By: Brian Taaffe
Senior Director – Platform & Data Strategy, BigHand

The legal sector is no stranger to change, but 2025 has brought sharper challenges. After years of financial growth, cracks are showing. Rates continue to rise, but translating these into realized revenue remains a struggle. Escalating demands for transparency and value from savvy clients make it clear: firms must evolve or risk being left behind.

 

Realization Gaps and The Transparency Mandate

Although 2024 saw financial progress, the profitability puzzle remains.

BigHand’s latest market data reveals a key issue: fewer than half (48%) of firms link financial performance metrics like matter profitability to remuneration models. This disconnect fuels a dangerous pattern. Lawyers, eager to satisfy clients, often resort to pre-emptive discounting. The result? A “doom loop” where rate increases are offset by concessions, undermining profits and stifling growth. Rising write-offs worsen the issue: 72% of firms reported increases last year, with 75% predicting more this year.

Transparency is increasingly non-negotiable. Pricing transparency is a top financial challenge for 26% of firms. The rise of Alternative Fee Arrangements (AFAs) has heightened expectations, with 29% of firms reporting increased client requests for AFAs. Opaque pricing is now a liability, while transparent approaches are the benchmark for success.

To thrive, firms must translate rising rates into revenue, embrace client demands, and focus on sustainable profitability.

 

Three Strategies to Drive Sustainable Growth

In a sector demanding more for less, it’s time for firms to shift their focus from unchecked growth to sustainable strategies that secure profitability. Here’s how:

1. Prioritize Cash Flow Discipline

Profitability starts with strong cash flow. Streamline billing, enforce clear payment terms, and closely monitor lock-up metrics. Data shows 58% aim to bill and collect more often, and 31% are adjusting terms. Better client communication is key, with 30% planning more frequent touchpoints during matters. A disciplined approach to cash flow isn’t just about survival – it’s about positioning your firm to seize opportunities.

2. Empower Lawyers with Commercial Confidence

Specialized expertise isn’t enough anymore. Lawyers need the training and tools to handle commercial discussions with confidence. Encouragingly, 34% of law firms are already investing in commercial awareness training – but this effort must align with financial incentives that support the firm’s broader profitability goals.

3. Adopt Technology for Data-Driven Decision-Making

Business Intelligence (BI) tools are no longer just a game changer, but a must-have in this market. If you want to stay ahead of the competition, not only do you need a robust BI tool, but also one that offers the functionality to expand your business externally and internally.  BigHand’s Business Development module offers just that – identification of strategy opportunities for growth, trends in top clients, and key cross-sell opportunities to grow your work with current clients. When integrated into workflows, these tools and analyses enable firms to make better data-driven decisions that deliver results and grow your business.

 

2025: Longevity in Prosperity

This year presents a pivotal moment for the legal sector. Success awaits firms that master financial discipline, empower teams, and harness cutting-edge technology to meet the challenges they face. With the right approach, firms can achieve sustainable, profitable growth that endures.

For deeper insights into these trends and to discover how your firm can stay ahead, download BigHand’s 2025 Annual Law Firm Finance Report today.