Professional services
Law Firm Realization Rate Calculator
Measures firm realisation, where the pattern across matter types is the finding.
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. Realization has two separate components and they have different causes. Hours lost usually means scope creep or inefficiency the client will not pay for; rate lost usually means discounting at the point of billing. Reporting one blended figure hides which problem you have.
Get a Free Business AuditHow the calculation works
Amounts billed divided by the standard value of recorded time, with the written-down value shown. Across a firm the useful cut is by matter type and by originating attorney, because realisation failures cluster: a particular work type or a particular person's engagements consistently write down, and the aggregate rate averages that away.
What moves the number
- Matter type, since some consistently write down.
- Who set the fee and how clearly scope was defined.
- Flat fee matters that ran over.
- Supervisory and internal time recorded to matters.
Where this one goes wrong
Realisation is decided at billing and caused at engagement, which means the data points at the engagement letters rather than at the billing clerk. A matter type that consistently writes down was priced or scoped wrong each time, and that is fixable in a way that individual write-down decisions are not. Flat fee work needs separating entirely, since its realisation is simply whether the hours came in and blending it with hourly work hides which flat fees lose money.
Before you quote
- Cut realisation by matter type and originating attorney.
- Separate flat fee matters from hourly.
- Record the reason for each write-down.
Questions
About this calculator
Where should a firm look for realisation problems?
By matter type and by originating attorney, because the failures cluster rather than spreading evenly. A type that consistently writes down was priced or scoped wrong each time, which is fixable in a way individual billing decisions are not.
Is realisation a billing problem?
It is decided at billing and caused at engagement. The write-down happens because scope grew without a conversation or the fee was quoted before the work was understood, so the fix belongs with the engagement letter rather than the billing process.
Why separate flat fee matters?
Because their realisation is purely whether the hours came in at estimate. Blended with hourly work it becomes invisible, and flat fee pricing only improves when the firm can see which matter types consumed more time than they were priced for.
The formula
hour realization = hours billed / hours worked; rate realization = amount billed / hours billed x standard rate
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How to use this calculator
- Hours recorded. Enter your own figure; the page starts at 160.
- Hours invoiced. Enter your own figure; the page starts at 138.
- Standard rate ($). Enter your own figure; the page starts at $285.
- Amount actually invoiced ($). Enter your own figure; the page starts at $36,500.
The result updates as you type, so you can try a figure, see what it does to hour realization, 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 |
|---|---|
| Hours recorded | 160 |
| Hours invoiced | 138 |
| Standard rate | $285 |
| Amount actually invoiced | $36,500 |
What comes out
| Result | Value |
|---|---|
| Hour realization main result | 86.25% |
| Rate realization | 92.80% |
| Overall realization | 80.04% |
| Value written down | $9,100 |
| Effective rate per hour recorded | $228.13 |
Overall realization is 80.04%: 86.25% of hours survive to the invoice and 92.80% of the standard rate does. That is $9,100 written down, an effective $228.13 per hour recorded.
How sensitive the answer is
Holding everything else steady and changing only standard rate, this is what happens to hour realization. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Standard rate ($) | Hour realization |
|---|---|
| $143 | 86.25% |
| $214 | 86.25% |
| $285 example above | 86.25% |
| $428 | 86.25% |
| $570 | 86.25% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Hours recorded
- A number, between 0 and 5000, starting at 160.
- Hours invoiced
- A number, between 0 and 5000, starting at 138.
- Standard rate ($)
- A money amount, starting at $285.
- Amount actually invoiced ($)
- A money amount, starting at $36,500.
What the results tell you
| Result | What it is |
|---|---|
| Hour realization | The headline result. A percentage. |
| Rate realization | A percentage. |
| Overall realization | A percentage. |
| Value written down | A money figure. |
| Effective rate per hour recorded | A money figure. |
Keep going
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