Professional services
Law Practice Overhead Calculator
Totals practice overhead, where the owner's non-billable time belongs in it.
Result
Overhead is what the business costs whether or not you work. Wages for people who are on jobs belong in job cost instead, and counting them here overstates overhead and underprices everything.
Get a Free Business AuditHow the calculation works
The monthly total of what the practice costs whether or not anyone bills: premises, support salaries, malpractice insurance, research and practice management subscriptions, dues and continuing education. Divided by revenue it gives an overhead rate, and divided by billable hours it gives the overhead each hour must carry.
What moves the number
- Premises, insurance and subscriptions.
- Support salaries, which free billable time.
- Continuing education and professional dues.
- The owner's non-billable management hours.
Where this one goes wrong
In an owner-run practice the largest unrecorded overhead is the owner's own non-billable time: intake, billing, collections, compliance and administration are real work producing no billable hours, and leaving them uncosted makes the overhead rate look lower than it is and the rates correspondingly thin. Put a value on those hours. Malpractice insurance is the line that varies most by practice area, so a benchmark from a different area is not a useful comparison.
Before you quote
- Cost the owner's non-billable hours as overhead.
- Divide by billable hours as well as by revenue.
- Compare malpractice cost only against the same practice area.
Questions
About this calculator
What is the biggest missed overhead in a small practice?
The owner's non-billable time. Intake, billing, collections, compliance and administration are real work producing no billable hours, and leaving them uncosted makes the overhead rate look lower than it is and the rates built from it too thin.
Should overhead be divided by revenue or by hours?
Both are useful. Per revenue gives the share of each dollar consumed; per billable hour gives the amount each hour has to carry before any profit, which is the figure that connects directly to setting a rate.
Why does malpractice insurance vary so much?
Because it is rated by practice area and claims history, and areas differ enormously in exposure. That makes cross-area benchmarks useless, and it also means a practice changing its area mix should expect the premium to follow rather than stay put.
The formula
overhead rate = monthly overhead / monthly revenue
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How to use this calculator
- Premises per month ($). Enter your own figure; the page starts at $1,800.
- Office and management wages ($). Enter your own figure; the page starts at $5,200.
- Library, research and subscriptions ($). Enter your own figure; the page starts at $2,400.
- Insurance and licensing ($). Enter your own figure; the page starts at $900.
- Software, phones and internet ($). Enter your own figure; the page starts at $450.
- Marketing and advertising ($). Enter your own figure; the page starts at $1,500.
The result updates as you type, so you can try a figure, see what it does to overhead 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 |
|---|---|
| Premises per month | $1,800 |
| Office and management wages | $5,200 |
| Library, research and subscriptions | $2,400 |
| Insurance and licensing | $900 |
| Software, phones and internet | $450 |
| Marketing and advertising | $1,500 |
| Everything else | $700 |
| Monthly revenue | $68,000 |
What comes out
| Result | Value |
|---|---|
| Overhead per month main result | $12,950 |
| Overhead per year | $155,400 |
| Overhead rate | 19.0% |
| Cost of opening the doors | $588.64 |
Overhead runs $12,950 a month, 19.0% of revenue. Every working day costs $588.64 before anybody turns a wheel.
How sensitive the answer is
Holding everything else steady and changing only premises per month, this is what happens to overhead per month. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Premises per month ($) | Overhead per month |
|---|---|
| $900 | $12,050 |
| $1,350 | $12,500 |
| $1,800 example above | $12,950 |
| $2,700 | $13,850 |
| $3,600 | $14,750 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Premises per month ($)
- A money amount, starting at $1,800.
- Office and management wages ($)
- A money amount, starting at $5,200.
- Library, research and subscriptions ($)
- A money amount, starting at $2,400.
- Insurance and licensing ($)
- A money amount, starting at $900.
- Software, phones and internet ($)
- A money amount, starting at $450.
- Marketing and advertising ($)
- A money amount, starting at $1,500.
- Everything else ($)
- A money amount, starting at $700.
- Monthly revenue ($)
- A money amount, starting at $68,000.
What the results tell you
| Result | What it is |
|---|---|
| Overhead per month | The headline result. A money figure. |
| Overhead per year | A money figure. |
| Overhead rate | A percentage. |
| Cost of opening the doors | 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.