June 10, 2005
Look Beyond Averages
Chris Roehm, an associate and good friend in Fort Lauderdale, Florida, sent me an example that illustrates why you should look beyond averages to increase partner income.
An attorney had a standard rate of $250.00. A summary report showing average rate indicated that her average rate for the quarter was $250.36. She was happy. The firm was happy. However, when the firm looked beyond the averages, this is what they found:
Timekeeper Standard Rate Average Rate
ABC $250 $250.36
Rate Hours % of Time at Rate
$195.00 7.00 1.29%
$200.00 27.10 4.98%
$225.00 32.50 5.97%
$240.00 41.20 7.57%
$250.00 168.40 30.92%
$260.00 217.70 39.97%
$265.00 6.40 1.18%
$270.00 44.30 8.13%
This timekeeper had 107 hours (almost 20% of her time) worked at rates lower than her standard rate!
The analysis raises the question, if the firm’s team is already working as hard as they can, why would you have your legal professionals work at rates lower than the firm can reasonably charge? Chris notes that, if this timekeeper had worked those 107 hours at her standard rate, the firm would have earned an added $3,000 in fees. If you have 10 attorneys in the firm with a similar pattern, the impact is $30,000 per quarter or $120,000 per year.
In older established firms, the amount of lost fees can be dramatically higher. We have found a tendency for attorneys to keep older clients at the same rates longer than they should. It is not unusual to find rates 3 to 5 years old. And we find situations that are even older. When this happens, the firm is foregoing the opportunity to adjust rates to reflect increases in lawyer experience as well as for the general increases in market rates and cost.
The moral of the story, according to Chris, is that you are giving away partner income without even getting credit for the undocumented discount you are providing. Find those situations, increase those old rates and increase partner income. I will add that you are much better off making small annual increases than having to go to your client, hat in hand, asking for a big catch-up adjustment to the long-time, low rates they have enjoyed. Chris Roehm (chris@jurissoutheast.com) heads up Juris® Southeast Sales and Services, covering Florida, Georgia and Alabama, and works with Juris law firms and those considering Juris to increase partner income.
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Filed under Blog by Tom Collins