Marketing Opportunity: Megafirms overpay $160,000 for First-year Associates
Here's a golden marketing opportunity for mid-size firms with offices outside New York City: the going rate for a big-firm first-year associate in New York exploded to $160,000! That's $667 salary per workday. Adding in overhead, the total cost of these associates is at least $2,000 per day.
+700-lawyer Simpson Thacher & Bartlett announced the new starting salary two weeks ago, and 40+ mega law firms followed suit. See the "The Pay-Hike Parade" for the details.
The giant law firms are boosting their rates to pay these breathtaking salaries. A client of mine who is the President of a $650 million company, said his +1500-lawyer Chicago law firm was already charging his company $500 per hour.
"When I saw the announcement about the raises, I said 'Oh God," Michael Roster, executive vice president of World Savings, a subsidiary of Wachovia Corp., told the ABA Journal. With the salary raise, Roster said law firms will put more pressure on associates to bill, and partners may have more incentive to charge clients for associate learning time.
This creates a huge opportunity for mid-size and boutique law firms. Not only can they offer better rates but also more specialized expertise. Corporate Counsel are going to be a looking for a 20-lawyer trial boutique in Minneapolis -- which does nothing but work in court-- as opposed to the litigation department of an expensive New York megafirm. Litigation accounts for 34% of overall corporate legal spending.
Corporations spent a median of $1.8 million on outside law firms, with small companies (less than $100 million in revenue) spending $525,000, medium companies ($100m to $1billion) at $963,500 and large companies (+$1 billion in revenue) at $5,177,000.
I predict a lot of these dollars will be going to mid-size and specialty law firms in 2007.
