Beyond good lawyering: How to strategically adapt your small or mid-tier law firm to protect your bottom line

Jeff Schoenberger is a business coach for Lawyerist and a senior consultant for Affinity Consulting.

The world needs lawyers. People have disputes, contracts, estates, and regulatory puzzles that require the legal knowledge and services lawyers offer. But being needed does not necessarily mean being profitable. 

Even as the legal market posts solid gains, many firms, especially mid-tier and smaller firms, are feeling the squeeze. Rising costs, talent competition, and changing client expectations are pressing firms to rethink long-standing operational assumptions. 

See the big picture 

Contrary to some gloomy predictions of slow growth for law firms, recent years delivered strong results:

• Demand for legal services in 2024 grew approximately 2.6%, the strongest increase since before the 2008 financial crisis.1
• Billing rates have continued to climb, contributing to higher revenues across many firms.
• Among the Am Law 100, total gross revenue reached roughly $158 billion in 2025, representing about 13.3% year-over-year growth.2
• Profits per equity partner rose 12.3%.3

At the same time, the pace of demand growth decelerated late in 2024, with quarterly run rates settling around 3.3%.4 However, as 2025 unfolded, demand rebounded, with third-quarter law firm demand rising about 3.9% year-over-year, one of the strongest quarterly increases in recent history. This signaled sustained client activity and a continued opportunity for firms.5

Understand the new reality of expenses versus revenue 

Rising revenues are welcome, but costs are increasing right alongside them. Law firms continue to invest heavily in:

• AI, technology, and cybersecurity
• Talent acquisition and retention
• Practice management systems and business development

Operational costs have risen across the industry,6 and firms that treat these increases as unavoidable rather than strategic signals risk shrinking their margins and putting themselves at a competitive disadvantage. 

Combat rising expenses with efficiency 

Rethink client service touchpoints 

Not every client interaction needs to be in person or billed at premium rates. Routine communications can often be handled via phone, secure video (e.g., Webex, Zoom, Teams, or Google Meet), or client portals, a feature of many law practice management systems. This can reduce administrative friction while improving responsiveness. 

Invest in workflow and practice automation 

Modern intake, billing, and document workflows reduce repetitive work and improve consistency. The most successful firms adopt these tools deliberately, focusing on outcomes rather than novelty. 

Use metrics to guide decisions 

Tracking key performance indicators such as realization rates, cost per matter, and profitability by practice area enables smarter decisions. Across-the-board rate increases are rarely as effective as targeted, data-informed adjustments. 

Navigate the competitive talent frontier 

Recognize tight labor markets 

Competition for skilled lawyers remains intense. Corporations and in-house departments continue to draw talent away from firms, often offering competitive compensation and benefits packages.7 

Prioritize work-life balance 

Younger lawyers increasingly expect flexibility and balance. Firms clinging to rigid, hours-driven models may find themselves losing capable lawyers to alternative practice models. 

Focus on succession and mentorship 

As senior lawyers retire, firms without strong mentoring and succession plans risk losing both clients and institutional knowledge. Rebuilding those assets is far more expensive than maintaining them. 

Adapt to protect your firm’s bottom line 

The traditional law firm model is under pressure. That does not mean it is obsolete, but it does mean firms must adapt. 

Mid-tier and smaller firms should focus on:

1. Reducing unnecessary expenses without diminishing client value.
2. Managing revenue intentionally through pricing strategy and service design.
3. Treating talent strategy as a core business function, not an afterthought. 

Put simply, profitability is no longer a byproduct of good lawyering alone. Profitability in 2026 will belong to firms that align people, processes, and technology with clear business goals.

Endnotes 
1 State of the Legal Market 2025, THOMSON REUTERS INSTITUTE (Jan. 7, 2025), https://www. thomsonreuters.com/en-us/posts/legal/state-of-the-us-legal-market-2025/. 
2 The 2025 Am Law 100 by the Numbers, LEGAL. IO (April 15, 2025), https://www.legal.io/articles/5609720/The-2025-Am-Law-100-By-the-Numbers. 
3 Id. 
4 State of the Legal Market 2025, THOMSON REUTERS INSTITUTE (Jan. 7, 2025), https://www. thomsonreuters.com/en-us/posts/legal/state-of-the-us-legal-market-2025/. 
5 Debra Cassens Weiss, Law Firms See ‘Sharp Spike’ in Demand in Third Quarter, Report Says, ABA J. (Nov. 13, 2025), https://www.abajournal.com/web/article/law-firms-see-sharp-spike-in-demand-in-third-quarter-report-says. 
6 2025 Predictions: Driving Profitability for Law Firms, SUREPOINT TECHNOLOGIES, https://surepoint.com/resources/blog/2025-predictions-driving-profitability-for-law-firms-and-optimizing-operations/ (last visited April 14, 2026). 
7 Frederick J. Esposito Jr, Law Firm Finance Trends and Predictions for 2025, ABA (Jan. 1, 2025), https://www.americanbar.org/groups/law_practice/resources/law-practice-magazine/2025/january-february-2025/law-firm-finance-trends-and-predictions-for-2025/.