There is No Magic Number for Occupancy Overhead

A lawyer called me a while back to inquire about average percentage of revenue to be allocated for occupancy. He wanted to know whether his percentage was in line with that of other law firms.

I cited one study that put the average around 9 to 10 percent — but I added that I didn't pay attention to those figures because each law firm has different issues to consider, and responses to those issues determine the cost. Therefore, averages should not control any one firm's decision.

There are many issues that might factor into the decision about how much to spend on rent. For example, when speaking with the above-mentioned lawyer, I asked him to consider a number of questions:

• What is the nature of your clientele?

• What do clients expect from your office surroundings?

• How far away are they from your office?

• Can they get to you easily?

• Do they come from diverse parts of the community, or does a significant percentage come to you via the Internet, so that your location doesn't really matter to them?

It's your clients' convenience that's important, not yours. After all, the practice of law is a personal service business, and in offering the best service that you can, you must above all be accessible.

Of course, your comfort counts, and you should consider the following questions as well:

• How many more years do you intend to practice? The fewer the years, the more you may want to pamper yourself in your office furnishings.

• How successful have you been?

• Do you want to reward yourself with new surroundings?

• Have you considered the percent of time you spend in your office compared to the percent of time you spend in your house? Lawyers often spend a great deal of money for a house, but cut corners on an office space in which they spend the bulk of their waking hours.

On a broader level, why does it matter what others pay for rent? Certainly, you cannot be too far out of line with your competitors and stay in business; however, such concerns relate to the whole of your practice, not to any single item. The real issues and questions are far more complex than a simple answer to the one question.

Is your rent competitive for the geographic area in which you're located? Is your current physical location one that you, your clients and prospects are comfortable with?

Would you like to improve the quality of your professional life by moving to better-appointed quarters — and can you afford it?

Would your current and prospective clients think more of you if you had better quarters, thereby possibly allowing you to take on better cases and charge more for them?

At some point in your practice, you may indeed require moving on up geographically to keep up with the Joneses. After all, if the appropriate location results in more revenue for you, the percentage for occupancy goes down.

Just don't jump the gun because of any one factor, and certainly not because of an average of many of them.

You must ask a multitude of questions of yourself and of your clients as well. Without that information, your selection is a guess that is sure to overlook critical elements.