The Pinstripes seem to be getting healthier
In an article entitled, “There’s still gold in them there pinstripes,” USA Today reports on a recent American Lawyer survey.
The average profit per partner at the nation’s 100 largest law firms passed the $1 million mark for the first time last year, with the top 10 firms booking profit per partner of $2 million or more.
Gross revenue of the “Am Law 100” increased about 10% over 2004, the magazine reported. Seven big law firms each generated more than $1 billion.The nation’s 100 largest law firms employed about 70,000 attorneys in 2005 – about triple the number of lawyers who worked at the top 100 firms in 1986, the first year the survey was taken.
Growth may be slowing, according to the survey. The total number of attorneys employed by the Am Law 100 grew less than 3% last year, following a year of about 2% growth.
The richest firm, as measured by the average compensation per partner ($3.8 million) and revenue per lawyer ($2.4 million), was also the smallest – Wachtell Lipton Rosen & Katz of New York.
The business model of the Wachtell firm seems to be based on
i) staying small and ii) billing based on a percentage of the value of the business deals that the firm helps arrange rather than hourly. Their primary focus is mergers and acquisitions, corporate and securities law, executive compensation and taxation, areas that lend themselves to this approach.
USA Today quotes Dane Ciolino, who teaches the business of law at Loyola University law school> Ciolino says the Am Law 100 bears little resemblance to the average American law firm. “The average (American) lawyer is working at a small firm making $60,000 to $100,000 a year,” Ciolino says. “Even at large firms in (many) big cities, it’s $100,000 to $160,000 on average.” The high fees reaped by the Am Law 100, he says, “tell you more about the clients (the firms) are handling” than differences in quality between large and small firms.
Ciolino is correct in that the nature of the firms, large and small, is different.
But, my experience coaching lawyers and consulting with law firms around the country suggests we shouldn’t stop there. There are some important lessons that can be learned from these statistics:
First, size doesn’t reflect necessarily on either revenue per partner nor profit per partner.
Second, firms grow based on their clients. Thus, lawyers must look for clients who have growth potential. In other words, “commodity” work will not result in high and profitable growth … unless you have a large volume of such work. Highly focused and “high end” work will result in higher revenue and profits.
Third, when the work you do is perceived by the client as having high value, you will be able to charge more … even a percentage of the value of the work. This will get you out of the time modality of billing and into the value modality of billing, where the profits are significantly higher.
Fouth, you should seek to plan your business model, not allow it to occur by happenchance. Taking charge of your career is always more satisfying and usually more profitable …Tags: Cash Flow - Finances
Categorized in: Cash Flow - Finances