Eye-Popping Stats from Clio Legal Trends Report
Tuesday, October 25, 2016

Clio, a cloud-based law firm practice management technology company, released its first Legal Trends Report last week based on data aggregated in the last year from 40,000 active Clio users. And it has some eye-popping information in it.

First, let me say how great it is to have some data-driven information on how solos and small firms practice. Historically, this kind of data has been self-reported by smaller samples of practicing attorneys, which makes the results less reliable because of personal bias. Past surveys and reports may have provided some trend information, but it’s nice to have unbiased data to review.

So, based on its 2015 user data, Clio reported on three critical key performance indicators: utilization rate, realization rate and collection rate. Here’s what they found:

Utilization rate: the average utilization rate was a paltry 28%, meaning that lawyers bill only 2.2 out of 8 hours every day. While this figure does not include lawyers who use flat fee billing, it still indicates that lawyers bill a lot less than is necessary to have a profitable practice.

Realization rate: the average realization rate was 81%, which means that lawyers write off $19 for every $100 billed.

Collection rate: the average collection rate was 86% and while that may sound pretty good, when you look at all three KPI’s together, the picture is pretty bleak:

2.2 of 8 Hours Utilized

1.8 Hours Realized

1.5 Hours Collected

How can you survive on only 1.5 hours/day of billable time? The answer is, you can’t.

It’s no surprise that solos had the lowest utilization rate, at 22%. All those extra hats you’re wearing — the administrative tasks that eat up your available billable time — are costing you plenty. If you don’t have automated systems to help you, this should be a big wake-up call that you need to heed to keep yourself in business.

 

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