Lean, focused, profitable

Client confidence is high, but commercial pressure is rising

Last year's survey of the small and mid-sized legal market found firms were making small but incremental adjustments to their client offering instead of major moves.

Whatever changes were made, they clearly hit the mark. A whopping four-fifths (84%) of respondents rated their firm's client experience as good or excellent, while only 1% rated it as poor.

Four-fifths rate their client experience as good or excellent.

This was consistently high across practice areas of the law, with employment and personal injury lawyers slightly more likely to rank their client service as "excellent”.

Diversity of skill to solve client problems, having one point of contact for clients, and maintaining a strong culture also highly ranked, at 70%, 69% and 67% respectively.

Relying on existing client relationships to drive revenue has become the focal point for most.

Growth isn’t just about taking on more work anymore, says Sophia Ramzan, Partner & Head of Residential Conveyancing at Watkins Solicitors.

Firm identity is crucial to client engagement believes Zoë Bloom, a Partner at AFP Bloom.

While it's easier said than done, Bloom believes sustainable growth comes from being confident in your positioning, developing a clearly differentiated offering and building a culture that supports responsibility and sound judgement.

Kate Bennett, Co-founder of Arbor Law, says growth is less about building a bigger pyramid or increasing hourly capacity as it is on the specific needs of the client.

The percentage of firms reporting growth has gone up from last year, rising from 58% to 62%. Firms reporting a decline in revenue went down from 5% to 4%.

Almost two-thirds say their law firm has grown since three to four years ago

Growth across practice areas is evenly spread for the most part. Firms offering employment or commercial and corporate services are most likely to report growth, both at 66%, followed by property (63%), litigation (63%), private client (63%), personal injury (62%) and family practices (61%). The differences are not dramatic, which suggests the growth story is not confined to one buoyant part of the market.

The top challenges facing small and mid-sized firms are: attracting new business (39%), pressures on prices from clients (33%), meeting compliance regulations (28%), cybersecurity (25%) and staff burnout (24%). The pressure points shift slightly by practice area. For firms specialising in personal injury or litigation, attracting new business remains a leading concern (both at 41%). Property firms appear especially exposed to pricing pressure and compliance demands (35%), while personal injury and clinical negligence firms are more likely to identify cybersecurity as a top challenge at 35%.

Interestingly, only 13% said retaining current clients was a challenge and 0% said client retention or repeat work was something that was holding their firm back.

Together, those figures suggest firms do not think the core issue is keeping clients once won; the bigger problem is operating profitably and sustainably in a difficult market.

This comes down to a shift in client demands, according to Kate Bennett, Founding Partner of Arbor Law.

That shift is being driven by tighter budgets, expanding risk, increasing regulatory complexity and the need to prove ROI, says Bennett.

Firms need to understand how their clients measure performance, she says, such as value, efficiency, risk management, or strategic impact, and design their delivery models around that reality.

According to Ramzan, fee pressure and client expectations around speed are a growing challenge. The solution, she says, is growing at a pace you can manage without cutting corners.

"We’re focusing on tightening processes, using systems better, and making sure the team is properly supported so we can keep delivering consistently."

The top investments firms have made recently are to their back-office operations, including standardising documents and workflows (30%), improving pricing transparency and matter scoping (21%) and investing more in client experience and responsiveness (19%).

Others were a little more nuanced with their expansion ideas. A department head at a mid-sized firm told us growth is simply when new partners want to join the firm, while a senior leader at a small firm said their strategy is to "reduce the costs as much as possible to invest into securing more clients."

Firms have done an excellent job at remaining relevant in a highly competitive and heavily disrupted legal market. Yet more needs to be done to ensure profitability behind the scenes.

Profitability depends on removing operational drag

Lawyers at small firms seem more confident serving clients well than about running lean, modern, and resilient businesses.

The most profitable type of work is concentrated in two areas: legal work involving litigation and dispute resolution, or private client-type work, including wills, probate, trusts and estate-related advice, both at 42%.

Ongoing advisory and volume-based work are both on 18%, suggesting that profitability is being driven more by higher-value, often bespoke matters than by scale models or subscription-style services.

Bloom from AFP Bloom says volume work is being stripped out of the market and what remains is judgement.

What clients value is strategic thinking and the ability to control complex situations, she says.

