{"id":5149,"date":"2018-09-25T17:17:48","date_gmt":"2018-09-25T21:17:48","guid":{"rendered":"https:\/\/abovethelaw.com\/?p=513734"},"modified":"2018-09-25T17:17:48","modified_gmt":"2018-09-25T21:17:48","slug":"building-the-case-for-innovation-within-the-law-firm","status":"publish","type":"post","link":"https:\/\/abovethelaw.com\/legal-innovation-center\/2018\/09\/25\/building-the-case-for-innovation-within-the-law-firm\/","title":{"rendered":"Building The Case For Innovation Within The Law Firm"},"content":{"rendered":"

\"\"Budget season is nearly upon us, which means that legal professionals across the industry are currently looking hard at their spending, most likely defending existing investments and lobbying for new investments. However, as many of us know, making the case for investment in the firm can be particularly challenging.<\/p>\n

It is difficult to escape the fact that driving profitability in a law firm (or any professional services firm) is intrinsically tied to the tight control and management of overhead expenses. To break down the profit equation, profit can be shown as:<\/p>\n

Revenue[1]<\/a>= Hours Billed and Realized x Average Hourly Rate
\nExpense = Hours Worked x Hourly Cost + Overhead Costs
\nProfit = Revenue – Expense<\/p>\n

[1]<\/a> Ignoring AFAs for the purposes of this discussion.<\/p>\n

It\u2019s a pretty simple concept: as overhead expenses increase, profit drops. And make no mistake, any expense that doesn\u2019t lead directly to billing a client is an overhead expense — including investments in research, tools, technology, and innovation.<\/p>\n

That does not mean that all overhead expenses are bad — but it does mean that those expenses require justification. As an example, let\u2019s assume the following:<\/p>\n