« Associate Attorney Compensation – Five Approaches
| Law Firm Merger as an Exit Strategy for Sole Owners
Oct 03, 2018
Small Law Firm Financial Performance Indicators
I am the owner of an estate planning firm in Milwaukee, Wisconsin. I have five associates and four paralegals working in the firm. More of my time is spent on managing the practice and marketing than on servicing clients. I am trying to develop financial goals for the firm but I am clueless as to what financial indicators or ratios I should be looking at and what constitutes good or bad performance. Anything that you are willing to share would be appreciated.
Here are what I believe to be key financial indicators/ratios and performance for a firm of your size and type:
- Owner compensation – 40% of gross revenue.
- Overall compensation – 65% of gross revenue.
- Staff and non-equity attorney compensation – 25%-30% of gross revenue.
- Paralegal compensation – 4% of gross revenue.
- Support staff compensation – 15% of gross revenue.
- Marketing – 2.4% of gross revenue – 8%-10% for estate planning firms.
- Rent and other occupancy expense – 7% of gross revenue.
- Reference materials – 1.4% of gross revenue.
- Equipment/technology – 2% of gross income.
- Lawyer income pie (associates and owners) – 59% of gross revenue.
- Other expenses – 10% gross revenue.
- Annual Revenue collected per lawyer – $300,000.
- Annual billable hours – 1500-1600 associates – 1100-1200 paralegals.
I like to see profit margin – owner compensation – salary if paid as w-2 wages plus profit in the range of 35% – 45%.
Performance can vary by type of practice.
Click here for our financial management topic blog
Click here for our law firm profit improvement blog
Click here for articles on other topics
John W. Olmstead, MBA, Ph.D, CMC
Posted at 09:54 AM in
Tags: , , , , ,