Rethinking the £1 Million Milestone: Is Turnover the Wrong Target?

There is a number that haunts the ambitions of almost every small law firm owner: £1 million in turnover. It sits on business plans like a finishing line, a marker of having "made it." And once firms cross it, many immediately start chasing the next million. But what if the milestone is the wrong thing to measure? That question sits at the heart of Michelle Peters' thinking — and it is worth taking seriously. The argument is simple: for a significant number of law firms, revenue growth beyond a certain threshold does not produce proportional profit growth. In some cases, it actively erodes it. ## The margin problem hiding inside growth Law firm economics are not like most businesses. Revenue is largely driven by fee earner capacity, and increasing that capacity means hiring. Hiring introduces payroll costs, management overhead, training, supervision, and compliance risk, all of which compound as headcount rises. It is a pattern Michelle Peters, law firm profit growth specialist and founder of The Business Instructor, sees repeatedly. As she puts it: "I've seen far too many £1m turnover law firms running on a 10% profit margin — which means a modest dip in revenue, or a modest rise in costs, wipes out the year's profit completely." That is not scaling. That is doing more work to stand still, with more risk attached. ## The profit that goes missing The owners of small law firms turning over £1-2 million regularly tell Michelle they were more profitable, and considerably less stressed, when the business was smaller or when they had a smaller team. They scaled the business. They did not scale the profit. Michelle is equally direct on what law firm owners should expect to take home. She describes £200,000 after tax as "the minimum any law firm owner should expect given the time, effort, risk, and level of expertise needed to set up and run a successful law firm." The number of £1 million-plus firms whose owners are not in that bracket, she says, is shocking. This is a structural problem, not just an operational one. More turnover usually means more staff, more clients, and more moving parts. And more moving parts means more that can go wrong. The margin rarely keeps pace. ## A different question before the next target The legal sector has a strong cultural attachment to turnover as a measure of success, partly because it is a number that can be shared: in directories, in pitches, in conversations with peers. Profit tends to stay private. But profit is the point. Before setting the next growth target, Michelle argues firm owners need to ask a harder question: will this scale my profit, or just my problems? Growth for its own sake is not a strategy. It is, as she puts it, "just more weight on the same shaky foundations." The alternative is a leaner, calmer business that actually pays its owner more. That might mean tightening the client mix, being more selective about volume work, or improving matter profitability through better billing discipline. None of that requires chasing another million in turnover. As Michelle puts it, borrowing a phrase that has aged well: turnover is vanity, profits are sanity. ## The conversation that needs to happen Michelle has a podcast series exploring how law firm owners can achieve the profits they want alongside the lifestyle they want, rather than sacrificing one in pursuit of the other. Discover more at The Million Pound Myth podcast. Michelle Peters is a law firm profit growth specialist and founder of The Business Instructor