A new report has revealed small firms have bigger profit margins.
Mid-sized firms are the most profitable, a report by the Australasian Legal Practice Management Association and Crowe Horwath has found.
While the survey did not include top-tier or national and international firms, the results found that firms earning between $10m and $20m were the most profitable last, overtaking firms with earnings sitting in the $20m-plus bracket.
In large firms, average revenue per partner declined last year, sitting at $1.47m down from $1.51m in 2014, while boutique partner revenue average increased to $1.6m, up from $1.29m the previous year.
“They’re a lot more nimble, less overhead intense and able to respond (to the market),” ALPMA president Andrew Barnes told The Australian.
“There are significant pressures on the (top-tier and large mid-tier firms) because they are geared up for the big work, with big infrastructures, and those things are under pressure.”
But the CommBank Legal Market Pulse survey released last month did survey the nation’s top 50 firms and found that business confidence had recovered, The Australian reported.
Crowe Horwath partner Andrew Chen said large firms had been optimistic believing that big ticket transactional work would boost profits but that didn’t eventuate.
The report found that three quarters of firms would expect to hire more fee earners over the coming year but that this would replace existing staff. Ninety per cent of firms said they did not intent to change their billing methods.
