Adopting our assumption with respect to statistics published in the latest BRW, Australia’s most profitable partnerships are:
- Griffith Hack [WTF - who are these guys?]
- Mallesons Stephen Jaques
- Freehills
- Gilbert + Tobin
- Allen & Overy
- Blake Dawson
- Clayton Utz
- Allens Arthur Robinson
- Arnold Bloch Leibler
- Corrs Chambers Westgarth
Strewth! How much do they make, you ask?
Applying a standard profit margin of 45% across the top-ten (the AFR applies estimated margins of a similar size when calculating per-partner profit, on an individuallised basis) we can get an indictation of what equity partners earned on average in FY 2010/2011:
- Griffith Hack: $1,287,931.04
- Mallesons Stephen Jaques: $1,227,499.98
- Freehills: $1,167,258.87
- Gilbert + Tobin: $1,153,636.29
- Allen & Overy: $1,071,428.56
- Blake Dawson: $994,186.04
- Clayton Utz: $986,453.20
- Allens Arthur Robinson: $985,135.13
- Arnold Bloch Leibler: $909,698.26
- Corrs Chambers Westgarth: $893,976.36
A notable absentee from the top-ten is Australia’s largest firm by revenue, Minter Ellison. The results are, of course, to be used as a guide only. For example, it is a notorious fact that Mallesons are tighter with staff than, for example, Freehills. This much, at least, is made plain in the current BRW, where it is asserted that Mallesons had per-partner income of $1,300,000.00 last financial year, meaning staff are being screwed its profit margin rises above our 45% estimate.
Additionally, these equity draws are by no means reflective of what full equity partners earned last year. Entry-level partners among these firms are likely to have pulled little more than $400,000, while second and third year partners might not earn much more than $500,000. Applying those figures across the partnerships identifies that senior partners earn well in excess of the figures above.
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It may not be entirely legitimate to include Griffith Hack in that table. They’re not exactly a small outfit, with a quick look at their site revealing 31 principals. But because it’s an IP/patent firm, the majority of those (all but 10) appear to be non-lawyers.
But you’d be surprised at the stonking profits some small specialist outfits make; above those even of the figures quoted above. And they will often pay their staff stonking salaries to much. But given the size of the firms, those figures are not usually published.
The AFR published a list of partner incomes today, together with equity bands and salary partner shares.
To say that all of the top 10 have the same GP margin may be a bold assumption – not to say that the AFR’s numbers are correct (and I’m not sure where they get them from), but the AFR generally applies a different GP margin to each of the firms – even a percentage point or two of variance in GP makes for a large difference in profit per partner.
Firm Spy,
Whilst most of the focus of this site is on the Legal Profession, how about something for the Accountants out there.
Accounting firm profitability is a real black box – law firms are outstandingly transparent with revenue, earnings and equity details. No such information appears to be available for Accounting firms… can this be rectified ?
What a lot of people dont realise is how lucrative small boutique firms can be. We left the big end of town to start out on our own a little while ago. Without overheads (such as HR people, marketing team and big office rent), no office politics and less admin (partner meetings, BD meetings, etc etc etc), we are able to pay our staff 20% more, work less and still pulling in profits commensurate with the big boys.
new partners only make around $400k?? thats horrible!
This is inconsistent with the feature in today’s Legal Affairs section. Verification much?
@ Ex Top Tier – very true. In WA, there is at least a dozen boutique 2 to 4 partner firms, with their partner earnings being on par with top tiers.
@Ex Top Tier – It sounds like you work at Bransgroves Lawyers.
@ Six Minutes
In WA, there are also lots of truck drivers whose earnings are on par with the top tiers.
Why do people believe this drivel? The vast majority of these figures are estimates. Most firms do not reveal revenue, margin or total profit. The gaping differences between the BRW and AFR estimates demonstrate that they are purely speculating and nothing more. The numbers they publish are there to sell papers/magazines and cannot, by virtue of the huge spread in estimates, represent an accurate picture of law firm profitability. Placing any value whatsoever on these reports is just plain silly. With respect, all FS has done here is *extrapolate* from BRW’s and AFR’s *extrapolations* which they based on *estimates*, the accuracy and methodology of which are *unknown*. So to paraphrase Blackadder, you are telling us that one law firm’s profits, which you cannot verify, are slightly higher than another law firm’s profits, which you cannot verify. How extraordinarily enlightening.
@ Anon
Contrary to what you say, there aren’t glaring differences in the estimates contained in the AFR & BRW. Both publications are Fairfax so it should come as no surprise that there is the editorial consistency you would have found if you actually read both publications. Revenue per partner is absolutely uncontroversial: simply divide revenue by the number of partners. Our guess is that law firms would neither overstate nor understate revenue to the BRW because people at the ATO might take issue with official receipts. We’re speculating, but we doubt Australia’s most prestigious law firms would expose themselves to protracted and expensive audits just to appear bigger, or smaller, in the BRW.
The singular matter of speculation, which you correctly touch on and which we concede in the post, is the profit margin. We used a standard figure of 45%, which is around the mark we see the AFR use.
We think people believe these figures because they are generally across Australian legal affairs, not Blackadder.
I’m pretty sure that the major law firms don’t reveal anything to either BRW or AFR. Therefore, exposure to tax issues is a non-problem. Also, if they don’t reveal figures (which the AFR and BRW admit) how can it be any more than a guess?
If there is editorial consistency between publications, why are there diffenences at all? I don’t get it.
I really can’t see these figures being right, or even in the ballpark.
The market doesn’t operate as if they’re right (eg, poaching, partner moves etc) and, also, many of the firms listed at top have almost 100% equity, which would make these figures harder to achieve and maintain.
Freehills and G+T up the list, Corrs way up the list, Blakes and Allens down, I think.
Well no surprise there that Mallies is the stingiest of the lot. Our secs, support staff and some of our lawyers got pay rises that were reviewed up to next to nothing. Well guess what? Money talks and bullshit walks. See ya!
Maybe I’m a novice but why is this such a mystery. There are thousands of current and former top tier partners out there that have the inside word, not to mention their accountants, etc. Surely someone’s spilling the beans on what actual drawings are? Even on an anonymous basis.
Its not a surprise that Griffith Hack would be up there given the lucrative nature of “hard” IP work. However, as mentioned above, it would appear that the figures are taking into account the patent and TM attorney partners, most of which are not practising in the capacity of a laywer.
raise your hands if you know of a mid tier firm in sydney paying partners under $100K a year.. but their equity partners are lapping it up??
Anon – Bransgroves for sure!
Of course Clutz partners are taking home the $$$, they are profiting immensely from the o/t they don’t pay their staff.
Wow if Griffith Hack makes that much profit and beat all the top tiers, you should investigate another IP firm called Spruson & Ferguson (Griffith Hack is only #3). They are much bigger than Griffith Hack in fact they’re #1 among IP firms in Australia. But their partners are the greediest in the world paying their support staff/lawyers peanuts while they buy yachts & multiple properties everywhere.