Question: What's a reasonable target for Chargeable hours per day for an Employed Lawyer? (Para-Legal, Clerk, Secretary etc). Answer: Don't fall into the simple trap of generalising...it can cost your firm hundreds of thousands of dollars per year in lost profit. Agree with each individual what it is that you are paying them for …set a WorkPlan™…see Practice Materials page on this site… Step 1…. How many hours do you and the employee agree are to be invested on average per day after allowing for private time and other breaks…and for how many weeks per year. In NSW for example a typical full-time employee will work around 230 days per year after allowing for 20 days Annual Leave. Do not budget for Sick Leave. Where Annual Leave has accrued beyond 20 days and will be taken in the planning period, allow for the extra days above 20 by reducing the weeks from 46. Step 2…Given the Employee's skills and experience and your Business Plan, what Firm Time roles do you want each employee to be taking? How much time are you prepared to budget? Principles…typically a very green employee will need more of each day for training and research and may often be at a loose end unless you manage the resource well. Mid-range employees are not so involved in training and management and marketing…they can often spend less than 2 hours per average day in these areas in total. They must record accurately what they are doing and report on it to you monthly. Entries on a timesheet such as "Marketing" are next to useless. You need detail of tasks undertaken in pursuance of a Business Development Plan and you want the individual summarising his/her activity to you at month end so you can see whether continued use of the resource in this way is likely to be effective. Similarly for precedents and training other staff. Step 3…. After deducting agreed planned Firm Time from the original total agreed input you are left with a target for Client Time which will vary team member by team member…this is a very good thing! Step 4…It's now up to you to ensure that everyone in the firm has at least enough Client work to do on average every day to hit their Client Time targets and produce enough raw Work in Progress targets. Set up systems for monitoring workloads closely, for allocating work, for mentoring and for formal feedback to each team member. Set up your Business Development Plan properly so there is continuous activity likely to generate enough leads for you to convert into the files you need based in the plan. So…how much Client Time can you expect from anyone on average?…it depends!! Question: What percentage of turnover should we be aiming for as profit? Answer: The percentage varies firm to firm depending on your structure, state of development and business strategy. The "Bottom Line"…what really matters is whether the per partner return for effort and investment is satisfactory to you…that's the only really relevant measure. Here are a few pointers to help you judge for yourself… Add up… i) Each partner's reasonable "Notional Salary" given the effectiveness and scope of the effort they are expected to put in across all agreed areas of endeavour in the practice…in Client Time and Firm Time…managing Partners will almost always derive a higher Notional salary for the extra effort and overall responsibility. ii) An allowance for superannuation…8% absolute minimum at present… iii) A level of interest return on partner's share of the capital invested in the practice that commercially reflects the level of risk…25% to 40% per annum. iv) A director's fee for each partner… v) If there's anything left per partner it's your only true commercial profit…some might call this "Super-profit" Think about these two examples… Example One… A three-partner firm turning over $3,000,000 with a "profit" of 33%… Each partner's total return is $330,000…broken down as in (i) to (iv) above… i) Notional Salary say minimum AUD $150,000 ii) Super say $12,000 iii) Interest say $125,000 @ 25% iv) Director's fee say $25,000 v) True profit is just $18000 or 0.6% of turnover per partner…1.8% for the firm Example two… A Sole Practitioner turning over $1,500,000 with just 26% apparent "profit"… Total return $390,000… i) Notional Salary say $135,000 ii) Super say $10,000 iii) Interest on similar capital $125,000 (NB Per partner capital may be higher in a strong sole practice). iv) Director's Fee $40,000 v) True Profit $80,000 or 5.33% of turnover is many times the true profit of the partners in Example One. Note that we have assumed equal Notional Salaries in Example One…that need not be the case. The amount you push into Super is an issue for you…if you 'divert' it from True Profits don't forget to add it back for planning purposes