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Am Law 100 Insights: How Much Do Realization Rates Actually Matter?
During the pandemic era, it may have been easy to assume high realization rates were going to be a part of the "new normal." Firm leaders saw the benefits firsthand in 2020 and 2021, when transactional demand soared and lawyers working remotely were more diligent in their billing practices and better able to reap the benefits. Plus, firms for years have been adding business professionals to help them make the most of their pricing strategies.
But in 2023, Am Law 100 firms saw their lowest realization rates in five years, according to The American Lawyer survey data. The average rate was 80.93%, down from 82.2% in 2022 and 83.11% in 2021, when industry observers expressed hope that firms would remain vigilant about collections for their own sake. The median rate followed a similar course, decreasing from 83% in 2021, to 81.2% and most recently, 79.65%.
Despite the lower realization, the industry appears to have had a better financial year in 2023 compared with 2022, with the Am Law 100 growing revenue as a whole by 6.8%. So how much do realization rates actually matter?
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