Big Law Life #98: Inside Your BigLaw Firm's Different Measures of Profitability - And How They Affect You
In this episode, I take a closer look at a topic that many BigLaw lawyers misunderstand: profitability. Most partners focus on the firm's overall "profits per equity partner" (PEP), but that number tells only part of the story. There are other profitability numbers - internal, often unseen analyses that many attorneys don't focus on but in fact shape how practices and partners are viewed, rewarded, and resourced. I explain how these shadow numbers differ from the publicly announced firm metrics, how factors like leverage, write-offs, and politics distort perceptions of profitability, and why understanding these differences can make a difference to you at your firm. Knowing how your firm evaluates profitability in different ways and how to influence those numbers is a crucial career advantage. At a Glance: 00:00 Introduction to the concept of firm profitability 01:20 Why PEP only tells part of the story and how shadow P&Ls work 02:05 How internal accounting and practice-level metrics shape profitability 03:27 Defining "shadow P&L" and how practice groups interpret performance differently 04:01 How leverage and write-offs impact profitability and risk across practices 07:14 Examples of approaches and how accounting treatments reshape profit 10:55 Why long-term relationship value can be less valued in firmwide numbers 12:18 How firms use both official and shadow P&Ls to evaluate partners and practices 13:30 How politics and perception influence profitability outcomes 15:17 How to challenge assumptions and advocate for your practice's true value 18:14 Final reflection and wrap-up
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Show notes: https://www.lauraterrell.com/podcast