Nearly half of Australian legal firms are considering expanding into new areas of law, according to a new study by Macquarie Relationship Banking.

45% of firms included in the 2011 Legal Best Practice Benchmarking Survey plan to integrate new areas of the law into the firm during the next three years, with the two most popular areas being commercial and employment law. 

Head of legal at Macquarie Relationship Banking, Terry Lyons, said the focus on employment law seemed to suggest firms recognised the practice area’s economic resilience. He added that the constant legislative changes to the practice area had also bolstered employment law throughout the economic uncertainty of the past few years.

According to the survey, 70% of firms increased profits since the previous financial year. Lower revenue firms, those under A$4m a year, were most successful at increasing profits during the period, with nearly 30% of those firms increasing profits by30% or more. Firms which increased profits during the period cited revenue growth and efficiency improvements as the two main reasons for the change.

The survey of more than 100 legal practices around Australia also indicated a significant number of firms will be increasing fees in the current financial year. 56% of firms indicated they had raised their fees in the past financial year. 27% indicated they would raise their fees between 1% and 9%, while 28% expected fees to increase between 10% and 19%.

Firms ranked reliability as the number one service quality demanded by their clients, but less than half of legal practices felt it was one of their strengths. Being proactive and fast-acting were also deemed important to clients by 45% and 47% of firms respectively, yet only 25% of firms felt being proactive was a strength.  Lyons said client relationships are critical to business growth and these statistical discrepancies offered an opportunity for forward thinking firms to move ahead: “Solid client relationships are critical for legal practices,” he said. In fact, the survey revealed that 66 % of new business enquiries come through existing client repeat business or word of mouth referrals, making existing clients even more valuable.

Lyons added that while many firms may remain cautious about the future, things are certainly starting to improve: “Cautious optimism certainly seems to be the name of the game for legal firms this year. While caution can be a good trait, firms should remember that 70% grew their profits in the past year,” he said.