The annual ALPMA/Crowe Horwath Financial Performance Benchmarking Survey of New Zealand law firms shows the sector is expecting an average of 5 per cent growth in the next financial year—building on gross profit margins* that currently average nearly 75 per cent.
The 10 best performers average $1,230,938 per partner in revenue, down from $1,308,000 in 2016, while the average revenue generated per partner is $786,997, showing a decrease of 2 per cent from the 2016 survey.
The survey, conducted by the Australasian Legal Practice Management Association (ALPMA) and business advisory and accounting firm Crowe Horwath, benchmarks the financial performance of New Zealand law firms. The first survey was conducted in 2015, making 2017 the third annual survey.
Results from the 2017 New Zealand Survey include:
- Fixed fee billing structure almost doubled from 12 per cent to 23 per cent and hourly rate billing dropped by 8 per cent.
- Earnings before interest and taxes average $356,488 per equity partner, down from $369,000 in 2016.
- The 10 best performers have average earnings of $635,381 per partner ($659,000 per partner in 2016).
- The median work in progress (WIP) and debtor-days lockup is 88 days consisting of:
- WIP days of 34
- debtors days of 54
- The average revenue generated per fee earner is $344,057 compared with $368,206 in 2016.
- The 10 best performers average $1,230,938 per partner in revenue and the bottom 10 average $444,222 per partner.
- Average gross margins* are 75 per cent and average net operating profits* 33 per cent.
*The gross profit margin is the margin after direct costs, predominantly fee earner salaries, have been deducted. Net operating profit is the profit available to partners before interest and taxes are paid.
Open Measures
NZ Survey participants have received an email with the results summary, plus a login to access Open Measures, which enables them to interactively compare their firm's performance against the results from similar law firms using a number of filters including location, practice type and size of firm.
In Open Measures (www.openmeasures.com) any firm can easily assess and review its performance against similar firms across an organisation, over any time period. Visual score cards easily assess, track, rank and evaluate the performance of firms, franchises and divisions within an organisation or branches of a business.
