August 4, 2006
High Performing Law Firms Spend More
The most profitable firms don’t have the lowest cost structure. That was one of the findings from a recent Juris, Inc. survey. Top performing firms had higher per-head operating expenses and a higher ratio of non-fee earners to fee earners. Full survey details will become available later this month.
The findings provide more evidence that it pays to focus on revenue rather than cost reduction. That is not to say that profitable firms spend recklessly. While costs per head are higher, the firm’s total cost as a percentage of revenue was lower due to higher revenue per partner and per head.
Cost cutting campaigns will not move a law firm into the category of a top performer. If you want to increase profitability, you need to concentrate on increasing revenue rather than focusing attention on reducing expenses. You should pursue business development as well as opportunities to increase productivity, effective rate, and realization. Eliminating amenities, downgrading facilities, reducing personnel, holding back on salary increases, and reducing administrative staff is likely to cause more harm than gain.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
Related posts
Filed under Expense Control by Tom Collins