How much of a firm associate's salary is from billing and can be negotiated? Forum

[Anonymous User]

There's that general "rule of thirds" where partners tell you that (up to) a third of your billings goes to salary; a third goes to rent, malpractice insurance, paralegal salary, etc.; and the last third is profit.

Is this true? My boutique firm typically offers entering associates about a fourth of their billing rate x quota. I negotiated hard during the offer stage and got approximately the third, and since then I've gotten raises and bonuses beyond my third.

To give further context, I have gotten steady raises of at least $10k a year (started under $100k but now am above that line), and they seem to value my contribution to the firm. As far as I know, I'm the highest-paid associate there. I'm on track to bill around 85% of my quota, which is good.

My next review is coming up in a few weeks, and I want to know how flexible I can be in negotiating the raise and bonus they'll offer me, if any. Note that our firm works on an "actually billed" system where our efficiency and quota are based on not what we bill, but how much was actually billed to the client after cuts. I don't know anyone who makes quota, but this is a flexible metric and just one factor in evaluating our performance. I think it's just a mechanic to get people to work as hard and efficient as we can.

That said, I imagine the three partners of my boutique firm make a hefty profit from the "billed" system and have wiggle room in the salary department. Given the above, how much of my salary do you think can be negotiated during/after the review?

[4LTsPointingNorth]

You're at a boutique with an idiosyncratic compensation system, so I don't know how much helpful advice you can find here. The "actually billed" system you describe sounds much like a pre-emptive salary negotiation tactic from the partnership at your firm since much of billing realization is dependent on partner discretion resulting from their billing discussions with clients.

If you have had a good year relative to your peer associates, push for something above your baseline 10k a year comp increase. If you know your hours billed, billables realized, and the final profit margin from the firm's perspective after overhead and comp, and if that number is significantly higher than an average that you're aware of, then bring that up and see where it takes you.

[clerk1251]

There's that general "rule of thirds" where partners tell you that (up to) a third of your billings goes to salary; a third goes to rent, malpractice insurance, paralegal salary, etc.; and the last third is profit.

Is this true? My boutique firm typically offers entering associates about a fourth of their billing rate x quota. I negotiated hard during the offer stage and got approximately the third, and since then I've gotten raises and bonuses beyond my third.

To give further context, I have gotten steady raises of at least $10k a year (started under $100k but now am above that line), and they seem to value my contribution to the firm. As far as I know, I'm the highest-paid associate there. I'm on track to bill around 85% of my quota, which is good.

My next review is coming up in a few weeks, and I want to know how flexible I can be in negotiating the raise and bonus they'll offer me, if any. Note that our firm works on an "actually billed" system where our efficiency and quota are based on not what we bill, but how much was actually billed to the client after cuts. I don't know anyone who makes quota, but this is a flexible metric and just one factor in evaluating our performance. I think it's just a mechanic to get people to work as hard and efficient as we can.

That said, I imagine the three partners of my boutique firm make a hefty profit from the "billed" system and have wiggle room in the salary department. Given the above, how much of my salary do you think can be negotiated during/after the review?

You are an associate, and the highest paid one at that. You bill 85% of your quota. You get generous raises. I wouldn't push the envelope. Especially at a small firm, you don't want to rub one of the partners the wrong way and change the dynamic of your relationship there. If you want more money - look to lateral.