The costs of running a law firm are not that big when compared to a lawyer’s hourly rate billed to clients. Some costs are directly billed to the client in addition to the hourly rate. Most costs are tax deductible.
Disbursements such as court filing fees, discovery/exam reporter and transcription fees, and expert witness fees are paid on top of a lawyer’s fees. So are specialized legal research program usage fees, long distance telephone calls, postage, delivery charges, photocopying and faxing. The lawyer should break even for all of these.
A lawyer pays his or her staff, but much of this staff work is billed out to clients (clerk work is billed, but secretarial work is not billed), so overall, staff should be break-even or be a profit centre for the lawyer.
Once you take the expenses that are recovered from the client in addition to the lawyer’s hourly fees, such as those set out above, you are left with the lawyer being out of pocket for student debt, partnership buy-in debt, professonal membersip fees, insurance, rent, basic phone and yellowpages, computer and software, some legal research subscriptions that are not already billed to the client, professional development costs, furniture, pens, paper and general office supplies (staplers, stickies, etc.). That’s not much to have to cover, given an hourly rate that is usually three figures per hour.
Also keep in mind that most expenses are tax deductible.
The costs of running a law firm are not that big a deal when compared to a lawyer’s hourly rate. If there were too many lawyers, lawyers would not be able to charge fees that are so far above their costs - that’s just supply and demand. That’s why lawyers tend to have decent lifestyles – upper middle class for the most part. If there were too many lawyers sharing the pie, their disposable incomes would lessen, and their lifestyles would decline to the point that they would ship out to another career.