Key Metric: The Current Law Firm Billing Rates by Practice Area

by | Oct 27, 2015

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Billing rates in some practice areas are growing faster than others, according to the most recent CounselLink® Enterprise Legal Management Trends report, published last week.

The latest report – a mid-year update based on data ending June 30, 2015 – identified “IP-Patent” and “Regulatory and Compliance” as two practice areas where billing rates have risen. As the full report says, these areas “show median partner rate growth above 2.9% during both the past year and over the previous three-year period.”

There are 10 other practice areas included and the “Whisper Chart” nearby presents all 12 blended hourly rate for matters by practice area the team tracks.  The blended rate metric is the first of six key metrics the presented in the ELM Trends report which is published twice each year.

Why Blended Rates are Important

According to the report:

“Although individual lawyer rates are the focus of considerable industry attention, it is equally, or arguably more, important, to look at the bigger picture – the blended average rates that result when a mix of different timekeepers works on matters. The chart shows that the median blended hourly rate is highest for Mergers and Acquisitions, where the most expensive firms are more often involved with a great amount of partner engagement.”

Last a similar analysis report found law firm M&A billings nearly doubled.

Interpreting the Whisper Chart

The chart, while incredibly useful and derived from $18 billion in legal invoices, is complex, so here is how to interpret the chart:

“The chart captures median rates for three different groups of timekeepers (partners, associates and paralegals) and the range of the blended average hourly rate across multiple matter types. As a guide to interpreting the output, consider IP -Trademark compared to Corporate, General, Tax. These two categories have somewhat similar average hourly partner rates – $413 and $425, respectively – but IP -Trademark work requires significantly less partner time. The result is a noticeably lower blended median rate for IP – Trademark work ($300) versus the same rate for Corporate, General, Tax ($335).”

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Volatility of Billing Rates

The report also includes a “volatility index” (shown nearby) which is “a calculated marker indicating the variability encountered in blended matter rates.”  For example, comparing “IP-Trademark” to “Insurance” shows:

“the spread between the 25th and 75th percentiles of blended hourly rates for IP – Trademark work is broader than that for Insurance. On a 10-point scale, IP – Trademark has a Volatility Index of 6, while Insurance has an Index of 2, indicating that the mix of timekeepers and rates paid on these matters varies more significantly than the mix for Insurance. A high volatility index could also be an indicator of a wide variety of matter types being represented in this category.”

Complimentary ELM Resources

There are a variety of complimentary resources available for further examination.  These include:

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