Profit First for Lawyers

Profit First for Lawyers


Labor Cost Ratio: Unlocking Law Firm Profitability

August 08, 2024

In this informative and engaging episode, we continue our three-part series on crucial financial reports, focusing on labor cost ratio – a vital metric that RJon Robins identifies as a key factor in building and maintaining million-dollar law firms.


Greg Crabtree, author of ‘Simple Numbers, Straight Talk, Big Profits,’ dispels accounting myths and reveals the simple truth behind labor and profit. By breaking down complex financial concepts, Greg makes them accessible to law firm owners at every stage of their firm’s growth, regardless of current revenue.



“Labor is the only cost that comes to work every day with an attitude. And it’s got some good days and it’s got some bad days. And I’ve got to find a way to get it to perform consistently. That is in its best interest and my best interest. And then we both win.” – Greg Crabtree



Key Takeaways

  1. The role of labor cost ratio in law firm profitability
  2. Understanding the 2:1 ratio of gross margin to labor costs
  3. How to categorize and balance different types of labor in a law firm
  4. The concept of capital heavy, moderate, and light businesses
  5. The importance of proper capitalization and cash reserves
  6. Addressing owner compensation and distributions

Links & Resources Mentioned:

‘Simple Numbers, Straight Talk, Big Profits’ by Greg Crabtree


– Ep 45: Learning “bookkeeper-ese” in Secrets To Bookkeeping That Does Not Suck with Sherri Mansell


– Profit First for Lawyers curated resource page: Labor Cost Ratio worksheet


– Leave us a review on AppleSpotifyAudible or wherever you listen to your favorite podcasts


–  Buy your copy of Profit First for Lawyers


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