How much do lawyers earn? A lot, apparently. According to a recent study, law firm net profit margins were among the highest in the world of commerce, at nearly 20 percent. In contrast, the average net profit margin for private companies is around 7 percent.
But so what? Does knowing this help you in any way?
Unless you are an economist (or the mother of a lawyer) there’s no point in comparing the legal “industry” with any other. You are not the industry.
In the same way, there’s little point in comparing your profit and loss statement with that of any other lawyer. True, you may learn that you are spending too much on rent or employees or advertising, relative to your gross revenue, and maybe you could make some adjustments. But what really counts isn’t how much you spend running your practice, it’s how much you take home.
If your net margins are “only” five percent but you take home millions, who cares that you spent a fortune on advertising or payroll?
On the other hand, if your net income is one-third of revenue, much higher than the average, but your gross is only $150,000, you don’t have much to brag about.
I’m not suggesting that you pay no attention to the cost of overhead. In fact, I’m a big believer in keeping fixed costs as low as possible. But, your number one priority isn’t low overhead, it’s net profit.
How much did you take in? How much did you spend? How much was left?
Don’t forget to subtract the value of your services before you calculate your net. If it would cost $150,000 to hire an attorney to do what you do and your net income is $150,000, your net profit is zero.
A cynic would say, “you don’t own a practice, you own a job”.
Yeah, but I’ll bet you’re the best boss you’ve ever had.
Get more clients and increase your income. Get this.