Professional services
Law Firm Revenue Calculator
Projects firm revenue, where the chain from hours to cash loses more than people expect.
Result
Service lines rarely carry the same margin. Splitting them is the only way to see which part of the business is paying for the rest, which is frequently not the part that looks busiest.
Get a Free Business AuditHow the calculation works
Timekeepers times billable hours times rate gives standard value, reduced by realisation and collection to give revenue actually received. Projecting from standard value rather than from the collected figure is the common error, and in a firm with normal realisation and collection the difference is large enough to change hiring decisions.
What moves the number
- Billable hours per timekeeper by level.
- Rates by level and practice area.
- Realisation, which differs by level and matter type.
- Collection, which differs by client type.
Where this one goes wrong
Multiply the chain rather than discounting the end: standard value times realisation times collection, because each stage compounds. A firm projecting from standard value and then applying a single allowance at the end usually understates the loss. The second point is that contingency and flat fee work does not fit this model at all and needs projecting separately by expected resolution, since its revenue has no relationship to hours recorded.
Before you quote
- Multiply through realisation and collection, do not approximate.
- Project contingency and flat fee work separately.
- Use hours actually achieved last year, not targets.
Questions
About this calculator
Why is projected revenue always too high?
Usually because the projection starts from standard value, meaning hours at full rates, and applies a single allowance at the end. Realisation and collection compound, and multiplying through both gives a markedly lower and more accurate figure.
Can contingency work be projected the same way?
No. Its revenue has no relationship to hours recorded, so it needs projecting separately by expected resolutions and values. Mixing it into an hours-based projection produces a figure that is wrong in both directions at once.
Should I project on targets or on actuals?
On hours actually achieved last year. Targets are what the firm hopes for and projections built on them become plans that require everything to improve simultaneously. Starting from actuals and naming the improvements separately keeps the two honest.
The formula
revenue = matters x average value; gross profit = revenue x margin
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How to use this calculator
- Matters opened per month. Enter your own figure; the page starts at 28.
- Average value ($). Enter your own figure; the page starts at $2,600.
- Gross margin on this work (%). Enter your own figure; the page starts at 58%.
- Share of total revenue (%). Used to show what the whole business turns over.
The result updates as you type, so you can try a figure, see what it does to matter revenue 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 |
|---|---|
| Matters opened per month | 28 |
| Average value | $2,600 |
| Gross margin on this work | 58% |
| Share of total revenue | 40% |
What comes out
| Result | Value |
|---|---|
| Matter revenue per month main result | $72,800 |
| Per year | $873,600 |
| Gross profit per year | $506,688 |
| Implied total business revenue | $2,184,000 |
The repair line brings in $873,600 a year and earns $506,688 of gross profit on it.
How sensitive the answer is
Holding everything else steady and changing only average value, this is what happens to matter revenue per month. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Average value ($) | Matter revenue per month |
|---|---|
| $1,300 | $36,400 |
| $1,950 | $54,600 |
| $2,600 example above | $72,800 |
| $3,900 | $109,200 |
| $5,200 | $145,600 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Matters opened per month
- A number, between 0 and 10000, starting at 28.
- Average value ($)
- A money amount, starting at $2,600.
- Gross margin on this work (%)
- A percentage, between 0 and 95, starting at 58%.
- Share of total revenue (%)
- Used to show what the whole business turns over.
What the results tell you
| Result | What it is |
|---|---|
| Matter revenue per month | The headline result. A money figure. |
| Per year | A money figure. |
| Gross profit per year | A money figure. |
| Implied total business revenue | 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.