Professional services
Law Practice Case Profit Calculator
Works profit on a closed matter, where the lesson is in the hours variance.
Result
Gross profit is what is left after the cost of doing the job. Overhead comes out of that: the building, the office wages, the vans, insurance, software and advertising. A healthy gross margin still loses money if overhead is larger.
Get a Free Business AuditHow the calculation works
Fee collected less the cost of the hours actually spent and any disbursements, giving profit and margin on the matter. Done on closed matters rather than prospectively it becomes the feedback loop that improves pricing, because the variance between estimated and actual hours is where the estimating error lives and it is systematic rather than random.
What moves the number
- Actual hours against estimated hours.
- Who performed the work, since cost varies by level.
- Write-downs and collection shortfall.
- Disbursements advanced and recovered.
Where this one goes wrong
Run this on closed matters by type and the pattern appears: a particular matter type consistently overruns, or a particular stage does, and the fee for it has been wrong every time. That is worth far more than the figure for any single matter. The other finding is usually who did the work: matters where the owner handled tasks a junior could have done show a thin margin at a fee that would have been profitable delegated.
Before you quote
- Run it on closed matters by type to find the pattern.
- Compare actual against estimated hours, not just the total.
- Check which level performed the work.
Questions
About this calculator
What does matter-level profitability reveal?
Pattern rather than incident. Run across closed matters by type it shows which matter types or stages consistently overrun, which means the fee for them has been wrong every time. That is worth far more than the number on any single matter.
Why does delegation show up here?
Because the fee is usually the same whoever does the work while the cost is not. Matters where the owner handled tasks a junior or paralegal could have done show a thin margin at a fee that would have been comfortable with the work pushed down.
Should I use billed or collected fees?
Collected, since a matter billed in full and paid in part was not as profitable as the bill suggests. Using billings makes collection problems invisible in the profitability picture, and they are a real cost of operating rather than a timing issue.
The formula
gross profit = revenue - direct costs
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How to use this calculator
- Revenue ($). Enter your own figure; the page starts at $68,000.
- Direct labour ($). Enter your own figure; the page starts at $16,000.
- Disbursements and expert fees ($). Enter your own figure; the page starts at $11,000.
- Other direct costs ($). Enter your own figure; the page starts at $2,200.
The result updates as you type, so you can try a figure, see what it does to 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 |
|---|---|
| Revenue | $68,000 |
| Direct labour | $16,000 |
| Disbursements and expert fees | $11,000 |
| Other direct costs | $2,200 |
What comes out
| Result | Value |
|---|---|
| Gross profit main result | $38,800 |
| Gross margin | 57.1% |
| Total direct cost | $29,200 |
| Profit per working day | $1,764 |
That is $38,800 at a 57.1% margin, about $1,764 for every working day. Overhead still has to come out of it.
How sensitive the answer is
Holding everything else steady and changing only revenue, this is what happens to gross profit. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Revenue ($) | Gross profit |
|---|---|
| $34,000 | $4,800 |
| $51,000 | $21,800 |
| $68,000 example above | $38,800 |
| $102,000 | $72,800 |
| $136,000 | $106,800 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Revenue ($)
- A money amount, starting at $68,000.
- Direct labour ($)
- A money amount, starting at $16,000.
- Disbursements and expert fees ($)
- A money amount, starting at $11,000.
- Other direct costs ($)
- A money amount, starting at $2,200.
What the results tell you
| Result | What it is |
|---|---|
| Gross profit | The headline result. A money figure. |
| Gross margin | A percentage. |
| Total direct cost | A money figure. |
| Profit per working day | 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.