable.

Suggested retrenching efforts include:

• Take the tough steps of cutting under-performers
• Reduce excess real estate
• Sharpen the knife on fixed overhead expenses
• Shrink in order to grow financially stronger

Focus on Strengths

This @RainmakingLady agrees with the advice that law firms should focus on the few key practice areas where they offer a distinct competitive advantage. Stand out and get on the short list by staking out clearly defined claims.

Legal Marketing Consultant

Legal marketing consultant Margaret Grisdela is available to discuss business development goals for small to mid-sized law firms. Contact her at www.legalexpertconnections.com, www.insurancedefensemarketing.com, or at 1-866-417-7025.