Is Benchmarking the master or the servant?

Recently, I received a call from a lawyer wanting to know what percentage of his gross revenue should be allocated to rent, perhaps the number 2 or number 3 largest cost item for lawyers. He said he wanted to know whether his percentage was in line with other law firms.

My response didn’t satisfy him; he went to another consultant and was told the average was 12%. In a recent survey conducted by Juris, Inc., the percentage for occupancy cost was 9%.

The question I put to the caller was: Why? Why does it matter what others pay for rent? The answer should seem obvious:  You cannot be too far out of line with your competitors and still stay in business. This, however, relates to the whole of your business/practice, not to any single item.

The real issues and questions are far more complex than a simple answer to this one question.

Is your rent competitive for the geographic area in which you’re located? Is the area in which you’re located acceptable to you and to your clientele and to your prospective clientele? Do the facilities in which you’re located please you? Would you like to improve the quality of your professional life by moving to other, better appointed quarters, and can you “afford” it? After many years in the legal profession, with some successes, can you afford and would you like to treat yourself to better quarters? Would your current and prospective clients think more of you by your being in better quarters – and thereby allow you to take on better cases and/or charge more for these cases you do take on?

These are the questions that would be more important to me than those asked by my caller. If the answers to these questions mean that you pay 13% or 10%, then so be it. But, you’ve asked the proper questions and made conscious choices consistent with your firm culture and goals.


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