Posts Tagged ‘statistics’

Friday, October 18th, 2013

Don’t Mess-Up Or Misunderstand Your MAP Stats

My good friend, Marc Rosenberg, you know the famous Rosenberg Survey guy, has shared some great information on the 10 biggest mistakes partners make in reading and computing MAP statistics.

Here are some bullet points but be sure to follow the link to read much more informative detail about each one.

Over-reliance on partner income percentage as a measure of profitability. – Many partners believe that 33% is the minimum acceptable partner income percentage and they should strive for 40%. If a firm is heavily leveraged, partner income percentages in the 20s and low 30s are perfectly acceptable.

Being content with “average.” – This is one that really bugs me! Don’t celebrate being average.

Average salary data – Salary data is too tied to geographic area for nationwide averages to be very helpful.

Utilization percentage – This metric is total billable hours of a firm divided by the total work hours of the firm, with all personnel included.

Net firm billing rate – This is calculated by taking the total annual net fees of the firm and dividing it by the total firm billable hours.

Average compensation for firm administrators – This is a mis-leading number because of the wide variety of levels of firm administrators. Rosenberg thinks the results were misleading and has discontinued using it.

Treating non-equity partners like “partners.” – Treating non-equity partners the same as equity partners will usually distort the computations. ManIMG_1902y non-equity partners perform like managers.

Computing income per partner. – Don’t ignore the distinction between accrual and cash basis methods of accounting.

Average fees per professional – There is a problem here with definition. What is a professional? It varies by firm. Rosenberg likes to use fees per person.

Computing the average charge hours for any category of personnel, such as partners and professional staff. – There are two main issues. Most firms make the mistake of computing the number of FTE’s by adding up their total work hours and dividing by 2080. The only proper way to compute average annual charge hours for a personnel grouping is to only include personnel who were with the firm for a full year and were full time the entire year.

Order your copy of the 2013 Rosenberg Survey here.

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