Professional services
Law Practice Billing Rate Calculator
Builds a billing rate from cost upward, where the billable hours assumption does most of the work.
Result
Business arithmetic for running a practice, not legal advice. Fee agreements, contingency limits, trust accounting and advertising are all governed by the rules of professional conduct where you practise, and several are strict. Check the applicable rules before any of this affects a client agreement or a marketing decision. The billable share is the input most often overstated. Client development, conflicts checking, continuing education, trust reconciliation and administration are all necessary and none of them bill.
Get a Free Business AuditHow the calculation works
Total cost including compensation and the firm's overhead allocation, divided by the hours that will actually be billed, then uplifted for profit. The hours figure is the sensitive input: dividing by a theoretical full year rather than by realistic billable hours produces a rate that cannot recover cost, and the error compounds because every matter is priced from it.
What moves the number
- Realistic annual billable hours, not scheduled hours.
- Compensation plus the overhead allocation per timekeeper.
- Realisation, since billed is not collected.
- What the local market and practice area will support.
Where this one goes wrong
Build the rate on hours that will actually be billed and collected rather than on hours worked, because the gap between the three is wide in practice: non-billable administration, time written down before billing, and bills not paid in full each remove revenue the rate was supposed to produce. A rate calculated against theoretical capacity is structurally short. Fees also have to be reasonable under the professional conduct rules your state has adopted, which constrains the upper end independently of what a cost calculation suggests.
Before you quote
- Use realistic billable hours, not scheduled or worked hours.
- Check the rate survives realisation and collection losses.
- Confirm the fee is reasonable under your state's conduct rules.
Where the rules come from
Questions
About this calculator
What hours figure should I divide by?
Hours that will realistically be billed, which is well below hours worked once non-billable administration, business development and write-downs are counted. Dividing by theoretical capacity produces a rate that cannot recover cost, and every matter inherits that error.
Does a cost-based rate guarantee profitability?
No, because billed is not collected. Time written down before billing and bills not paid in full both remove revenue the rate assumed. The rate has to survive both, which means building in realisation and collection rather than treating them as surprises.
Is there a limit on what I can charge?
Fees must be reasonable under the professional conduct rules your state has adopted, which consider factors including the work required, the results and customary local charges. That constrains the upper end regardless of what a cost calculation supports.
The formula
rate = (income + overhead) / (billable hours x realization x collection)
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
- Income you need ($). Enter your own figure; the page starts at $145,000.
- Annual practice overhead ($). Rent, staff, insurance, research, software, bar dues.
- Working weeks per year. Enter your own figure; the page starts at 46.
- Hours worked per week. Enter your own figure; the page starts at 50.
- Share of hours that are billable (%). Enter your own figure; the page starts at 58%.
- Share of billed time invoiced (%). Enter your own figure; the page starts at 90%.
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 | $145,000 |
| Annual practice overhead | $78,000 |
| Working weeks per year | 46 |
| Hours worked per week | 50 |
| Share of hours that are billable | 58% |
| Share of billed time invoiced | 90% |
| Share of invoices collected | 92% |
What comes out
| Result | Value |
|---|---|
| Rate you need to charge main result | $201.89 |
| Billable hours per year | 1,334.0 |
| Gross billings needed | $269,324 |
| If every hour billed and collected | $167.17 |
| Lost to realization and collection | $46,324 |
You need to charge $201.89 an hour across 1,334.0 billable hours. Ignoring realization and collection would suggest $167.17, which leaves $46,324 a year unaccounted for.
How sensitive the answer is
Holding everything else steady and changing only income you need, this is what happens to rate you need to charge. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Income you need ($) | Rate you need to charge |
|---|---|
| $72,500 | $136.25 |
| $108,750 | $169.07 |
| $145,000 example above | $201.89 |
| $217,500 | $267.53 |
| $290,000 | $333.17 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Income you need ($)
- A money amount, starting at $145,000.
- Annual practice overhead ($)
- Rent, staff, insurance, research, software, bar dues.
- Working weeks per year
- A number, between 0 and 52, starting at 46.
- Hours worked per week
- A number, between 0 and 100, starting at 50.
- Share of hours that are billable (%)
- A percentage, between 0 and 100, starting at 58%.
- Share of billed time invoiced (%)
- A percentage, between 0 and 100, starting at 90%.
- Share of invoices collected (%)
- A percentage, between 0 and 100, starting at 92%.
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 decimal figure. |
| Gross billings needed | A money figure. |
| If every hour billed and collected | A money figure. |
| Lost to realization and collection | A money figure. |
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.