Four Reasons BigLaw is a Bad Bet
- The average earnings for a BigLaw partner in 2011 was $1.4 million dollars (average AmLaw 100 P.P.P.)
- The average billable hour per year required at a BigLaw firm now ranges from about 1900 hours per year to 2400 hours per year (up from the 1300 hours per year the ABA said would be reasonably feasible)
- The average billable rate for a BigLaw attorney is at least $540 per hour and an increasing number of partners now bill at over a $1,000 per hour!
- BigLaw overhead is a staggering $200,000 (and approaching $300K at some firms) per associate per year (this does NOT include salary)
The problem for clients isn’t how much the partners are making, but how they are making it. A recent New York Times article noted:
The problem, many lawyers say, is “P.P.P.” P.P.P. stands for profit per partner. It has become the ultimate metric for measuring success among law firms. When American Lawyer magazine began publishing a ranking based on profit per partner in the early 1980’s, it revolutionized the industry, but it also arguably led to a dangerous race among firms that left clients as a secondary priority.
In other words, the interests of law firms went from serving their clients to serving themselves. The mad rush for higher P.P.P. has led to an ever-increasing need to raise hourly rates and/or increase minimum billable hour quotas. As I have discussed elsewhere, these high minimum billable hour quotas are unsustainable and result in massive bill padding. To further exacerbate the problem, the firms need to cover their shockingly high overhead – and guess who pays for that – yep, the client.
Smart clients should have been in the lifeboat a long time ago, because the BigLaw luxury liner is taking on water fast. Even a cursory examination of the above “house of horrors” reveal that a company would be better served by bringing a skilled in-house attorney onboard (for less than the cost of overhead of a BigLaw associate) and get a full year’s worth of work from them, at a fraction of the cost of a BigLaw associate. Or better yet, bring on an Axiom attorney (or two) for a legal project and avoid incurring your own overhead. There are a myriad of options out there, just make sure you get far enough away from that sinking ship before you get sucked under with it.