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: Law Department Management

Profit margins correlate to lawyers per billion (and revenue per lawyer)

By Rees Morrison

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Consider this hypothesis: lawyers per billion correlates positively with an industry?s average margin of profit. The logic is that high technology and financial services, industries marked by relatively high profit margins, have more lawyers per billion than do commodity industries that run on low margins, like extraction and agricultural products (See my post of Feb. 19, 2009: toss-up between lawyers per unit of revenue and units of revenue per lawyer; Feb. 24, 2009: importance of intangibles in industries drives lawyer ratios; and Feb. 25, 2009: lawyers per billion with 22 references and one metapost.).

Where profit margins are razor thin and high grosses result in modest nets ? think about grocery chains, internal legal talent is at a premium. Where margins are fat due to rapid expansion of an entire market ? think about cell phones, rapid differentiation, protected oligopolies, or advantageous intellectual capital, an investment in internal legal talent pays off more handsomely and companies support more lawyers.

Full post as published by Law Department Management on March 06, 2009 (boomark / email).