by puppylaw » Mon Oct 01, 2012 11:29 pm, Post AFA’s fuel additional growth, until someone realizes they are depressing realization metrics. PPP is backward-looking. After deducting a notional salary and interest on capital, equity partners generated a median “super profit” of £55,941 per partner last year – up 6.7 per cent from £52,436 in 2015.Overall profit margins hit 24.2 per cent last year compared to 22.8 per cent the previous year. As a proportion of fee income, non-salary overheads dropped slightly, to 31.5 per cent last year from 32.3 per cent in 2015. Everyone will work harder, and everyone will make more money, right? They are based on data provided by law firms as to total revenue and total expense, which data may or may not be reliable, depending on firm. Profitability at UK law firms jumped to a seven-year high last year, driven by robust fee income growth coupled with tight control of overheads. The figures follow on the back of the RBS report which found that 2016 was a good year for law firms with the financial performance of SME sized legal firms growing by five per cent. This time we are going to have a look at the other supposed great barometer of the worth and prospects of a firm, the profits per equity partner or ‘PEP’ as it is generally known in the business. An over-emphasis on boosting PPP today steals from the health and stability of the law firm in the future.

Used in the proper context, PPP holds many of the keys to financial success. Net profits generated by equity partners rose by 8.5 per cent to an average of £135,979 in 2016, compared with £125,340 in 2015. London EC2A 4NE Even worse, in a misguided effort to maximize profit per partner, some firms: An overemphasis on this year’s PPP sacrifices profitability in the future. Because if one associate quits, the cost of hiring her replacement and lost productivity cost each partner over $80k in compensation over the next five years. Net profits generated by equity partners rose by 8.5 per cent to an average of £135,979 in 2016, compared with £125,340 in 2015. If you needed a quick method to assess the financial health of 100 law firms, using PPP partially removes size from your analysis and will bring you closer to identifying firms that are doing well, and those that are not. Firms are looking to maximise efficient use of space that ranges from some law firms fitting more lawyers into the same floor space to more actively sublet excess space. Management reeks of passivity. So when people tell me they’re going to manage something (or even worse, manage-through something), I immediately try and discern whether they’re setting themselves up for failure. Let’s assume for a moment that the firm chooses to maximize profits per partner. news@globallegalpost.com, The Global Legal Post If you focus too much on maximizing your income today, you will earn less in the future. Continue to place too much focus on near-term productivity every few years, and each partner is throwing away compensation that quickly adds up to seven-figures.

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