Currently in the legal sector in 2010 there are 145,000 solicitors in the UK working in 10,362 firms. This works out to an average of 14 partners per firm, but of course it's not like that; in reality:-

40% are sole practitioners
45% are in 2 - 4 partner firms
10% are in 5 - 10 partner firms and;
5% are in over 10 partner firms

I predict that the number of solicitors will fall to below 100,000 within 5 years but the number of firms will increase to over 12,000. An average of 8 per firm.

If gravity is the one law we all are forced to comply with, economic law comes a close second. 

The law of supply and demand tells us that in an oversupplied market, prices will drop.  The simple fact of the matter is that there are too many lawyers, so it naturally follows that those that remain in practice will start to earn significantly less in the immediate future than they do now.
 
The average salary of a UK solicitor in 2010 is £70,000 p.a. but of course it's not like that; in reality:-

sole practitioners earn £28,000
2 - 4 partner firms earn £33,000
5 - 10 partner firms earn £53,000
10 + partner firms earn £167,000

Of course, if we strip out the big London firms, then the average salary is much lower.

The question is, how low does it have to go before you decide that it's not worth it?

The answer to that is that at the moment, it's too close to call for a lot of practicing solicitors and there are some events coming up that will tip them over the edge. Such as:-

The Legal Services Act allowing new business models and competition
The Jackson Review (of personal injury lawyers)
Legal Aid Reforms

In addition there are:-

Tax bills due in January 2011 and July 2011
Increased indemnity premiums in England and Wales
Increasing amount of defaulting debtors
Changes in Personal Injury funding
Banks are restricting access to capital or demanding more security

In the last 18 months, numerous small firms have gone to the wall and other larger firms have failed such as:

Bus Merton LLP
Hammonds Direct LLP
Hextails LLP
Orchard Brayton and Graham LLP
Alexander Samuels LLP
Halliwells LLP

The reason for my "cheery" prediction is because this is the tip of the iceberg.

Here are some of the other events that will expose more of the unprepared firms:

Overtrading
Inability to retain key staff
HMRC will harden their attitude to law firms
Banks will remove or restrict overdraft facilities
An increase in interest rates
Stress within the partner model

What can you do about it?

As a sole practitioner, you can start to outsource and go from £28,000 to £60,000+ by making a few changes to the way you run your business.

In a small and mid-sized firm you can also outsource but you can also merge or acquire other firms.

If you're in a 10+ partner firm then you need to look at your partnership model
and prepare for the future as you could be best placed to make the most of the carnage.

But after 4 years at university, a year doing a diploma, two years as a trainee,
£28,000 is a low amount of money...but it's what the market will pay.

If you want to increase it substantially, either join a bigger firm (if you can),
re-train (if you can) or start your own firm giving customers what they want.

I was discussing law firm growth with a friend of mine who grew his own business from nothing to "a few million" in the space of a few years and I asked him how he did it.

He said that in any business with more than 50 employees, there were two "killers" that had to be rooted out.
 
Bureaucracy and Office Politics.

Bureaucracy

Bureaucracy can often be invisible in an organisation that's growing because it's
never one big thing but death by a thousand cuts; it's the small things that can suck the life out of a business.

All business needs systems and processes, but over time or through a change in the market, some come become obsolete. Systems and processes are there to ensure that everyone knows what they are doing and to speed up the service to customers. 

If they don't do that or contribute to that, then they have to go.

But some people have a healthy (or unhealthy) attraction for certain formalities.
 
There is the case of a manager in a firm who sent out a memo outlining how all memos should be written.  All employees had to follow an exact format, font size and font style and the position of the employee in the firm determined the size of font they could use; 10 point for paralegals and trainees, 11 point for solicitors and 12 point for partners.

When another memo went out a few weeks later insisting on a uniform desk code, only four items on a desk at any one time - phone on the right and so on it was time to call a halt.

These proposed "procedures" did not contribute to or speed up the customers experience, they were far too inward looking and only served to annoy employees.

Politics

If bureaucracy can be a serious nuisance, it's usually just overly enthusiastic OCD sufferers who just need to be reminded of the purpose of the business; but office politicians are much worse.

They are people who hold bad and destructive ideas about how to get ahead.  If they are not rooted out of a business they can destroy it.

Bureaucracy is a curable illness but politics is like cancer.  Bad enough in one place but if it's allowed to spread it can be terminal.

As someone who's been self-employed for the majority of his adult working life I have a difficulty accepting any kind of office political activity. Probably because it's rooted in power and power corrupts.

Not all "politicians" are nasty, some are just plain naive.

If your idea of doing good is based on holding power over someone else then that is just nasty or naive.

Politics is the complete opposite of business and in almost every other area it's inferior. Politics and business should have the same aims and that is to make life or the world a better place, but the way they go about it is very different.

Politicians can't do any good until they get power.  Businesses can't make any profit until they do good.

If in your firm you happen to be right about your ideas for making the business a
better pace through innovative ideas that make the customer experience better and quicker then you are rewarded with customers paying you more money.  That money trickles down through the business paying off your operating costs, wages and expenses and ending up as profit which is the only true indicator of customer joy.

Profits are a measurable indication of the good that your firm is doing.

That's why profit is so vital in any business; it forces everyone to pay attention
to the ultimate purpose of the business.

Not bureaucracy or office politics but providing benefit to the customers.