To calculate a firm’s profitability Texas Lawyer used the profitability index, a mathematical formula. The formula, developed by our affiliate The American Lawyer, is:
Profitability =
Profits Per Partner /
Revenue Per Lawyer
The formula takes some of the variables—although not all—out of gross revenue, net profits, leverage or even profit-margin comparisons. It shows whether the equity partners in a particular firm are taking home more or less than the average revenue their respective lawyers are bringing into the firm.
