U.S. lawyers are still spending too little of their workday on billable hours, a year after an eye-opening report found lawyers devoted only 29 percent — 2.3 hours — of each eight-hour workday to billable hours.
This year’s Legal Trends Report, prepared by Clio, a Canadian company that provides cloud-based practice management for firms, found that the average utilization rate improved only incrementally to 30 percent, which is 2.4 hours of billable hours each workday.
Additionally, the third annual Legal Trends Report, made public on Thursday, finds that lawyers invoice clients for only 1.9 hours accomplished during an eight-hour workday and collect only 1.6 hours of that time.
That’s a lot of time not spent on billable hours.
Instead of completing billable hours during the workday, the lawyers spend their time on billing and financials; marketing and business development; and firm organization and administration.
“The fact that lawyers miss out on nearly 5.6 hours of billable work each day should be a wake-up call for why efficiency is so important to law firms — it’s a critical leverage point for increasing revenues,” Clio wrote in the report.
A large majority, 84 percent, of legal professionals surveyed for the report said they equate success with increasing firm revenue. But George Psiharis, chief operating officer for Clio, said it is surprising that few of the lawyers and other legal professionals consider factors that can increase revenue — growing a client base and billing more hours — as important factors in a firm’s success. Only 34 percent of the legal professionals said growing the firm’s client base is a key route to success, and only 23 percent said that billing more hours would make their firm more successful.
In contrast, 80 percent of lawyers said improving efficiency of firm operations is an important factor, and 77 percent said hiring more staff would also help the firm be successful.
“That was a big surprise for us. The top two things you think about doing for driving more revenue were at the bottom of the list,” Psiharis said.
However, increasing revenue by producing more billable hours, according to the report, is not as simple as working more than eight hours a day. Clio reports that the average full-time lawyer plans to work 46.8 hours a week, but actually works 49.6 hours a week. That adds up to an extra 3.5 weeks of unplanned work each year.
Three-quarters of lawyers report that they work outside of regular business hours, and 39 percent said that negatively affects their personal life.
The report is based on data collected from nearly 70,000 legal professionals that are Clio clients, a survey of 1,968 legal professionals, including Clio users and non-users, and a survey of 1,336 consumers. Psiharis said most of the company’s clients work at firms ranging from solos to middle-market firms of about 200 lawyers.
The report also found that billing rates at U.S. firms hit an average of $245 an hour as of February 2018, a level that keeps pace with the rise in the cost of living from 2010 through February. Billing rates for nonlawyers, however, have changed little since 2011.
Some practice areas are more profitable than others, because of higher realization and collection rates. For instance, intellectual property lawyers charge an average of $327 an hour and collect $258, while lawyers who represent juvenile court clients bill an average of $87 an hour and only collect $60.
The report shows these average billing rates for lawyers in 10 large metropolitan markets: $368/hour in New York; $346 in Los Angeles; $327 in Washington, D.C.; $312 in Chicago; $305 in Atlanta; $302 in Dallas; $297 in Miami; $288 in Boston; $287 in Houston; and $269 in Philadelphia.