Difference Maker: Utilization Rate Separates Growing Law Firms from Shrinking Ones

The 2019 Clio Legal Trends Report (download link here) is a longitudinal study of law firm data across a variety of categories, including internal efficiencies and external relationships with clients.  It’s a fascinating read every year; and, the 2019 version may have been the most compelling.

The 2019 study focused on what the functional difference between growing firms (law firms that grew revenue by over 100% across a 5-year period) and shrinking firms (law firms that lost over 50% of their revenue over a 5-year period) was.  Perhaps surprisingly, the driver for revenue growth was not what you might expect.  It wasn’t pricing.  And, it wasn’t marketing spend.  It wasn’t attorney experience.  And, it wasn’t total case intake.

It was utilization rate.

If you’re not familiar with utilization rate, it represents the amount of total hours you could bill in a day versus what you actually bill.  For example, if you set aside 8 hours to work on any given day, billing for all 8 hours would represent a 100% utilization rate.

Of course, no one does that.  In fact, 29% is the industry average in legal.  Growing firms, however, increase their utilization rate at a higher percentage than other firms, and top out at 33%, 5 percentage points above the industry average.

So, if you ever wanted to know what the secret sauce for law firm growth is, it’s efficiency.

. . .

Need to get more efficient? We can help.

The Wyoming State Bar offers free law practice management consulting services through Red Cave Law Firm Consulting.

To request a consult, visit the Wyoming State Bar’s law practice management page, and start running your law firm like a business.

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