Written by: Marcus Wolter, Elizabeth Bestwick and Crystel Saraie

In 2023, the legal industry saw shifts in demand, with larger firms losing ground as midsize and smaller firms gained traction. This shift reflects the demand mobility rate—where clients move firms due to cost concerns and service needs—and indicates that clients are increasingly turning to firms that provide more tailored and flexible services. Recent trends have shown that larger firms have had a decrease in demand, whereas midsize and smaller firms have seen an increase. This suggests that larger firms may no longer be meeting their clients’ needs as effectively.

In early 2023, corporate practice demand grew by only 0.6%, with larger firms (Am Law 1-50) seeing a 1.2% drop by year-end.[1] [2] On the other hand, firms outside the Am Law 200 saw slight growth. Notably, Clio reported in 2023 that mid-size firm lawyers billed nearly 160% more and collected 200% more than in 2016.[3]

This shift is likely a result of rising costs at top US and UK law firms, a sluggish M&A market, and a preference for flexible services. In 2024, partner rates at these firms reached $1,400-$1,700, with associate rates between $900-$1,000.[4] [5] The American Lawyer expects these rates to increase even further in 2025. In contrast, smaller firms not only offer more competitive pricing, but also provide more flexible services, such as Alternative Fee Arrangements (AFAs). Clients also praise smaller firms’ level of attentiveness, with Doccly reporting that many feel underappreciated by traditional law firms and are consequently opting for smaller firms with better overall customer service.[6]

As a result, larger firms are losing market share, while smaller firms continue to gain new clients and opportunities. Despite these demand fluctuations, the overall US legal sector revenue grew 4.8% in 2023 [2], with the UK’s top 100 firms reporting fee income growth of 8-9.7%.[8]

In conclusion, the demand mobility trend is certainly reshaping the legal industry. Firms must adapt to remain competitive in this evolving market. International boutique firms like Caldwell are well-positioned to capture clients shifting away from larger firms by offering personalized, flexible services at competitive pricing. Most importantly, being nimble and early adopters (in fact, actual co-developers) of the latest and greatest in legal tech, positions us perfectly to capture clients shifting away from large firms.

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[1] Sloan, K. (2024, May 6). Law firms kicked off 2024 with strong demand and profits, report finds. Reuters. https://www.reuters.com/legal/litigation/law-firms-kicked-off-2024-with-strong-demand-profits-report-finds-2024-05-06/

[2] Rusanow, G., & Hildebrandt, B. (2024). 2024 Client Advisory (p. 5). Citi Global Wealth.

[3] Clio. (2024). Legal Trends for Mid-Sized Law Firms. (p. 17). 2024.

[4] Maloney, M. L. | A. (2024, September 24). Senior partners approach $3,000 an hour, as more billing rate hikes expected in 2025. The American Lawyer. https://www.law.com/americanlawyer/2024/09/24/senior-partners-approach-3000-an-hour-as-more-billing-rate-hikes-expected-in-2025/?kw=Senior

[5] Zoppi, M. (2023, October 15). Hourly rates for Magic Circle Partners reach £1,500, analysis finds. Law Gazette. https://www.lawgazette.co.uk/news/hourly-rates-for-magic-circle-partners-reach-1500-analysis-finds/5113366.article#:~:text=Newly%20qualified%20lawyers%20at%20magic,might%20think%20appropriate%20to%20charge.

[6] Chen, L. (2022, August 18). 5 reasons why law firms are hemorrhaging clients. Doccly. https://doccly.com/articles/5-reasons-why-law-firms-are-hemorrhaging-clients

[8] PwC. (2023). Bold steps to sustainable transformation: PwC Law Firms’ Survey 2023. (p. 6). PwC.