Professional services
Law Firm Client Lifetime Value Calculator
Works client lifetime value, where business clients and one-off matters behave completely differently.
Result
Gross profit, not revenue, because revenue you spend delivering the work is not available to spend winning customers. Referrals are the least reliable input here; measure yours rather than assuming.
Get a Free Business AuditHow the calculation works
Average matter value times matters per client times years retained, with margin applied, plus the value of referrals. The split that matters is between transactional and ongoing relationships: a business client with recurring needs generates matters for years, while a single personal injury or estate matter is complete and will not recur regardless of satisfaction.
What moves the number
- Whether the client type has recurring legal needs.
- Years retained for ongoing relationships.
- Referrals generated, which in some areas exceed direct value.
- Average matter value and margin.
Where this one goes wrong
For non-recurring matter types, almost all the lifetime value beyond the first matter is referral, so a satisfied client who refers is worth several who do not and the acquisition arithmetic should account for it. For business clients the value is retention, and it is lost to responsiveness far more often than to competence: the client who cannot reach their lawyer finds one they can. Measuring the two client types on one blended figure misprices both.
Before you quote
- Separate recurring from one-off client types.
- Measure referrals, which dominate value in one-off areas.
- Track retention drivers, which are usually responsiveness.
Questions
About this calculator
Does lifetime value apply to one-off matters?
Through referrals rather than repeat work. A completed estate or injury matter will not recur however satisfied the client, so almost all the value beyond the first matter is what they refer, and the acquisition arithmetic should credit it.
Why do business clients leave?
Responsiveness far more often than competence. A client who cannot reach their lawyer finds one they can, and that is usually the stated reason when a long relationship ends. It is also the most fixable thing on the list.
Should both client types use the same figure?
No, because they behave differently enough that a blended figure misprices both. A business client with recurring needs and a single personal matter have nothing in common economically, and averaging them hides which acquisition spend is worth making.
The formula
lifetime value = average matter x matters per year x years x gross margin
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How to use this calculator
- Average fee per matter ($). Enter your own figure; the page starts at $2,600.
- Matters per client per year. Enter your own figure; the page starts at 1.4.
- Years they stay. Enter your own figure; the page starts at 6.
- Gross margin (%). Enter your own figure; the page starts at 58%.
- Clients they refer. Enter your own figure; the page starts at 0.4.
The result updates as you type, so you can try a figure, see what it does to lifetime gross profit, 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 |
|---|---|
| Average fee per matter | $2,600 |
| Matters per client per year | 1.4 |
| Years they stay | 6 |
| Gross margin | 58% |
| Clients they refer | 0.4 |
What comes out
| Result | Value |
|---|---|
| Lifetime gross profit main result | $12,667 |
| Lifetime revenue | $21,840 |
| Including referred clients | $17,734 |
| Gross profit per year | $2,111 |
One customer is worth $12,667 of gross profit over 6 years, or $17,734 once the people they refer are counted. That is what you can afford to spend winning one.
How sensitive the answer is
Holding everything else steady and changing only average fee per matter, this is what happens to lifetime gross profit. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Average fee per matter ($) | Lifetime gross profit |
|---|---|
| $1,300 | $6,334 |
| $1,950 | $9,500 |
| $2,600 example above | $12,667 |
| $3,900 | $19,001 |
| $5,200 | $25,334 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Average fee per matter ($)
- A money amount, starting at $2,600.
- Matters per client per year
- A number, between 0 and 60, starting at 1.4.
- Years they stay
- A number, between 0 and 60, starting at 6.
- Gross margin (%)
- A percentage, between 0 and 95, starting at 58%.
- Clients they refer
- A number, between 0 and 20, starting at 0.4.
What the results tell you
| Result | What it is |
|---|---|
| Lifetime gross profit | The headline result. A money figure. |
| Lifetime revenue | A money figure. |
| Including referred clients | A money figure. |
| Gross profit per year | A money 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.