Legal practice management | Law Firm Profit | Small Law Firms
Last month we ran a Linked In legal practice management survey asking the principals of small law firms ( in this survey a small law firm as a firm with 4 partners or less) what annual law firm profit they would be satisfied with, on a per principal basis.
The results are now in.
We had 132 responses and as you can see from the graph, the most popular answer was an income of between $200,000 and $250,000
This figure seems low and let me explain why.
Last month I spoke in Canberra at a legal practice management conference targeted at small law firms. During my presentation I asked the question ” In Canberra, what do you think is an appropriate salary for a non equity principal?”. In other words what salary should they be paid.
The consensus view was that a salary of at least $200,000 would be needed.
Now this is Canberra, which is a city of 250,000 people. It is not Sydney or Melbourne, where one might expect salary expectations to be even higher.
The conclusion then must be, that the income expectations of principals in small law firms is very low. Indeed if we took an average of the most popular income range in the survey, it would be $225,000, which is little more than what was considered a reasonable salary in the Canberra market.
One of the reasons then for the low level of law firm profit in small law firms appears to be the low level of income expectation for many principals.
One of the keys to lifting profitability in a small law firm is to lift the level of expectation of the profits that you would like to earn. The minute you do that, your whole approach will change.
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Colin,
The reason I find the results of the survey surprising is that I would have thought the main reason for taking on staff (leveraging) the work would be to increase your take home income. Given the level of profit found to be acceptable by most in the survey it would seem to be a valid approach to down size, lower overheads, pin back your ears make more money based on personal billings alone or as the case may be, partner billings alone.
Having said that I too have at times fallen into the trap of growing for fun/ego, or worse still, not taken action to cull decisively staff when the dollars said I should have been doing otherwise.