A kindling of posts on the fees of law firms and their “burn rate”

We who contemplate management of outside counsel focus hugely on total amounts paid, overlooking the importance and insights of the regularity of spending during a matter’s life. How much a department spends each month on a matter I define as the burn rate.

Burn rate analyses shed light on volatility and indirectly on drivers of costs. When significant events happen in a matter, the burn rate leaves a tell-tale singe (See my post of Aug. 31, 2005: importance of burn rates; Sept. 5, 2005: further on defense costs and amounts at risk; March 20, 2006: burn rate calculations and cycle time; May 20, 2005: burn rate jumps during trial; March 20, 2008: data shared between law departments allows comparison of burn rates; and June 25, 2006: match budgets to burn rates.).

Burn rates also highlight dormancy periods (See my post of April 17, 2007: percentage of dormancy months; Oct. 25, 2007: dormant cases; April 17, 2007: inactive cases; and Aug. 1, 2006: dormancy as a performance metric.).

Burn rates, especially when calculated as a rolling average (See my post of Jan. 6, 2006: rolling averages.), help legal departments budget.

Finally, burn rates provide a basis on which to compare the performance of various law firms on similar matters.