For many years the national norm for all firms has been around 1750 billable hours - much higher for litigation firms - often in the 1800-2000+ range. In my experience I find 1650-1700 a good target for most firms. However, I am finding that 1500 is more the norm for estate planning firms especially if the attorney is also doing new client intake interviews and meetings. As a general rule attorneys should be billing approximately 70% of their total worked time. Of course this all assumes that you have adequate work to keep you both busy on a full load.

Lexis has published a couple of studies on billable hours that you might find useful - Billable Hours Survey Report, Non-Billable Hours Survey Report and Where Do all the Hours Go.

Recently the managing partner in an eight attorney firm was contemplating bringing in a senior lawyer as an Of Counsel that wanted to gradually wind down his practice. He was thinking of paying him using an eat-what-he-kills approach whereby the Of Counsel would be paid 40% for his personal production (collected working attorney receipts) and 20% for bringing in the client (origination). Thus, if he brought in the client and did all of the work he would get 60% of the fee.

This approach is fine and I know several law firms that use this approach and these percentages. My concern is with the percentages. Don't forget the overhead. Lets say that he collects $300,000 and that he brought in the business and did all of the work. He would get 60% of $300,000 or $180,000 and the firm would get 40% of $300,000 or $120,000. Typical overhead per lawyer is $100,000 per year or higher. If the overhead is $100,000 there would only be $20,000 profit contribution or 6.6% margin. I believe the firm should make a margin of 25%-30% from associates and Of Counsels.

Examine your overhead. I would suggest 35% on working attorney receipts and 15% for client origination.

You may believe that the overhead consumed is far less that the firm's average overhead per lawyer and that a contribution cost allocation approach allocating only variable/direct costs is more appropriate. However, there are often other costs and I find that many law firms cut themselves short, only cover their overhead, and make very little or no profit margin. Look over your overhead and determine the profit margin that you desire and go from there.

Question I am the owner of a solo practice located in the western Boston suburbs. I have been considering selling my practice. Do you see many practitioners selling their practices?

Answer: Yes, I am seeing many solo practitioners selling their practices. However, I also see many lawyers looking to exit their practice start by thinking that they will sell their practice. However, when all is said and done the arrangements often take one of the following arrangements:

1. Admitting an existing associate to partnership and then having the associate buy out the owners partnership interest in a retirement payout.
2. Bringing in an associate and mentoring and grooming them, admitting the associate to partnership when he or she is ready, and then having the associate buy out your partnership interest in a retirement payout. Sometimes partnership interests are sold gradually over time.
3. Merger with another law firm.
4. A wind-down of the practice and then Of Counsel relationship with another firm with a client transition/payout arrangement.

Many solo practitioners are often taken back by the inflexibility of some of the various state rules of professional conduct concerning sale of law practices and find the above approaches more flexible.

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Are you looking for a quick and dirty checklist to use to review the profitability of your practice. Click below for a copy of our Law Practice Profitability Checkup.

We frequently consult and work with law firm clients working on implementing succession strategies that involve the sale of a law practice, merging with another firm, or hiring lateral talent. If you are looking to join up with another firm keep us in mind. We post confidential listings on our website.