In this blog, we feature insights from legal industry consultant Peter Webb, founder of Firm Performance, about overcoming law firm profitability challenges. Peter outlines four key challenges contingency fee law firms must address to stay profitable and competitive.

The Pressure to Grow — Profitably

For contingency fee law firms, growth often comes with a high cost—literally. As Peter explains, “A lot of times, firms are not paying attention to…acceptable cost-acquisition. They’re just saying, “I need cases, I need cases, I need cases.”

In the desire to scale, these law firms may “end up throwing money at various marketing initiatives or advertising or Google,” he notes. The danger? Spending nearly as much acquiring a case as you’ll eventually earn from it—months down the road. That’s where tracking and profitability come into consideration.

4 Key Law Firm Profitability Challenges

Challenge #1: Generate New Cases at an Acceptable Cost

According to Peter, contingency fee law firms must understand the importance of tracking marketing initiatives and determining an acceptable cost acquisition. Without visibility into true case profitability, firms risk bleeding capital without even realizing it. Peter advises the challenge is how to “do it in a way where you are actually growing profitability, not just growth at any cost.”

Challenge #2: Scale with Profitability in Mind

Scaling law firm operations can open new markets and growth opportunities—but not if it undermines the bottom line. “The key operative word here is profitability,” notes Peter. “It’s not scaling at any cost where you have this new office and it’s costing as much to run as it is it’s making, but you don’t have any reporting, and you have no one actually highlighting that and surfacing that information.”

Whether expanding by geography, practice area, or additional attorneys, Peter emphasizes operational discipline and data-informed decision-making.

Challenge #3: Embrace Technology or Fall Behind

Change is a constant and nowhere is this more apparent that in technology. Peter is even more candid: “Firms that are not embracing technology in the ways that they should are unfortunately [falling] behind.” The true function of technology, he says, is “to speed up time and reduce cost.” Without keeping pace with changes in technology, law firms face their competitors—especially tech-native younger firms—outpacing them with efficiency and agility.

Challenge #4: Know Who You’re Competing With

Finally, Peter challenges law firm leaders to look beyond the courtroom and assess who their real competition is. “They don’t know the young kid who just got out of law school, who grew up with the internet, who is now doing circles around them online,” notes Peter.

Modern competition comes from law firms building their brands and client acquisition engines online—not just their reputation in court. When someone looks for an attorney nowadays, their first action is to search online—and that’s where the competition resides.

Learn More

Click the video above to watch the full conversation with Peter Webb and learn how your contingency fee law firm can overcome law firm profitability challenges and position itself for sustainable growth.