The typical law office spends 45 to 50 percent of the fee dollar on the expenses of operating the office. These funds go for non-lawyer salaries, rent, telephone, library, equipment, supplies and other facilities. The comparison of overhead percentage ratios is, in fact, quite a game among some lawyers. We are often asked: "What should a law firm's overhead ratio be?" An answer such as 45 percent, derived from some recent survey, will often satisfy the questioner; or he may be unhappy because he realizes that in his shop, the figure is higher, say 55 percent.
Actually, the percentage ratio of overhead is quite unimportant and firm to firm comparisons of this number may be misleading. One Western firm of three lawyers that provided information to the authors for 1987 showed an expense ratio of 60 percent. Non-lawyer salaries alone were taking 30 percent of every fee dollar. Some firms of that size can operate on a 38 percent total expense ratio!
But the lawyers of that firm averaged income of $175,000 each in 1987, a figure far above normal. The firm used paralegal assistants and modern techniques to improve the productivity of its lawyers rather than hiring more lawyers. Such innovations change overhead ratios from the "norms" quoted in some quarters, but the dollar rewards of such organization speak for themselves.
In calculating the percentage of gross receipts spent on overhead, the compensation of all lawyers is normally excluded. That is, all payments to lawyers are treated as part of "profit." Unless this is done, a firm will be unable to compare its own year-to-year overhead ratio. Here's why:
Want to continue reading ?
Become a subscriber to LawCrossing's Job Seeker articles.
Once you become a subscriber you will have unlimited access to all of LawCrossing Job Seeker's articles.
There is absolutely no cost!
Already a member? Login
LawCrossing has received tens of thousands of attorneys
jobs and has been the leading legal job board in the United States for almost two decades. LawCrossing helps attorneys dramatically improve their careers by locating every legal job opening in the market. Unlike other job sites, LawCrossing consolidates every job in the legal market and posts jobs regardless of whether or not an employer is paying. LawCrossing takes your legal career seriously and understands the legal profession. For more information, please visit www.LawCrossing.com.
I like the volume of jobs on LawCrossing. It is a good site to refer to anyone concerned with the legal profession.
LawCrossing Fact #64: By viewing LawCrossing’s testimonial page, users will see how easy it is to find their dream jobs!