How to Increase Law Firm Profitability

TL;DR — Key Takeaways

• Some law firms today face shrinking margins due to rising administrative burdens, growing competition, and inefficiencies that eat into billable hours.
  
• Increasing profitability isn’t about working more hours—it’s about optimizing how a firm operates.

• Strategic technology implementation, improved workflow management, and effective utilization of legal support services can significantly reduce overhead, expedite case timelines, and enhance client satisfaction.
  
• With the right operational and support services strategy in place, law firms can sustainably increase profit margins and scale more effectively.

There are countless roadblocks to law firm profitability and growth. High overhead costs, AI-driven competition, internal inefficiencies, the path from costly client acquisition to bill collection—the list is long. 

Understanding today’s challenges and opportunities shows us how to increase law firm profitability. Let’s consider the most impactful, proven ways firms can boost margins while maintaining or improving the client experience.

Why Law Firm Profitability Is Stagnant Today 

Some law firms, particularly in the smaller and sole practitioner segment, are experiencing a profitability plateau. In an era of major technological change, we see claims of growth opportunity exploding everywhere, from remote-enabled proceedings to AI research and analysis.

So what’s behind a lack of growth in your practice’s profit margin? 

Common Operational Inefficiencies

Is your firm leading from the top on revenue-enhancing changes? Profitability can stagnate as a result of: 

• Overreliance on a “if it’s not broke, don’t fix it” approach to manual processes
• Lack of action and follow-through on insights from analytics and KPIs
• Underutilization of litigation technology tools that promote efficiency

Rising Overhead and Administrative Burdens

Very few budget line items are set-it-and-forget-it calculations. While you can gain efficiency and customization with long-term relationships, it pays to understand the competitive landscape of the services, products, and people you rely on. Consider: 

• Lack of cost negotiation and ongoing oversight of vendors, partners, landlords, etc.
• Inflation eating your business budget (forcing review of necessary vs. outdated expenses)
• High-talent staff overloaded with low-skill outsourceable work

Shifts in Client Expectations and Competition

AI isn’t just becoming a solution for lawyers; it’s also multiplying their competition. The edge will fall to early adopters of tools that greatly improve law firm efficiency and scope of: 

• Legal research and analysis
• Document and contract review and redlining
• Predictive analytics and case insights

At the same time, increased expectations of customer service immediacy and 24/7 access to information, communication, and scheduling tools mean that many clients associate technology performance lags with inferior services. Just consider how adding a website chatbot improved lead qualification by 31% and engagement by 52% for law firms in 2025.¹

Key Drivers of Increased Law Firm Profitability

What leads to a jump in profits? Law firms often find success when they:

• Improve internal processes and workflows
• Identify high-value work and align staff talents and time accordingly
• Reduce administrative time through strategic outsourcing
• Optimize pricing, billing, and cost controls
• Understand and leverage useful technology tools and automations
• Improve client relationships and retention

How to Streamline Case Management for Higher Margins

Efficiency is intrinsically tied to law firm profitability. Evaluate your client and case management systems to find out where processes can be sped up, and resources can be reduced. 

Standardize Intake and Documentation

Streamline intake and case documentation through a connected workflow that funnels potential clients from marketing to intake, documentation, and scheduling.

Automate Routine Tasks

Increase efficiency by leveraging technology to streamline simple and routine tasks off your perpetual to-do list. Automate: 

• Legal research
• Document generation, summarization, and review
• Contract management
• Due diligence
• Compliance tracking

Goldman Sachs’s 2023 estimation that 44% of legal tasks could be automated has been widely cited. Whether you aim for that target or not, it’s undoubtedly true that some rote and low-skill tasks could easily be absorbed through automation.²

Leverage Legal Support Services to Shorten Case Timelines

A jack of all trades is a master of none. Instead of relying on your staff to handle every facet of case preparation, engage dedicated and efficient specialists for:

• Court reporting and transcription
• Record retrieval, organization, summarization, and analysis
• Trial graphics and demonstratives
• Remote deposition hosting and transcript summarization
• Trial presentation and technology services

Maximize Billable vs. Non-Billable Hours

More billable time, vs less administrative time, is a basic building block of firm profitability. To achieve it: 

• Delegate low-value tasks to external specialists
• Automate workflows and tasks that compete with staff focus on billable hours
• Enhance attorney productivity with better resource allocation

Reduce Cost Per Case Without Sacrificing Quality

A lower average cost per case doesn’t mean shortchanging clients or lowering successful outcomes. Instead, identify how you can most effectively leverage tools, talents, and partners to cut the fat without sacrificing quality: 

• Employ useful data analytics to find and correct inefficiencies and opportunities
• Thoughtfully integrate AI tools to minimize time and human error
• Implement scalable support solutions
• Use technology to improve efficiency through automation

Improve Client Satisfaction to Increase Repeat Business

Long-term client relationships are more profitable than one-and-done exchanges, making it worthwhile to invest in improving your client satisfaction and retention rates. Aim for:

• Faster and more effective communication and case updates
• Continuing communication and engagement
• Strong referral program
• Seamless client experience with the right mix of services and support partners

Measuring Profitability: KPIs Law Firms Should Track

The right mix of key performance indicators (KPIs) can offer a snapshot of a firm’s current state, provide data that leads to actionable insights, and track the impact of actions taken. 

