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I have been a member of my firm comp committee for 18 years. Everyone always wants a formula but there are objective and subjective issues to be balanced. In a good year fir the firm it is easier to pay everyone in a bad year all share the pain. The closest to a formula is 75/25 to acknowledge an off the desk dollar is worth more than a referral to others but both have a weight. You $450k is a good number for a medium size (200 attorney) but not big enough for Big Law. Key facts are profitability of the $2.3mm; leveraging to others and whether other partners played key roles and whether you are an equity partner. If profitable work, without significant other partner participation and associates work the file who are profitable and you are equity I would estimate - $2.3mm x 25% (some value to leverage dollars but you have to pay the attorney working the file do it can’t be 100%) = $575k plus 75% (working and collecting off your desk has value and should weight higher than referral to others) x $450k = $337,500 LESS overhead of $225k-$350k (Big Law on high end medium law on low end) $687-$587k. If not equity $625k-$500k. It will also be adjusted for bracketing for those near you depend on your stage in the partnership (go up the comp scale slower than a partner wants and in exchange later in life down the comp scale slower than the firm wants). That has you at $700k - $450k depending on stage in partnership and whether you have been profitable in the past. Finally the base adjustment will reflect expectations of future pay and go up if this will be the new normal and down if this is a one shot.
Your off the desk should have room to increase. Run the above formula and adjustments with your $450k at $700k.
Overhead is the most controversial. We simply divide overhead items by working attorney FTE. As a committee we understand some partners consume more overhead than others and some are in mor expensive offices but trying to make an adjustment isn’t worth the fight. I have been active with recruiting others and find a sole practitioner has around $175k and Big Law can be $400k or more. I used a range of $225k-$350k in the example to be conservative. If the person is at a high overhead firm and only collecting $425k off the desk the person will not be there long. The original writer makes the guesstimate difficult by having relatively low “off the desk” “working attorney” number of $425k. That’s probably the Mendoza line in a medium size firm.
This depends on rates, leverage, the pay of the people who did the work, and whether this was a one-off good year because of a lawsuit. That said, $2.4 m is a lot of money. You should get at least $500k. But why are your working attorney numbers so low?
Not saying what it SHOULD be, but at my Am Law 100, your comp WOULD probably be $375-$600k, depending on whether you are equity or fixed income. Also dependent on all the factors mentioned above, plus whether this was a one time thing or a pattern of collections over a period of years.
But I’m very interested in other input.
$625K to $650K, assuming a profitable practice
Havoc?
This is a helpful discussion probably for many here.
I’m in a boutique (50) and on the executive committee - our EC makes the initial comp share recommendations which are then considered by all equity shareholders for input (and the usual arguments). We are not a formula firm and consider a number of subjective factors along with originations, billed and collected, working atty (not given much consideration in my firm), and hours billed. At my firm the 2 Mil plus in the OP likely would result in $700-750. We’ve have partners making around $450k on a 750-800K book. That doesn’t work for BigLaw but I think is fairly in line with a profitable small to midsize boutique.
I’m interested in feedback in how other firms weigh or consider subjective factors. Ours include, among others, work devoted to firm committees, speaking engagements, administrative work, business dev benefiting the firm - other shareholders, mentoring of associates, etc.
How much overhead does your firm have?
What did the other partners do? What did the other profit centers do? How much of your origination did you share versus what you billed?
And what size firm / how many equity partners
Many variables as others have noted, but at my mid-sized Midwest firm, you’d probably make around $500k
I would love him to explain why revenues on his own time is so low.