Lawyerist Podcast #557: KPIs for Lawyers: Measuring Your Law Firm's Financial Health with Bernadette Harris
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May 1, 2025 In this engaging discussion, guest Bernadette Harris, a finance coach at Lawyerist Lab, helps law firms decode their financial health. She dives into key performance indicators (KPIs), explaining their crucial role in maximizing profitability. Learn about net profit margins, utilization rates, and realization rates, and how they can enhance productivity. Bernadette also covers the significance of accounts receivable aging and making data-driven decisions to pinpoint profitable services, ensuring lawyers can make informed choices for their firm's future.
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Calculating Net Profit Margin
- Calculate net profit margin by dividing profit by total revenue and multiplying by 100 to get a percentage.
- Use this metric to see how much revenue your law firm actually keeps after expenses.
Healthy Profit Margin Benchmarks
- Aim for a law firm net profit margin between 20-30 percent for health.
- If profit margins are below 15-20% and you don't pay yourself, your numbers likely misrepresent true profitability.
Utilization Rate Targets
- Track utilization rate by dividing billable hours by total available hours to measure productivity.
- Target 70-80% utilization for attorneys to optimize capacity and avoid paying for unused time.
