Leaving Money on the Table: How Firm by Firm Rate Comparisons Can Ensure that Your Rates are Profitable

After releasing the 2024 attorney hourly rates at the end of 2023, I have had the time and opportunity to dive into the biggest law pricing trends for this year. With so much information at the fingertips of those who engage with the Valeo Attorney Hourly Rates and LPM Pricing Platform, I wanted to share the top trends that I will be looking at most closely this year.

The trends that have been top of mind and will have the biggest impact on the pricing industry this year are the continuing divide of rates between the largest rankings of law firms, the slower climb of increase in Associate rates, and the importance of growing support staff and fairly compensating them.

Watching the Divide in Rates Grow Between the Largest Law Firm Rankings

The first round of rate releases for 2024 was pulled from the largest law firms in the US and over 20 areas of practice by the Valeo Attorney Hourly Rates and LPM Pricing Platform. From this data, we have seen an increase in AMLAW 10 partner rates by 10% from 2023 to 2024. For the second year in a row, we have seen the top 10 firms climb 10%, allowing the chasm between mega-large law firms and large law firms to widen as these top Partner rates continue to increase.

This 10% increase in AMLAW 10 Partner rates is overall due to the 12.5% increase in merger and acquisition rates this year. According to Deloitte’s 2024 M&A Trends Survey, M&A activity is on the rise and optimism has returned to the market. This change in sentiment is due to the stabilization of interest rates, possible lowering of the same, and corporate cash on hand. Also, now four years after the pandemic, two-thirds of organizations noted they have restructured and are prepared with a strategy to approach this year’s market. This year’s M&A market will be run by lower interest rates, allowing more deals to go through and leading to higher legal fees.

The Valeo Competitive Edge: In the Early Indicators webinar that I hosted in January, I shared a prediction that M&A will lead the way in 2024. Two months into the year, this is proving to be true. With corporate cash hovering around $4 trillion this year, the M&A market is poised for a comeback.

A Slower Increase in Rates Across Associates

In January 2024, Valeo tracked Associate rates to have only increased by 2% from year end 2023 to January 31, 2024 – the lowest overall increase in the past four years. Each year, Valeo data helps our clients analyze rates by Associate class year to see rates by year and by individual law firm. Very interestingly, for the second year in a row and first time ever, Associate rates averaged $1,000/hour for the AMLAW 100. By August 2024, Associate class-year rate increases will have been implemented across most of the largest US law firms. At that time, I expect overall Associate rates to rise by 6%-8% over the 2023 rates.

The Valeo Competitive Edge: From 2009-2023, we saw a 149% increase in rates across the AMLAW 100 firms. However, in 2023, we witnessed many firms delay the start date for their first-year Associate rates when the financial health of many businesses was declining. Because of this, the direct correlation between the slow growth of associate rates in 2024 is due to many firms being cautious following last year’s economic uncertainty and a massive run-up in compensation due to Covid and post-Covid years. I expect these rates to trend higher next year, as M&A will be a catalyst for change this year.

Don’t Overlook Support Staff Rates on Your Budget Sheet

In major litigation matters, Support Staff can represent up to 10% of the overall legal fees. However, in many instances, their rates are overlooked in terms of an opportunity to increase revenue. In January 2024, the Valeo Attorney Hourly Rates and LPM Pricing Platform analyzed Support Staff rates from over 300 job titles, such as Paralegal, Librarian, Case Clerk, and Discovery Clerk. In our analysis, we found that their rates increased 8% in 2024 from 2023, with fees hovering around $295-$440/hour depending on the firm tier. This marked the fourth consecutive year that Support Staff rates have increased.

The Valeo Competitive Edge: This trend in Support Staff hourly rate increases will continue as more routine legal work and technical aspects of cases are pushed to non-attorney specialists.

To learn more about these trends, you can register here for our next webinar on April 9, 2024, or book a meeting with me for a full analysis of your pricing strategy.