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Think everyone else is billing more hours than you? You're probably wrong, according to a new report by Clio, the case and practice management software company. Clio's "2016 Legal Trend Report" provides an overview of the legal industry, based on data from its users. It's the sort of analysis that's common for BigLaw firms, but it's one of the first times we've seen it done for solo, small, and medium-sized practices.
The report full of plenty of insights, but perhaps the most notable is this: lawyers don't work as many billable hours as they typically report, they don't charge for all the billable hours they work, and they get paid for even fewer of them.
Lawyers aren't as productive as they often claim, according to the report. In LexisNexis's 2012 "Law Firm Billable Hours Survey Report," for example, attorneys said they worked an average of 8.9 hours a day and billed for 6.9 percent of that. But when Clio looked at the aggregate, anonymized data from Clio's own customers, covering 40,000 users and $60 million in billing, the picture changes. Drastically.
The typical lawyer is logging only 2.2 billable hours per day, according to Clio's report. That's 28 percent of an eight-hour day and about a quarter of what lawyers had self-reported in LexisNexis's "Billable Hours Survey."
Out of those 2.2 hours, attorneys bill for only 1.8 hours on average, 19% less than what they worked. And when it comes time for clients to pay up, lawyers collect on 1.5 hours from that 1.8, or 86 percent of hours billed.
That seems to indicate that lawyers can up their revenue by not just getting more work (as if it was that simple!), but also by leaving less billable time on the table and improving their collections practices.
Clio looked at typical billing rates and found that billing rates are highest pretty much where you'd expect. D.C., New York, Connecticut, and California top the list, at $281 an hour, $279, $277, and $266, respectively. They're lowest in Iowa ($129), West Virginia ($130), Montana ($154), and Maine ($155). The practice areas with the highest billing rates were Bankruptcy ($275), Corporate ($272), and Conveyance ($263), while the lowest were Criminal ($148), Personal Injury ($182), and Insurance ($200).
Looking at highs and lows alone isn't going to give the full picture though. You've got to adjust those numbers based on local cost of living, as anyone who has attempted to buy a house in San Jose or rent an apartment in Manhattan knows.
When you take differences in cost of living into account, things change a bit. Under this calculus, Nevada becomes the top state in terms of "real billable hours," or hours adjusted for costs of living. Connecticut is second, followed by Illinois, then New York. Arkansas makes the list, too, at number five.
So, if you want to get the most out of your billable hours, it might be time to start that bankruptcy practice in Reno. Housing is so cheap in "The Biggest Little City in the World" you won't have to bill more than 2 hours, anyway.
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