We have data! Unfortunately it is US data. However, information from various Australian sources confirms a likely similar experience for small Australian law firms through the recent economic turmoil.
The US data comes from practice management software company Clio. It has used anonymised data of file openings and billings from users of Clio software.
What the Clio data shows
File openings (new matter creation) reached a low point in mid April 2020 when it was 33% below the baseline established in the first five weeks of 2020.
Billings volumes were down in May 2020 by 25% compared to May 2019 after being down by 14% in April 2020 compared to April 2019.
Can a downturn of 25% or 33% be described as resilient? Yes, as a worst outcome that appears to be temporary rather than long term, especially when compared to industries such as travel, tourism and CBD retailing.
The resilience is becoming even more evident. New file openings were trending sharply higher by the end of May 2020 to be only 14% down from the baseline period.
In the Australian context of the recent massive job shedding at the Big 4 professional services firms, especially Deloitte and PwC, small firms are displaying a lot of stability. Compared to the many industries that have received knock-out blows, small legal practices are holding up very well.
Clio data by practice area
In the week that all file openings were down by 33%, file openings for specific practice areas were as follows:
Traffic offences were down by 64%
Criminal Law down by 51%
Personal Injury down by 44%
Employment law down by 27%
Family Law down by 26%
Real Estate down by 25%
Business law down by 22%
Wills & Estates down by 18%
By the end of May 2020, all the practice areas except for traffic, criminal and personal injury were bouncing back. Wills & Estates was steady.
In Australia, we have had JobKeeper and Cash Flow Boost. With these direct payments and the broader economic stimulus, small Australian legal practices have probably fared even better than equivalent-sized US firms.