Increased interest in LLPs

Benchmarking survey: two-to-four partner firms outperforming larger rivals

More than three-quarters of five-partner-plus firms are considering becoming limited liability partnerships - a major rise on a year ago - according to a benchmarking survey by the Law Society's law management section (LMS).

The survey of 149 small and mid-sized firms which are members of the section, produced in conjunction with BDO Stoy Hayward, also found that two-to-four partner practices outperformed their larger counterparts over the last year.The survey said that the 77% figure of firms interested in LLPs was a 23% rise on last year.

Only 6% of all the firms questioned said they had definitely decided against applying for LLP status.

Simon Young - managing partner of Exeter-based Veitch Penny, member of the LMS committee and the practice management representative on the Law Society Council - said: 'Becoming an LLP is a very attractive option for a number of firms, as it offers them a great deal of financial protection in the case of a wipeout insurance claim,' he said.The report found that two-to-four partner firms have increased their profits per partner by 29% to 88,000 in the past year, compared with 11.25 partner firms, which have seen an 8% rise to 101,000.

Fee-earners had to generate 93,000 in fees on average to cover overheads.Legal management consultant and report author Andrew Otterburn said many smaller firms have experienced change in the past two years.

'Those who do legal aid have seen the introduction of civil and criminal contracting, which has resulted in many firms dropping less profitable areas of work and becoming more specialised,' he said.Smaller LMS member firms have not only accelerated their growth rate, but have also improved their financial management, taking an average of just 32 days to collect a debt from clients.

As the Gazette reported last week, 65% of larger firms questioned in a financial management survey by Pricewaterhouse-Coopers had money tied up with clients for more than 150 days ([2001] Gazette, 22 November, 1).

Victoria MacCallum