When profit margins of big firms are five times those of big companies, why not try to reduce fees a smidgeon?

An excellent article in the ACC Docket, May 2012 at 32, describes the Litigation Investment Model of Reckitt Benckiser. Essentially, the model puts law firms at risk for their profit margin when they represent that company. And, those profits are lucrative.

For the 200 largest law firms in the United States, ALM Media found that their profit margin last year was about 38 percent. (I assume that one-third margin makes up the distributions to partners at year end, over and above their draws.) Law firms make much more than their clients as a percentage of revenue. “In the last reported quarter, the average operating profit, net of tax, for a typical US manufacturing company was 7.2 percent, and among technical and professional services, it was a paltry 6.8 percent.” Thus the heavy-weight firms in the United States are gold-plated; their profit returns are on the order of five times greater than the clients they represent. Hmmmmm……

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