Below is the law firm economic model, revised to compute profits per partner that are attributable to a matter rather than for the firm as a whole:

Profits per partner attributable to a matter

=

Realization rate (actual fees collected ÷ fees if all hours were collected at standard billing rates) x Average standard rate (fees if all hours were collected at standard billing rates ÷ # hours billed) x Leverage (# notional timekeepers ÷ # notional partners) x Margin (actual fees collected - direct and allocable indirect expenses, as a percentage of actual fees collected) x Utilization (# hours billed ÷ # notional timekeepers)

In business terms, these five drivers can be thought of as follows:

· Realization rate, previously discussed, is the percentage of standard billing rates that is actually collected.

· Average standard rate represents the blended hourly rate for the firm that would have been realized if billed hours were collected at standard rates. Average standard rate times realization rate equals the firm’s actual average hourly rate.

· Leverage is the ratio of fee-earners to equity owners – conceptually the associate/partner ratio. Mathematically, Leverage is 1 plus the associate/partner ratio. Numbers of notional timekeepers and notional partners equals that group’s work on the matter (hours times standard billing rates) as a percentage of that group’s total work for the firm, times the total number of people in that group.

· Margin is the traditional profit margin concept – the percentage of revenues that become profit after payment of related expenses.

· Utilization is also sometimes referred to as Productivity. It is the average number of hours billed by each timekeeper on the matter. For a firm that bills by the hour, the most productive timekeepers are those who work the most hours.