2025 Cost for Law Firms to Remain Competitive
KEY ISSUES
- Law firm’s costs increased significantly over 2022 and 2023
- Most costs associated with Marketing and Technology
- Returning to work and office costs have also become relevant post Covid
- Cooling of spending over 2024 and leveling off in 2025
Law Firms Heating Up & Cooling Off
We’ve seen a growing demand for the number of legal cases in today’s economy. Parallel with this growth, rates have also been increasing. Law firms are increasing spending on marketing, new tech, case libraries and more strategic investments.
Rate growth has become an ever-growing topic for law firms since the beginning of 2024. A 2025 Report on the State of the US Legal Market shows us the growing expenses as well. These expenses are a strategic approach to more exposure and keeping up with the times. This helps with positioning law firms for continued success in the future. A parabolic growth rate in 2022 and 2023 has been followed by a decline. The market has since decreased and leveled out from the end of 2024 onward.
An educated guess would be that inflation had caused the previous decline in spending over 2024. Building to a conclusion that law firms are cutting costs to save money. Expenses are growing due to firms investing money to capture more market demand (TR).
Expenses in Review
The importance of making sure to diligently review the overhead costs that firms are running into. Large chunk of the costs incurred are due to the return-to-office movement. This of course due to the post Covid era to increase productivity. With the past few years showing the spike, we can see the cooling off period has stabilized. Cost controls are beginning to become effective across organizations spending.
Currently the high-growth expenses include marketing strategies, information management, and improved technological advances. This is to improve firm efficiency throughout the organization. These are the most important growth areas along with associate compensation. Firms are moving to differentiate themselves from their competitors.
Cost of Investment for Growth
The recent State of the Market report states “high expenses appear to be improving exposure opportunities. Result in the increasing cost when shifting towards a technological environment.”
The previous decrease of spending in 2024 is predicted to repeat in 2025. Even with this evidence, law firms are still projected to have high cost in the area technology. Inflation and Covid are the predicted causes of turbulence from 2020 to 2023. With higher norms tech spending has increased the cost of doing business. Experts expect GenAI investments are now non-negotiable.
With AI assistance tools across organization, firms are seeing improvements in productivity. Legal research efforts have seen a decrease in time needed to conduct searches about key topics. This assures firms are gaining a competitive advantage within the marketplace. It is critical that c-suite teams are flexible when introducing new technologies introduced to the market. The key idea behind this investment in GenAI is efficiency.
Using Strength to Become More Competitive
The level of net profits gained over the year 2024 provided law firms with a strong base to stand upon for 2025. Law firms are pivoting with strength for future investments in opportunities in the competitive market. Firms are waiting in the wind for GenAI to become more accessible and pliable to current technologies.
The sheer cost of total integration is currently the largest barrier for most firms. Obtaining key buy in from current partners is the current pathway for most firms. December 2024 data showed most teams are cutting costs and building war chests for this coming spring to summer. Firms are making sure no matter what, the opportunity to integrate new technology is not missed. Staying competitive to other firms taking the same approach is an assurance they will not be left behind.
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