#89: How BigLaw Measures Profitability and What It Means for Your Career

Profitability is a word that makes many lawyers cringe. We know firms measure it, but the methods and metrics often feel murky—or worse, toxic to firm culture. Still, ignoring profitability is not an option if you want to succeed and thrive in BigLaw. In this episode, I break down what profitability really means inside large firms, why it's far more than just gross billings, and how to take control of the numbers that impact your compensation, partnership prospects, and long-term career. 

From cost structures and volume to realization and collections, I share how firms evaluate lawyers and practices, and the concrete steps you can take to ensure you're seen as a profitable and valuable member of your firm.

At a Glance:
00:00 Why profitability is uncomfortable for many lawyers but unavoidable in firm evaluations
01:20 Why profitability metrics can feel toxic and how firms define them in different ways
02:39 Revenue versus profitability—why $5 million billed doesn't mean $5 million in profit
03:59 Partner cost per revenue dollar and how staffing models impact profitability
05:10 High-volume, lower-margin practices versus high-margin, resource-intensive matters
07:11 Comparing a $15 million practice with 15% margin to an $8 million practice with 30% margin
08:12 Why collections matter more than billings if the firm isn't getting paid
08:41 Understanding your standard rate, average billed rate, and why the gap matters
10:06 Realization rate explained with examples and what your firm expects from you
12:38 Collections as the true test of profitability and what firms conclude about lawyers who can't collect
14:18 The risks of unreliable clients, poor billing practices, or weak client control
15:28 How cost allocations and overhead factor into your profitability picture
16:22 Using dashboards, financial analysts, and legal operations pros to understand your data
17:13 Asking the right questions of CFOs and practice leaders to align with benchmarks
17:36 Why profitability is multi-dimensional and how to shift the conversation from toxic to strategic

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Show notes: https://www.lauraterrell.com/podcast