Professional services
Law Firm Break-Even Calculator
Works the hours a firm must bill to cover its fixed base.
Result
Break-even, not a target. It is the point where the business stops losing money, which is a floor rather than a plan. Owner's pay only counts here if it is inside the fixed costs you entered.
Get a Free Business AuditHow the calculation works
Fixed costs divided by contribution per billable hour gives the hours needed. Contribution per hour is the effective rate, meaning the nominal rate after realisation and collection, less the variable cost of producing that hour. The hours figure translates directly into a target that timekeepers can act on, which a dollar figure does not.
What moves the number
- Fixed costs including premises, support staff and non-billable salaries.
- Effective rate rather than nominal rate.
- Whether attorney compensation is fixed or variable.
- Leverage, which changes contribution per hour by level.
Where this one goes wrong
Salaried attorneys are a fixed cost, which puts most of a firm's cost base above the line and makes break-even high and inflexible. That is the structural risk in a firm compared with a practice using contract attorneys: a quiet quarter is absorbed entirely by the firm. Calculate it with the effective rate rather than the nominal one, because using the rate card produces a reassuringly low hours figure that the firm will miss while believing it is ahead.
Before you quote
- Use the effective rate after realisation and collection.
- Count salaried attorneys as fixed cost.
- Express the result as hours per timekeeper, not just dollars.
Questions
About this calculator
Why express break-even in hours?
Because hours are what timekeepers control. A dollar target is abstract; hours per attorney per month is something that can be checked weekly and acted on, and it converts the firm's fixed cost into a number each person can see their part in.
Which rate should break-even use?
The effective rate after realisation and collection. Using the rate card produces a reassuringly low hours figure that the firm will miss while believing it is ahead of target, which is the worst combination available.
Does a salaried team raise break-even?
Substantially, because it moves most of the cost base above the line. A firm with salaried attorneys absorbs a quiet quarter entirely, which is the structural trade-off against the flexibility of contract or of-counsel arrangements.
The formula
break-even matters = fixed costs / (average fee per matter x gross margin%)
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How to use this calculator
- Monthly fixed costs ($). Rent, office wages, insurance, vehicle payments, software, advertising.
- Average fee per matter ($). Enter your own figure; the page starts at $2,600.
- Gross margin per matter (%). Enter your own figure; the page starts at 58%.
The result updates as you type, so you can try a figure, see what it does to matters needed per month, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Monthly fixed costs | $24,000 |
| Average fee per matter | $2,600 |
| Gross margin per matter | 58% |
What comes out
| Result | Value |
|---|---|
| Matters needed per month main result | 16 |
| Revenue needed per month | $41,600 |
| Gross profit per matter | $1,508 |
| Matters per working day | 0.7 |
You need 16 jobs a month, about 0.7 a working day, to cover $24,000 of fixed cost. That is $41,600 of revenue before the business earns anything.
How sensitive the answer is
Holding everything else steady and changing only monthly fixed costs, this is what happens to matters needed per month. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Monthly fixed costs ($) | Matters needed per month |
|---|---|
| $12,000 | 8 |
| $18,000 | 12 |
| $24,000 example above | 16 |
| $36,000 | 24 |
| $48,000 | 32 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Monthly fixed costs ($)
- Rent, office wages, insurance, vehicle payments, software, advertising.
- Average fee per matter ($)
- A money amount, starting at $2,600.
- Gross margin per matter (%)
- A percentage, between 0 and 95, starting at 58%.
What the results tell you
| Result | What it is |
|---|---|
| Matters needed per month | The headline result. A number. |
| Revenue needed per month | A money figure. |
| Gross profit per matter | A money figure. |
| Matters per working day | A decimal figure. |
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.