The Five Gears of Law Firm Profitability

Production Value: Creating a Billable Hours Target for Each Timekeeper

From the time employees begin work at a law firm, they have billable hour targets on their backs. It’s how they’re expected to carry their weight in the firm and how partners measure the worth of each employee.

But just billing the required number of hours doesn’t answer the question of how long a matter will take or how much it will cost to service the client.

How many hours of partner time, associate and paralegal time, and admin time will it take to resolve the matter? What about outside costs and expenses, which should include both the costs incurred to resolve the matter and some portion of the firm’s overall costs?

If they consistently estimate all the different factors correctly, they’ll net a profit.
If they occasionally get it wrong, accept it and go through the reporting and analytics process to learn why. No one’s right all the time. But successful firms learn from their mistakes, make adjustments and move forward. Less successful firms, on the other hand, may be less particular about tracking the profitability of individual jobs, or even write off losses as the price of doing business, putting revenue on equal footing with profitability.

While it may occasionally make sense to bring in less money on a matter than they send out, as a long-term business strategy, it’s a better fit for running a charity.

Do attorneys ever wonder if the amount they’re charging for a particular matter or case is profitable?

To make sure the Gears of Profitability stay turning in the right direction at your firm, get the complete how-to guide free from LexisNexis. You can also learn more about Law Practice Management Software from LexisNexis.

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