Don't Let Your Rising Billing Rate Push You Out the Door

The first thing I ask is "Do you think your work quality has gone downhill?" Invariably, the answer is "No." Then, I ask whether they have started to develop any of their own clients. Again, the answer is "No." Actually, the answer is more frequently "Clients?! How can I get clients? I'm so busy trying to make my billable hours and doing the work I'm given by so-and-so partner." At this point, I give them my short speech about law firm economics, the dangers of being priced out, and how they should start thinking about transforming themselves from worker-bee associates to value-added associates with rainmaking potential. I'd like to share my short sermon with you.

Basics of Law Firm Economics
Surprisingly, many associates do not fully understand law firm economics. There is a common misconception that as long as they keep doing a good job on the work they are handed from the partners, things will be smooth sailing forever. This may be true in a few circumstances, but it is certainly the exception and hardly the norm.

Here's the deal: Law firm clients want the work to be done for the lowest cost possible, but also want a stellar work product. So let's say Partner X has a client that needs a basic patent application prepared. Partner X could easily prepare the application in 20 hours, but Partner X bills at $475 an hour ($9,500). On the other hand, Associate Y, a second-year, could prepare the application in 30 hours, at the rate of $200 an hour ($6,000), with minimal supervision from the managing partner. Assuming the final work product is the same, a client would certainly rather have an associate prepare the application for approximately $6,000 rather than $9,500. That way, the client is happy with the lower cost, and the partner is happy because (1) the client gets a good deal and (2) the partner is likely getting some type of credit for his client's business, even though the associate did most of the actual work.