Margins matter. As most Am Law 100 firms faced another year of revenue growth that was weak at best, profit margins–the measure of how efficiently a firm converts revenues to profits–became more important than ever. No longer able to count on a swelling tide of revenue to boost earnings, firms must do more with less to increase or even preserve their partners’ profits.
But when it comes to profit margins, Am Law 100 firms are not all the same. Our five-year analysis of the margins of this year’s Am Law 100 firms shows a striking chasm between the highest- and lowest-margin performers. The highest-margin firms in 2010, such as Wachtell, Lipton, Rosen & Katz (63 percent) and Quinn Emanuel Urquhart & Sullivan (62 percent), can rightly claim to be money-making machines. Those firms with the lowest margins, such as Edwards Angell Palmer & Dodge (19 percent) and Squire, Sanders & Dempsey (22 percent), see an outsize portion of their gross revenues disappear into the ether of overhead, discounting, or some other cost of business.
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