The firm told us that it costs them $140k to employ an associate and we only become profitable after we make them our salary plus $140k. Is this true?

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I’ve always heard you need to bill 3x your salary (1/3 for salary, 1/3 for overhead, 1/3 for profit).

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I think this is the general way firms look at it, although I don’t know what the real overhead number is these days

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Regardless of whether it’s true it is broke ass energy.

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That’s weird they told you that. Just tell associates what their hour requirements are and leave it that that. I’m not sure what that information does to help you.

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If I make 2.5x my salary I get a percentage of that as my bonus.

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I’m not a partner obviously but based on the 3x salary rule that sounds pretty reasonable.

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It depends on so many things. Where are you located? Do you have physical offices, staff, other overhead? The old rule was 3x in a big metro. You, by definition, are profitable if you earn more than you cost, so salary, plus your UI taxes, Bar fees, malpractice insurance, fees for your share of office space, staff, etc. Your added expense could be as low as 20k over your salary. Larger firms usually shoot for 2.5x - 3x to make up for deadweight lawyers / partners with guaranteed contracts, staff, overly fancy physical plant, and partners who blow giant biz dev “expenses”.

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This. My prior firm would try to say 3x but also leased luxury cars for the partners, rented the top floors of a super expensive building, had multiple sets of NFL/MLB box seats, etc. So yeah maybe in that example where I’m pressured to bill a ton of hours to pay for perks that I don’t get to enjoy. There were also a few partners who I’m pretty sure didn’t do anything.

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This sounds reasonable to me based on discussions I’ve heard about overhead per associate.

Yeah. Agreed with the other posts. 3x is the classical marker

I don’t know the context of your conversation but my prior firm constantly brought up how much we cost them. It was very awkward and all of the associates hated it. It was like the firm expected us to thank them for allowing us to work there

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