Litigation and dispute resolution is, unsurprisingly, a major profit driver for litigation firms and personal injury and clinical negligence practices, but it also ranks highly among employment firms. Private client work is particularly prominent among private client, family, property and commercial and corporate firms, suggesting that wills, probate and trusts work continues to provide a dependable margin base for many smaller practices. Personal injury and clinical negligence stands out as the only area where volume-based or commoditised work enters the top three, reflecting the different economics of that market.

What's holding firm's back?

When asked what's holding their firm back from achieving growth, the most common response was "challenging economic conditions" at 33%, although that is down from 37% in 2025.

The second most common response was "difficulty attracting or retaining talent" at 27%, which has risen from 20% last year.

Talent pressure is especially pronounced in firms offering personal injury and clinical negligence expertise, while pressure on profit margins is particularly visible in family, private client and property practices.

Arbor Law's Bennett says firms need models that reduce unnecessary cost, remove unnecessary layers and deliver experienced judgement at the right point.

"I believe the next five years will reward firms that are senior-led, technology-enabled, flexible and genuinely integrated with their clients’ businesses."

But reputation, quality and culture are also everything, she added.

Ramzan from Watkins Solicitors says if people are supported and the team works well together, things tend to run better and clients notice that.

Bloom says they are focused on strengthening the firm’s ability to attract work collectively rather than relying on individuals.

"The challenge is to do that while maintaining our position at the top end of the market, handling complex and high value work in a competitive market. That requires constant adaptation and awareness of how we present ourselves to the market."

A quarter (25%) of respondents listed capacity or resource constraints and pressure on profit margins as a blocker, both of which were not measured in last year's survey.

Agility and competitive pricing sit in the middle. Both score 17% excellent and 45% good, meaning 62% view performance positively in each area. That is respectable, but not overwhelming, and suggests many firms feel broadly competent rather than differentiated on adaptability and price competitiveness.

A solicitor at a property firm says:

The weakest area of small firms is low overheads. Only 9% rate this as excellent and 32% as good, while 36% say average and 6% say poor. This was consistently poor across all disciplines.

Firms appear to believe that too much time is still being absorbed by back-office process, matter handling, and document work.

The biggest workflow issue is administrative tasks at 52%, followed by case management at 41% and document drafting and reviewing at 28%.

Administrative work is the leading workflow issue across every major discipline. Case management is particularly prominent in personal injury and clinical negligence, litigation, commercial and corporate, property and private client work. Document drafting and review is more visible in commercial and corporate, litigation and personal injury practices, while team collaboration appears more often as a pressure point in employment, property, private client and family firms. The shared problem is operational drag.

Firms make most of their money from higher-value legal work, especially disputes and private client matters, but their ability to convert that into growth is being constrained by economic pressure, talent issues, and inefficient delivery models. It's little wonder that firms are planning to invest more in technology, AI, standardisation of documents, and profitability tracking.

Growth is becoming more disciplined, data-led and technology-enabled

The biggest shift is likely to come from technology-enabled process improvement, especially where AI and standardisation can reduce effort, improve consistency, and support profitability.

This growth is being achieved cautiously, with 67% of firms now planning to expand organically, a slight dip from last year's high of 72%.

Two-thirds said their firm plans to grow organically

That preference for organic expansion is mostly consistent across practice areas. Litigation and disputes firms are slightly higher, at 72%, followed closely by employment at 71%, and personal injury at 70%. Only 66% of private client practices said they plan to grow organically, with 16% saying they didn't know.

Appetite for mergers and acquisitions is up from last year's low of 5%, now at 8%. This rose to 12% for personal injury and 10% for commercial and corporate.

When asked about the biggest concerns they would have in an M&A, the top concern was cultural fit (48%) rather than financial risk (43%).

Firms also expressed strong interest in increasing use of AI in research, drafting, and review (41%) and standardising documents and workflows (40%).

However, AI governance is critical, says Bennett.

"AI should enhance the judgement, experience and commercial skillset of our senior lawyers, not dilute the differentiation clients come to us for."

Use of AI has also become an expectation, a founder of a small firm told us:

A solicitor at a mid-sized firm says their focus is "retaining humanistic approaches but growing through AI efficiency."

Together, these datapoints tell us firms are trying to become more selective, more measurable, and more deliberate about where margin is created or lost. To summarise, firms are looking to improve profitability through AI, standardisation and organic expansion while remaining cautious about cultural and financial risk.