How is Law Firm Profitability Measured?
PART II - Cost Allocation
In professional services industries, such as legal, the revenue side of the profitability equation is usually easy enough – multiply billable hours for the practice, office, employee etc. by the applicable billable hour rate to determine revenue. This can be measured by fees worked, fees billed, or fees collected [ See Part I for more details ]. But, how do you allocate costs to a practice, office, or employee to determine if they are profitable?
An important part of calculating profitability is determining how to allocate organizational expenses to fee earners and which ...