Looking ahead, with an inventory growth rate of just 1.7 percent, and only slight growth in demand, we are concerned about the start of 2013. If demand improves as the year progresses—as seems possible given some positive economic signs—then revenue growth could likely overcome any slow start to the year. If the catch up in infrastructure-related expenses has indeed played out, firms continue the spate of recent announcements trimming non-legal staff, and head count increases remain modest, then expense growth will likely slow. However, a lot will depend on the prepayment behavior of firms, and how they handle payment of associate bonuses. Given these possibilities, profits per equity partner growth in 2013 will likely be again in the low single-digits—the new definition of a good year for the legal industry.
Dan DiPietro and Gretta Rusanow are chairman and senior client adviser, respectively at Citi Private Bank's Law Firm Group.
