Thinking of Buying a Legal Practice in Australia? Here Are 3 Vital Questions to Ask

Australia’s legal services industry generates approximately $35.8 billion in annual revenue, supported by more than 25,000 enterprises and employing over 128,000 people nationwide.

The sector remains a cornerstone of the professional services landscape, with profit margins averaging 13.8% and revenue forecast to grow by 2.3% annually through 2031.

Although large-scale mergers and the rise of international firms have reshaped the top end of the market, the vast majority of legal providers are small or boutique practices offering personalised service, flexibility, and competitive pricing.

1. Is the Business Financially Sustainable and Adaptable to Market Change?

Why It Matters:

Profitability in the legal sector varies widely by practice area, firm size, and client base. While corporate and regulatory practices command premium fees, general legal services depend on consistent client volume and efficient cost control.

What to Check:

• Profitability and margin trends – Industry profit margins sit around 13.8%, but smaller firms may overstate profit due to imputed wages.

• Revenue mix – The most lucrative areas include commercial law (31.2%), property law (18.2%), and personal legal services (19%), while community and administrative law provide steadier but lower-margin work.

• Operational costs – Wages remain the largest expense, consuming a growing share of revenue as firms compete for legal talent.

• Technology investment – Software costs for systems such as Smokeball, Clio, and PEXA have risen sharply, but they’re essential for maintaining productivity and client satisfaction.

2. What Is the Firm’s Competitive Position in an Evolving Market?

Why It Matters:

The Australian legal market is fragmented, but competition is intensifying as accounting firms and alternative legal service providers (ALSPs) expand into traditional legal territory. Understanding how the firm differentiates itself is crucial.

What to Check:

• Market share and structure – The top four firms hold only about 10% of total industry revenue, with over 97% of firms employing fewer than 20 staff.

• Client focus – Corporate, finance, and government clients are key revenue drivers, representing nearly 60% of the total market, while households now account for a smaller share due to lower accident and divorce rates.

• Competitor overlap – The Big Four accounting firms (PwC, Deloitte, EY, KPMG) now offer integrated legal and consulting services, putting pressure on mid-tier firms.

• Reputation and niche – Firms with a strong presence in specialised areas—such as compliance, intellectual property, or family law—are more insulated from market volatility and pricing pressure.

3. Is the Business Positioned for Future Growth and Technological Change?

Why It Matters:

The next decade will see major changes driven by technology, regulation, and globalisation. Firms that adapt quickly will capture growth opportunities, while those that resist innovation may struggle.

What to Check:

• AI and automation – Around 57% of corporate legal departments already use ALSPs, and leading firms have integrated AI for document review and due diligence. Generative AI tools are now standard for research and drafting support.

• Regulatory growth – New laws on climate disclosure, cybersecurity, and privacy have boosted demand for legal compliance work and will continue to do so through the 2030s.

• Global expansion – Free Trade Agreements with the UK, India, and Southeast Asia are enabling Australian firms to operate internationally and access high-value cross-border work.

• Alternative pricing models – More than half of Australian firms now use fixed or capped fees instead of hourly billing, reflecting client demand for cost certainty.

Ready to Invest in a Thriving Legal Practice?

With strong demand driven by regulatory change, international expansion, and technological innovation, Australia’s legal services sector offers stable long-term potential.

Firms that balance digital efficiency with personal client service and compliance expertise are best positioned for sustainable growth and profitability.

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