If you had to choose one metric to reflect your law firm's overall health, what would it be? Profit? We see many firms make the mistake of solely focusing on revenues and operating under the assumption that greater revenue in turn means greater profitability when, in fact, profitability should be the key metric.
But why does revenue totals capture all the attention? It's simple, revenue is truly easier for firms to calculate. With so much emphasis on billable hours, many law firms fail to look at the big picture. Those measurements, while important, fail to disclose the TRUE profitability of the practice. This goes way beyond hours or billings to include all costs allocated to the actual revenue sources. Interestingly, Am Law 100 statistics show that the top-grossing US law firms are now targeting profits, leading to increases in efficiency and cost-cutting.
The Law Firm Profitability Issue from ABA provides a useful road map for firms seeking to shift their focus from revenue-centric thinking. Lawyers and law firms need to become more efficient to remain competitive in a competitive environment. This allows lawyers to improve their practice management, accomplish more work, and do a better job in the same time. This can be accomplished using technology more efficiently.
Profitability is all about the bottom-line, your revenues minus costs and expenses. When you make a serious commitment to promote both growth at your law firm while also acknowledging the importance of managing costs, you will create a strong foundation for your firm that can withstand anything that comes your way.
BigSquare’s enhanced Profitability application allows your end-users the ability to easily perform profitability analysis on the dimensions that matter at your firm. All you need is an internet browser and you can slice and dice a library of profitability related metrics against key dimensions.. Learn more about how Firm Focus can help your firm here: Firm Focus Profitability Document.
This blog post helps summarize our Top 8 references for law firm profitability. You definitely will want to take a look.
BigSquare is the leading provider of Business Intelligence for law firms and professional service organizations. We focus exclusively on law firm reporting, law firm BI, law firm profitability and law firm analytics.