Looking for low legal rates in a big city? Philadelphia is the place to go, according to a recent report.
Among the 10 largest metropolitan areas, the Philadelphia region had the lowest average billing rate for lawyers, at $245, according to the recently released 2017 Legal Trends Report, from cloud-based practice management platform Clio. The highest average rate, of course, was found in the New York metro area, at $344.
But as a state, Pennsylvania’s lawyer rates were actually higher than Philadelphia’s, at $257. The rate for nonlawyer legal work was $171 in Pennsylvania, making the average law firm hourly rate $243.
Pennsylvania as a state had the 11th highest average lawyer billing rate in the country. The states with higher rates include New York, California and Maryland, as well as Washington, D.C. When ranked by real hourly rates, which took cost of living in each state into account, Pennsylvania came in 10th, still lower than New York and California, but higher than Maryland or Washington, D.C.
“Being situated in an urban area doesn’t necessarily mean being able to charge more” in Pennsylvania, said George Psiharis, of Clio, who worked on the report. “One way or another there is price competition in the Philadelphia metro market.”
Still, law firms generally billed at higher rates in the United States if they worked in an urban area, the report said. Urban lawyers made 25 percent more than their rural counterparts, and urban nonlawyers made 14 percent more than other nonlawyers.
Rates generally grew more in urban areas as well. Urban lawyers raised rates by $31 from 2012 to 2016 on average, compared to $17 for rural lawyers. Nonlawyers in urban areas saw their rates increase by $9, versus just $1 in rural areas.
Rates aside, Pennsylvania was in the middle of the pack when it came to how lawyers used and billed for their time.
Pennsylvania had an average utilization rate—the number of billable hours divided by the full work day—of 30 percent among lawyers and 24 percent among nonlawyers, compared to an average of 29 percent across all firms.
Pennsylvania’s collection rate was 88 percent, slightly above the U.S. average of 86 percent; and realization in Pennsylvania—a rate that measures the percentage of billable hours that are invoiced—was at 84 percent, also slightly above the national average of 82 percent.
Applying the national averages to an eight-hour work day, the report estimated that lawyers only did 2.3 hours of billable work each day, and only collected on 1.6 hours of that time.
Psiharis said the average utilization rate was the biggest surprise in compiling the data, showing “a big opportunity for improvement.” The two biggest reasons for low utilization, he said, are law firms spending too much time on non-billable tasks, or getting too little billable legal work from clients. The best way to combat that, he said, is using technology to respond efficiently to client inquiries.
Clio compiled its Legal Trends Report using data from more than 60,000 users of its platform, as well as surveys with nearly 3,000 legal professionals and 2,000 legal services consumers or potential consumers.
Lizzy McLellan writes about the Pennsylvania legal community and the business of law at firms of all sizes. Contact her at firstname.lastname@example.org. On Twitter: @LizzyMcLellTLI.