#LMA22 Preview: Financial Outlook for Legal Marketers
By Toni Wells
February 22, 2022 | 3-minute read
Business of Law Financial Management and Measurement Content Type Article
While there is a relationship between recessions in the United States and the Am Law 100 profit margin, the recession brought on by the global COVID-19 pandemic has caused a sequence of unprecedented events and a complex interplay between industry demand and cost management.
The LMA Annual Conference (March 21-23) session, “Financial Outlook for Legal Marketers: Understanding the Impact of 2020 and What Lies Ahead,” presented by Madhav Srinivasan and Koree Khongphad-Buckman, will explore the criticality of profit margin and its historical trend, as well as unravel the implications of the 2020 recession and share insights into how a firm can improve their financial acumen.
Annual Conference Advisory Committee Member Toni Wells (Bespoke Marketing Partners LLC), spoke with Srinivasan about current profit margin trends, the importance of law firm economics and what attendees will gain from this session.
Your presentation will touch on the decades-long relationship between U.S. recessions and the Am Law 100 profit margin. Without giving too much away, what are some trends emerging from this? How was this discovered?
The profit margin of the Am Law 100 law firms has remained between 35-40% over three decades, despite the enormous increase in revenues over this period. The shape of the profit margin curve has a very interesting relationship with the past three U.S. recessions since 1986.
However, the most recent recession in 2020 produced some surprising and unanticipated results, different from what would be indicated by history. The behavior of profit margin in 2020 can only be explained by analyzing the sequence of unusual events that happened in that COVID-19 year. This analysis will explore 2020’s performance with the background of history, overlaid with the impact of current conditions.
Why is this an important area for legal marketers and business development (BD) professionals to hone in on?
Law firm economics in the context of real-world events has a profound impact on legal marketers and BD professionals in three critical ways. First, external events impact the volume of investments into BD and marketing. Second, the nature of BD activities is highly dependent upon a firm’s strategy and client considerations. And finally, budgeting for BD expenses in 2022 and 2023 will be shaped by law firms’ recent experiences and likely additional focus on absolute return of marketing expenditures.
What will attendees take away from your session?
Attendees will deeply understand trends underlying law firm financial performance and its connection to macro events in the real economy. Specifically, they will comprehend the behavior of firms’ profit margin to shifts in the external environment.
We will demonstrate the complex interplay of unforeseen events and consequent dynamics that happened in 2020, and how that explains profit changes that year. Additionally, we will examine how COVID-19 dramatically impacted the nature of BD activities and the level of marketing expenditures. The analysis will show multiple future paths for BD and marketing, given the complete upturning of the investment-revenue relationship. These insights will provide attendees with strategic knowledge to think through and budget for marketing and BD expenditures over the next few years.
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