Why some practice groups are more profitable than others
Here’s a puzzle: two lawyers both bill the same hours at the same rate. Yet one consistently generates far more profit for the firm than the other.
How is that possible?
The answer lies in the simple fact that profit in law firms isn’t evenly distributed. It varies significantly by practice group, matter type, client base, and critically, by how the work is managed and delivered. If you don’t understand these differences, you’re missing one of the key factors shaping both your career and your firm’s financial success.
Beyond hours and rates
Many lawyers assume profitability is straightforward. More hours multiplied by a higher rate equals more profit.
But in reality, those numbers rarely tell the full story. Underneath the surface of billing lies a complex set of factors, discounts, write-downs, delays in collections, staffing costs, and delivery expenses, all of which have a significant impact on profitability.
Some practice groups habitually generate higher margins, while others may burn out resources and stress without producing adequate profit. The nature of the work, how the work is structured, and the client expectations all influence this balance.
The levers that shape profit
Profitability is the result of many levers working together. Consider these key components that law firms must manage carefully:
Price power – The amount clients actually pay, which may be less than the hourly rate due to negotiations and discounts.
Realization – How much of the billed time translates into actual revenue after write-downs and adjustments.
Collections – The timing and percentage of payments received against billed amounts.
Delivery cost – The internal costs for staffing, salaries, overhead, technology, and administrative support.
Leverage – The extent to which lower-cost staff or associates are used in delivering work, preserving partner time for high-value tasks.
Cycle time – Speed at which work is completed and converted into revenue.
Volatility – The frequency and extent to which matters expand beyond the original scope, often without commensurate billing increases.
Repeatability – Whether knowledge and processes can be reused efficiently across matters, reducing overall effort.
These elements form the foundation of what we call the “Matter Economics Canvas,” a framework that helps law firms analyze profitability in depth. Different practice areas interact with these levers in different ways, often reflected in distinct profitability profiles.
Why it matters for your career
Understanding profitability is not a concern just for firm leaders or finance teams. It directly shapes your daily work and future prospects.
Your workload: High-margin work is often staffed differently with more resources, clearer scopes, and often more recognition compared to lower-margin matters that may be more demanding but less profitable.
Your evaluations: Partners and management assess whether your work helps protect or erode firm margins, influencing evaluations, bonuses, and advancement opportunities.
Your career choices: Joining a high-margin practice group could influence your long-term career trajectory far more than simply choosing a group with prestige or personal interest.
Moreover, the slow but steady integration of AI and automation into legal work is beginning to impact many of these levers simultaneously. These technologies can reduce delivery costs, speed cycle times, and improve repeatability, all contributing positively to profitability.
The future of profitability
As law firms adapt to increasingly competitive and price-sensitive markets, a focus on maximizing these levers becomes essential. Selective staffing, efficient project management, dynamic pricing strategies, and technology adoption are no longer optional but critical for sustainable profitability.
Lawyers who understand how their work fits into this economic framework become empowered to contribute more strategically and build resilience against market pressures.
Our why at Legau
At Legau, we recognize that clarity about the business dynamics of law is indispensable for lawyers today. That’s why we created Business of Law 101, an eight-day free email course designed to give legal professionals in-depth insight into how the business side of law really works.
Our mission is clear:
→ Reduce stress by demystifying law firm economics
→ Promote education on financial and operational aspects of legal practice
→ Strengthen legal institutions from within through smarter business practices
If this resonates with you, if you want to understand the forces shaping your work and future in law, this course is a great place to start.