Professional services
Law Firm Case Economics Calculator
Works case economics at firm level, where the portfolio matters more than any one matter.
Result
Business arithmetic for running a practice, not legal advice. Fee agreements, contingency limits, trust accounting and fee splitting are governed by the rules of professional conduct in your jurisdiction, and several of them are strict. Check the applicable rules before any of this affects a client agreement. This assesses the firm's economics on figures you supply. It does not and cannot value a claim: recovery depends on liability, damages, insurance limits, venue and facts, and the probability input is a professional judgement rather than a calculation. The decision to take a matter also involves duties to the client and the merits, which are not economic questions.
Get a Free Business AuditHow the calculation works
Expected recovery and fee against the hours and costs the matter will consume, giving expected profit and margin. For contingency work the firm-level view is the important one, because individual outcomes are uncertain and the economics only work across a portfolio where the winners cover the losses and the costs advanced.
What moves the number
- Expected recovery and the probability of each outcome.
- Hours required across the likely paths.
- Costs advanced and the period they are outstanding.
- Portfolio mix and concentration.
Where this one goes wrong
Contingency practice is a portfolio business, which means concentration is the risk rather than any single case: a firm with its capital committed to a few large matters can be right about all of them and still fail on timing. Spreading the book and tracking total costs advanced against available capital is the discipline. Costs advanced are the quiet constraint, since they are the firm's cash sitting in other people's cases for years.
Before you quote
- Track total costs advanced against available capital.
- Avoid concentration in a few large matters.
- Evaluate the portfolio, not just individual cases.
Questions
About this calculator
How should contingency cases be evaluated?
As a portfolio, since individual outcomes are uncertain and the economics depend on winners covering losses and advanced costs. A case-by-case view can approve a book that fails in aggregate on timing or concentration.
What is the main risk in a contingency practice?
Concentration and cash. A firm with capital committed to a few large matters can be right about all of them and still fail on timing, because costs advanced are the firm's money sitting in other people's cases for years.
What limits how many cases a firm can take?
Available capital more often than available hours, because each case consumes advanced costs before producing anything. Tracking total costs advanced against capital is what prevents a firm taking on a book it cannot fund to resolution.
The formula
expected value = probability x (fee - opportunity cost) - (1 - probability) x (opportunity cost + unrecovered costs)
Put this calculator on your site
Free to embed. Paste this where you want it to appear. It stays up to date automatically because it loads from BDEVY.
Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- Expected recovery if successful ($). Your own assessment, not a prediction from this tool.
- Probability of recovery (%). Enter your own figure; the page starts at 60%.
- Contingency rate (%). Enter your own figure; the page starts at 33.33%.
- Hours the matter will take. Enter your own figure; the page starts at 120.
- What those hours could bill elsewhere ($). Enter your own figure; the page starts at $265.
- Costs you will advance ($). Enter your own figure; the page starts at $12,500.
The result updates as you type, so you can try a figure, see what it does to expected value to the firm, 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 |
|---|---|
| Expected recovery if successful | $150,000 |
| Probability of recovery | 60% |
| Contingency rate | 33.33% |
| Hours the matter will take | 120 |
| What those hours could bill elsewhere | $265 |
| Costs you will advance | $12,500 |
| Share of costs recovered if unsuccessful | 0% |
What comes out
| Result | Value |
|---|---|
| Expected value to the firm main result | -$6,803 |
| Fee if successful | $49,995 |
| Opportunity cost of the hours | $31,800 |
| Loss if unsuccessful | $44,300 |
| Effective hourly if successful | $416.63 |
| Probability needed to break even | 70.89% |
Expected value is -$6,803. At these assumptions the matter needs better than 70.89% odds to be worth the hours and the advanced costs.
How sensitive the answer is
Holding everything else steady and changing only expected recovery if successful, this is what happens to expected value to the firm. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Expected recovery if successful ($) | Expected value to the firm |
|---|---|
| $75,000 | -$21,802 |
| $112,500 | -$14,302 |
| $150,000 example above | -$6,803 |
| $225,000 | $8,196 |
| $300,000 | $23,194 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Expected recovery if successful ($)
- Your own assessment, not a prediction from this tool.
- Probability of recovery (%)
- A percentage, between 0 and 100, starting at 60%.
- Contingency rate (%)
- A percentage, between 0 and 50, starting at 33.33%.
- Hours the matter will take
- A number, between 0 and 10000, starting at 120.
- What those hours could bill elsewhere ($)
- A money amount, starting at $265.
- Costs you will advance ($)
- A money amount, starting at $12,500.
- Share of costs recovered if unsuccessful (%)
- A percentage, between 0 and 100, starting at 0%.
What the results tell you
| Result | What it is |
|---|---|
| Expected value to the firm | The headline result. A money figure. |
| Fee if successful | A money figure. |
| Opportunity cost of the hours | A money figure. |
| Loss if unsuccessful | A money figure. |
| Effective hourly if successful | A money figure. |
| Probability needed to break even | A percentage. |
Keep going
Related calculators
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.