Professional services
Law Firm Hourly Rate Calculator
Sets firm rates across timekeepers, where leverage decides firm profitability more than any single rate.
Result
The billable share is the number most people get wrong. Quoting, driving, chasing parts and fixing warranty callbacks are all paid and none of them are billed, which is why the honest figure is rarely above two thirds.
Get a Free Business AuditHow the calculation works
Cost per timekeeper including compensation and overhead allocation, divided by realistic billable hours, uplifted for profit. Across a firm the significant variable is leverage: the ratio of associates to partners and the rate spread between them, since profit arises substantially from the margin on associate time rather than from partner rates alone.
What moves the number
- Leverage, meaning the mix of partner and associate hours.
- Rate spread between levels against cost spread.
- Realisation by level, which differs.
- Market rates by practice area and location.
Where this one goes wrong
A firm can raise every rate and lose profitability if the work shifts toward partner hours, because the margin on partner time is thinner than on associate time once compensation is counted. Managing who does the work is therefore as important as what it is billed at, and that means delegation discipline rather than rate reviews. Realisation also differs by level, since clients write down junior time more readily, so the nominal spread overstates the actual one.
Before you quote
- Track the mix of partner and associate hours, not just rates.
- Measure realisation separately by level.
- Compare rate spread against the cost spread it has to cover.
Questions
About this calculator
What drives law firm profitability most?
Leverage, meaning how much of the work is done by associates rather than partners, because the margin on associate time is wider once compensation is counted. A firm can raise every rate and still lose profitability if work drifts upward to partners.
Why is realisation lower on junior time?
Because clients write it down more readily, questioning both the hours and whether the work needed the time it took. That means the nominal rate spread between levels overstates the actual one, and the gap is worth measuring rather than assuming.
Should rates differ by practice area?
Usually, because the market supports different rates and the matters have different economics. A single firm-wide rate card either underprices the areas the market values or overprices the rest, and most firms end up differentiating whether or not they intended to.
The formula
rate = (income + overhead) / (working hours x billable share)
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How to use this calculator
- Income you need per year ($). Enter your own figure; the page starts at $85,000.
- Annual overhead ($). Enter your own figure; the page starts at $288,000.
- Working weeks per year. Enter your own figure; the page starts at 48.
- Paid hours per week. Enter your own figure; the page starts at 40.
- Share of hours you can bill (%). Travel, quoting, admin and warranty calls are paid but not billed.
The result updates as you type, so you can try a figure, see what it does to rate you need to charge, 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 |
|---|---|
| Income you need per year | $85,000 |
| Annual overhead | $288,000 |
| Working weeks per year | 48 |
| Paid hours per week | 40 |
| Share of hours you can bill | 62% |
What comes out
| Result | Value |
|---|---|
| Rate you need to charge main result | $313.34 |
| Billable hours per year | 1,190 |
| Total to recover | $373,000 |
| If every hour were billable | $194.27 |
To take home $85,000 after $288,000 of overhead you need $313.34 per billable hour. Charging $194.27, the figure you get by ignoring unbillable time, leaves you short every week.
How sensitive the answer is
Holding everything else steady and changing only income you need per year, this is what happens to rate you need to charge. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Income you need per year ($) | Rate you need to charge |
|---|---|
| $42,500 | $277.64 |
| $63,750 | $295.49 |
| $85,000 example above | $313.34 |
| $127,500 | $349.04 |
| $170,000 | $384.74 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Income you need per year ($)
- A money amount, starting at $85,000.
- Annual overhead ($)
- A money amount, starting at $288,000.
- Working weeks per year
- A number, between 0 and 52, starting at 48.
- Paid hours per week
- A number, between 0 and 100, starting at 40.
- Share of hours you can bill (%)
- Travel, quoting, admin and warranty calls are paid but not billed.
What the results tell you
| Result | What it is |
|---|---|
| Rate you need to charge | The headline result. A money figure. |
| Billable hours per year | A number. |
| Total to recover | A money figure. |
| If every hour were billable | 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.