Are We Approaching a Profitability Plateau?

As we turn the calendar to 2007, law firm leaders will once again be able to tell their partners that their firm hit ' or exceeded ' budget and that their income will increase. That's the good news. <br>The bad news is that, as firms have grown more profitable and pushed harder on the drivers of their firms' economics, it is becoming difficult to identify ways to ensure that the double-digit increases in profitability will continue. After all, the economic model of law firms has only a handful of levers (rates, realization, leverage, utilization, expenses). Once firms pull as hard as possible on each lever, there is not much more they can do. For law firm leaders, managing the expectations of their partners will become a more difficult challenge, particularly since a good portion of those partners have come to expect double-digit increases in profitability each year.

21 minute read November 29, 2006 at 01:27 PM
By
William G. Johnston and Kristin K. Stark
Are We Approaching a Profitability Plateau?

As 2006 comes to a close, it is clear that most law firms are performing very well financially. Throughout the year, firms of all sizes have enjoyed solid productivity and a healthy pipeline of fee inventory.

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