One of the largest specialist personal injury firms has announced a return to profitability as its three-year turnaround plan delivers results.

Minster Law, headquartered in Yorkshire, reported a pre-tax profit of £503,000 for the year ending June 2024, a significant recovery from the previous year’s loss of nearly £4.8m.

This marks the firm’s first profitable year since the 2021 reforms to the personal injury market, which forced a fundamental overhaul of its business model. The changes made high-volume personal injury claims unsustainable, necessitating a shift in focus. Turnover also rose by 15%, reaching £36.7m.

Chief executive Shirley Woolham explained the transformation: “We had to adopt a start-up mentality, challenge every aspect of our business, and embrace transformational change to achieve sustainable growth. Over the past three years, we’ve re-evaluated our cost-to-income ratio, revamped processes, restructured internally, introduced new skills and technology, and reimagined how we deliver value.”

This strategic shift required substantial investment, reflected in the firm’s previous losses.

The latest results signal the beginning of a period of long term growth, driven by an increased focus on serious injury cases, particularly those arising from road traffic accidents (RTA). Case volumes in this area have risen by 50% over the past two years, with 188 of the firm’s 508 employees now dedicated to multi-track work. Minster, which took over Irwin Mitchell’s RTA Fast-Track work three years ago, is actively expanding its serious injury division through both organic growth and acquisitions.

Woolham added: “Minster is committed to supporting clients with the most complex and life-changing injuries. We’re enhancing our capacity and building new partnerships in serious injury, which will be announced soon. Our goal is to extend our network and provide exceptional expertise and support to even more clients.”

How Do Law Firms Stay Profitable?

Following the introduction of further fixed costs reforms on 1 October 2023, and its expansion into all of civil litigation pleaded up to £100,000 (essentially being any litigation not allocated to the Multi Track), there must now be an emphasis on efficiency within law firms, and also diversification of types of work being completed.

There has been a significant amount of consolidation within the legal market, to increase volumes of work, and also to maximise profitablity from pre 1 October 2023 caseloads which will include more higher value work (the Multi Track threshold was previously £25,000, and has now increased to £100,000).

Unusually however, in the case of Minster Law, the firm remains independently owned by a single shareholder, avoiding private equity backing. Woolham has emphasised the firm’s strong financial position, which enables it to increase its caseload and onboard remote-working lawyers across the country.

“We’ve invested in the right people, technology, and infrastructure to deliver consistently high-quality service,” Woolham said. “With robust capital reserves, we’re well-positioned to take on significant, long-term injury cases with confidence.”

There do remain some exceptions to the expanded fixes costs rules, and there has been explosion in the market as to Solicitors providing representation in housing disrepair type disputes as these still attract hourly rate standard costs.  It is likely however, that this will become a saturated market and will attract reforms in years to come, and law firms should look to diversify their workload to include higher value type disputes, private-paying client work and other areas of work outside of the fixed costs reforms.

Work within the boundaries of the fixed costs reforms can remain profitable, but firms engaging heavily in this area of work will need to adapt to ensure efficiency processes are in place, and that proper retainers are in place with clients to ensure recovery of any shortfall of costs.

How to Improve Law Firm Profitability?

Law firms looking to improve their cash flow can take inspiration from Minster Law’s strategic transformation. One key approach is to shift focus from lower-margin, high-volume cases to higher-value, complex matters at lower volume. This allows for increased revenue per case and positions the firm as a specialist in more lucrative areas.

Streamlining operations is also critical. Minster Law’s review of its cost-to-income ratio and re-engineering of internal processes demonstrate how reducing inefficiencies can increase profitability. Investing in technology, such as advanced case management tools, can further optimise operations and improve billing accuracy. At the same time, upskilling employees ensures the workforce can leverage these technological advancements effectively.

Expanding and diversifying revenue streams can also drive cash flow improvements. Minster Law achieved this by growing its serious injury division and pursuing acquisitions. Law firms can similarly explore new practice areas or acquire complementary businesses to broaden their client base and legal services.

Sources of work should also be considered, and ensure the correct marketing partner is in place to generate work, and consider reviewing marketing practices with a specialist in legal marketing.

A further common mistake is waiting until the end of a case to address costs. It is essential to consider costs from the outset, ensuring the retainer is properly structured, success fees in CFA type matters are calculated compliantly with tailored risk assessments, and appropriate rates for billable hours worked are set based on the case’s complexity and value.

Within inter-partes disputes when standard costs arise (predominantly multi-track type matters), skillful negotiation of legal costs, including recovery of Solicitor’s hourly rates for billable work, is vital for maximising profit margins on each case. Engaging an experienced Costs Draftsman to assist with drafting your Precedent H, Bill of Costs, and Replies to Points of Dispute will significantly enhance your firm’s ability to recover the maximum legal costs and disbursements.

They can also guide you through the Detailed Assessment process. Even well-executed casework can be undermined by poor cost management from the beginning, such as incorrect hourly rates or failure to properly budget for costs.

Inevitably, law firms will face unsuccessful case outcomes, where the losing party is required to cover the winning party’s legal costs. In these instances, effective negotiation of the winning party’s Costs Budget and Bill of Costs, along with ensuring proper ATE insurance, can significantly reduce your firm’s outgoings and protect its financial health.

How can ARC Costs Assist with Law Firm Profitability?

The costs draftsmen and costs lawyers at ARC Costs can play a pivotal role in improving law firm profitability by optimising legal cost management processes to help make informed decisions. We assist in drafting accurate Costs Budgets (Precedent H) to ensure that cases are appropriately funded and to minimises the risk of overspending on legal costs.  A well drafted Costs Budget will also expedite costs assessment processes, and maximise your recovery by reducing the areas in dispute on conclusion of legal proceedings.

We can also assist by preparing detailed and accurate Bills of Costs and negotiating higher settlements in cost disputes. If you are unsuccessful in a legal case, we can minimise your costs liability through the careful drafting of Points of Dispute.

In complex cases requiring Detailed Assessment, ARC professionals ensure that legal costs are properly managed and presented, preventing delays in the recovery of fees and boosting cash flow through successful outcomes.

If you have any costs queries you wish to discuss with the ARC Costs team, contact one of our experts at info@arccosts.co.uk or speak with one of our team on 01204 397302.

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