Managing partners need to beware.

Who says solicitors do not make good business people? This year’s Law Society benchmarking survey eloquently argues the case to the contrary. Median fee income has risen by over 5% in each of the last four years, which set against inflation shows practices are enjoying strong real-terms growth. And this despite a fall in residential conveyancing, especially in the south-east.

Median PEP is looking even better, with this year’s 6.9% rise following an 8.4% increase last time.

The findings are more nuanced than they appear, however. Fee-earners who might quite like to sample the boon enjoyed by equity partners may feel a little disheartened. The total number of equity partners across all 169 practices that participated rose by just seven year on year – or 0.6% – from 1,073 to 1,080.

Aside of course from public funding cuts, it is only the related issues of stability and succession that cast an ugly daub across what is a generally bright picture. This year nearly one in three participants reported that partners’ total drawings topped profits, a proportion which has been creeping up.

As the financial strength of a practice weakens, this can potentially discourage a prospective ‘investor’. And more importantly, sustaining this trend cannot but lead to instability.

Managing partners need to guard against irrational exuberance.

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