Financial benchmarks show where your law firm is performing well and where profit, productivity or cash may be slipping away. The real value comes from interpreting those figures in the context of your firm and turning them into practical decisions.
Law firm leaders make decisions about people, pricing, productivity and investment every day. But without an objective point of comparison, it can be difficult to know whether a result represents strong performance or an opportunity for improvement.
Drawing on findings from the ALPMA FY2025 New Zealand Financial Performance Benchmarking Report, Elwin Loo, Associate Director at Moore Markhams, has examined the financial and operational measures that matter to law firms.
The report covers 52 New Zealand law firms of different sizes and ownership structures. It provides a useful view of revenue, profitability, staffing, billable hours, overheads and working capital.
Key takeaways
- Firm size alone does not determine profitability.
- Most employed legal roles bill fewer hours than their targets.
- Matching work to the right level can protect billable time.
- Reducing work in progress and debtor days can release cash.
- Benchmarks create greater value when they lead to focused action.
Does a bigger law firm generate more profit?
Larger firms may generate more revenue per equity partner, but that does not necessarily mean they convert revenue into profit more efficiently.
The Moore Markhams benchmarks show profit per equity partner of NZ$562,723 for small firms, NZ$488,068 for medium firms and NZ$649,309 for medium-to-large firms. However, reported profit margins move in the opposite direction, from 37% for small firms to 35% for medium firms and 30% for medium-to-large firms.
Ownership structure adds another perspective. Firms with one to three owners and those with four to six owners reported average profit of NZ$600,000 per equity partner. The average for firms with seven or more owners was NZ$450,000.
This does not make one structure inherently better than another. It shows why comparing revenue alone gives an incomplete picture.
A useful review should ask:
- How much revenue does each equity partner support?
- What proportion of revenue is absorbed by salaries and overheads?
- Is the firm’s ownership structure supporting efficient decisions?
- Are higher costs producing better capacity, service or growth?
Where is productive time being lost?
The benchmarking data identifies a clear gap between targeted and actual billable hours for most employed legal roles.
Across the roles assessed, actual billable time averaged 52.2% of the working day, against a target of 63.9%. Equity partners slightly exceeded their target, while senior associates, solicitors, graduates and legal executives recorded shortfalls.
For senior associates, the estimated annual value of this gap exceeded NZ$101,000 per person. The estimated gaps for solicitors with two to four years’ experience and graduate solicitors each exceeded NZ$61,000.
These figures should prompt questions rather than automatic conclusions. A gap may reflect workflow, delegation, administrative demands, team capacity, pricing or the way performance targets have been set.
What this means for you
If actual hours are below target, increasing pressure on your people may not solve the underlying problem. Start by identifying where time is going, whether work sits at the right level and which processes make it harder to complete billable work.
Is work being completed at the right level?
A well-designed team structure helps people concentrate on work suited to their skills and experience.
The data shows six staff per equity partner in small firms, eight in medium firms and 11 in medium-to-large firms. Moore Markhams’ rule of thumb of 0.5 to 0.7 support staff per author, depending on firm size.
The answer is not simply to add more staff. Law firms need to understand whether partners and senior lawyers are carrying work that could sit elsewhere, and whether authors receive enough support to protect their billable time.
The right structure can support delegation, staff development, client service and more consistent financial performance.
How much cash is tied up in completed work?
Profit and cash flow are different measures. A firm can report a healthy profit while waiting too long to bill completed work or collect payment.
The survey averages were 50 debtor days and 40 work-in-progress days, producing total lock-up of 90 days. Elwin estimates that reducing lock-up by one day equates to approximately NZ$18,041 in cash for the average firm.
Reducing lock-up does not require a firm to win more work. It may begin with clearer engagement terms, timely recording, regular WIP reviews, prompt billing and consistent follow-up.
Why work with Moore Markhams on law firm benchmarking?
A benchmark tells you where your firm sits. It does not, by itself, tell you why the result has occurred or what to change first.
That is where collaboration adds value.
Moore Markhams can work with law firm leaders to interpret performance across connected measures, including:
- revenue and profit per equity partner
- staffing costs and team structure
- billable-hour performance
- overheads and cost allocation
- debtor and WIP days
- profit-sharing and succession considerations.
The purpose is not to chase every industry average. It is to identify the measures that matter to your firm, understand the causes behind them and agree on practical priorities.
This positions Moore Markhams as a collaborative adviser rather than a provider of a one-off report. It also gives the reader a clear reason to engage: to turn broad benchmark data into a focused plan based on their own numbers, structure and ambitions.
What should your law firm do next?
Start with three practical actions:
- Compare your firm’s performance across several measures. Review profitability, productivity, staffing and working capital together.
- Identify the cause behind the largest gaps. Avoid treating an industry average as a target without understanding your firm’s circumstances.
- Prioritise a small number of improvements. Focus on actions with a clear effect on profitability, capacity or cash flow.
If you want to understand how your results compare and where focused changes could make the greatest difference, find your local Moore Markhams expert. Our team can help you interpret the figures, test the assumptions behind them and turn the findings into practical priorities for your firm.
