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Create A Blueprint for Efficiency and Profitability In 2025
The legal industry is undergoing rapid change, and successful law firms evolve their operations to maintain profitability, improve efficiency, and meet rising client expectations. While many firms have enjoyed record-breaking revenues in recent years, underlying inefficiencies, outdated resource models, and escalating operational costs threaten their long-term growth and in some instances stability.
Despite strong financial performance across the sector, law firm leaders report significant inefficiencies in core business functions such as billing and collections, resource management, and practice optimization. Firms are increasingly realizing that high profits have masked operational inefficiencies — and those that fail to adapt will struggle as economic conditions fluctuate.
According to the BigHand 2025 Annual Law Firm Financial Report, 69% of law firms acknowledge that the cost of running their firm has soared over the past year, with 32% saying costs grew by more than 25%. Additionally, 85% of firms report that clients demand greater financial transparency and value demonstration, forcing firms to rethink their pricing, efficiency, and service delivery models.
Simply put, the old levers of profitability — billable hours and rate increases — are no longer sufficient. Firms that fail to proactively address inefficiencies risk losing market share to more agile competitors.
To remain competitive, law firms must rethink traditional business models and optimize operations at every level. This means tackling inefficiencies in financial management, staffing, and technology to create a more streamlined, resilient firm. Three critical areas demand immediate attention: breaking the cycle of inefficiency, reimagining the workforce, and leveraging technology for growth.
Breaking the Cycle of Inefficiency
For years, firms relied on steady rate increases to drive profitability. However, with clients demanding greater transparency and efficiency, the pressure is mounting to optimize operations instead. Billing inefficiencies, inconsistent pricing strategies, and underperforming practice areas continue to drain profitability across the industry.
Billing and collections remain one of the most glaring issues. Law firm partners and CFOs report that inefficiencies in collections and revenue realization lead to excessive write-offs and delayed payments, reducing overall profitability. Many firms struggle with rejected time entries and slow payments, often due to outdated processes that fail to align with client billing guidelines.
According to BigHand's research, 72% of firms reported increased write-offs last year, with 75% predicting even higher losses in 2025. By automating billing workflows, optimizing collections with predictive analytics, and leveraging AI-driven review processes, firms can significantly reduce revenue leakage and improve realization rates.
Meanwhile, practice area profitability remains a blind spot for many firms. Some firms unknowingly sustain practice areas whose profitability is well below the firm average and/or which do not align sufficiently with the needs of the firm's client base. Lower margin practice areas may create a demand on firm resources without clear insights into their cost structures and how those costs should be adjusted. For example, a firm servicing a low-rate insurance client found that every matter was unprofitable due to inefficient workflows and excessive partner review time. By implementing profitability assessments and restructuring workflows, the firm transformed a cost center into a sustainable revenue stream.
Pricing and matter estimation also remain underutilized tools. While many firms have dedicated pricing teams, they are often brought into engagements too late. Firms that incorporate pricing strategies from the outset — developing standardized cost-estimation frameworks and legal project management (LPM) capabilities — position themselves to compete more effectively in a market where alternative fee arrangements (AFAs) are becoming more prevalent.
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