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Accounting and Financial Planning for Law FirmsLJN NewslettersNewsSections

The Vital Signs of Firm Profitability

By Steven A. Davis and Marc Feigelson
October 27, 2011

The ultimate objective of law firm management is to create profit for owners. It is the role of a managing partner, management committee, and CFO to understand the elements that impact profitability, identify and improve weaknesses that soften profitability, and capitalize on opportunities to enhance profitability. As firms grow bigger and more complex, data become more valuable. But gathering data means nothing without useful reporting and disciplined review.

According to the 2011 Client Advisory from Hildebrandt Baker Robbins and Citi Private Bank [See Hildebrandt Baker Robbins, 2011 Client Advisory, January 2011], demand for legal services decreased during the past several years. Firms of all sizes saw an overall decline in demand in 2009 and flat performance at best in 2010. The largest firms took the biggest hit, but seem to be recovering slightly quicker. As one might imagine, bankruptcy and reorganization were the only practice areas seeing an uptick in business.

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