When it comes to measuring and growing profitability, the most critical KPIs include: 

Realization and Utilization Rates

Fundamental to tracking financial health, these KPIs also help identify efficiency and productivity. 

• Utilization rate – Tracks how much time lawyers spend on billable work vs. administrative and other nonbillable hours, shown as a percentage of billable to available hours.
  
• Realization rate – Tracks the degree to which a lawyer’s billable hours are actually paid, shown as the percentage of billed to non-billed dollars. How much is written off to uncollected fees, discounts, etc.?
  
• Collection rate – The percentage of paid to billed amounts—collection rate—is often shown alongside utilization and realization rate to demonstrate financial health.
  

Client Acquisition Cost and Lifetime Value

How much return are you seeing on marketing and retention costs? Take a look at: 

• Client acquisition cost (CAC) – What is the total expense to sign a single new client? Divide total marketing/acquisition spend by the number of new clients signed during the same time period.
  
• Client lifetime value (CLV) – A key factor in a retention analysis, CLV is the average annual revenue per client multiplied by the average client retention period in years. The total amount a client will bring into the firm over time will increase with a successful focus on strengthening client relationships and retention. 

These calculations are also combined as LTV:CAC, illustrating how much you’re spending to acquire clients in relation to a client’s total value to the firm. A healthy and increasing ratio illustrates sustainable growth.

Case Duration and Operational Cost Metrics

Is your firm taking on cases, making decisions, and allocating internal resources that contribute to profitability in terms of the time and costs required? Consider: 

• Case duration – There are several ways to break down your average case resolution time (i.e., by department, matter type, practice area). You can also track levels of resolution, case stages, settlement dates, court judgments, and even administrative completion. These metrics can help uncover inefficiencies and improvement opportunities.
  
• Operational cost – What does it cost to run the firm and keep the lights on? Aim for a low overhead rate (total overhead / total revenue), low cost per matter ratio, and high profit margin.

When to Partner With a Litigation Support Provider

Estimating the impact of partnering with support providers can be challenging. You might wonder about the right mix of service types and levels to maximize your firm’s profitability. Fortunately, there are ways to determine if finding a litigation support provider is your best next move.

Signs Your Firm Is Ready to Outsource

When is one more task on the to-do list too much? When are you missing opportunities to improve KPIs that showcase your firm’s financial health? 

Look out for these signs: 

• Your overhead rate, cost per matter ratio, and/or case duration KPIs are too high
• Administrative load/tasks cause delays, bottlenecks, or even missed deadlines
• Human error is found too often in support and administrative work products

How Services Like Court Reporting and Record Retrieval Improve Profit Margins

Your staff’s time isn’t free. Although it’s tempting to avoid outsourcing seemingly simple tasks, especially when you’re confident of your team’s skills and talents, many legal support services can be done more efficiently and thoroughly by dedicated specialists. 

Boost Your Bottom Line with U.S. Legal Support

Improving profitability starts with addressing internal inefficiencies and reducing time spent on non-billable work. Outsourcing services like court reporting, deposition hosting, AI-powered summarization, and record retrieval can help your firm streamline operations and focus attorney time where it matters most. 

With an effective operational strategy and a partnership with U.S. Legal Support, law firms can scale more effectively. For nearly 30 years, we’ve provided litigation support services to firms of all sizes and practice areas. Connect with us today to discover how we can assist you.

Sources: 

1. Pagecafe. Law Firm SEO in 2025: New Research Reveals How Clients Actually Find and Choose Attorneys Online. https://www.pagecafe.com/blog/law-firm-seo-in-2025-new-research-reveals-how-clients-actually-find-and-choose-attorneys-online/
2. Goldman Sachs. The Potentially Large Effects of Artificial Intelligence on Economic Growth. https://www.key4biz.it/wp-content/uploads/2023/03/Global-Economics-Analyst_-The-Potentially-Large-Effects-of-Artificial-Intelligence-on-Economic-Growth-Briggs_Kodnani.pdf