Are your hourly rates too low, causing you to miss your revenue targets?
Or maybe they’re too high, which means you might be missing out on untapped client bases?
Now you can take the guesswork out of answering these questions. The Lawyer Hourly Rate Calculator – published by Lawyerist – does the work for you.
“Whether or not you are going to charge hourly rates, you need to know what your time is worth,” writes Lawyerist founder and CEO Sam Glover in this post. “You can get a feel for the going rates in your town by asking other lawyers what they charge, but I think it is better to start from your bottom line: what do you need to make, and what hourly rate will get you there. If the market will bear a higher price, great! But if the going rate is lower than you need, you might need to go back and work on your business plan.”
Find the Lawyer Hourly Rate Calculator here.
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How to Calculate Your Hourly Rate|
The Lawyer Hourly Rate Calculator is a tool that starts with the following question: How much after-tax income do you need to make per year?
“In other words, how much do you need to pay your rent/mortgage, have a social life, keep up with your student loans, save for retirement, etc,” says Glover.
After you’ve entered this figure, take these steps:
- Estimate your monthly business expenses. “Don’t forget to factor in annual expenses like bar dues, malpractice insurance, etc.” says Glover. “And don’t forget to factor in regular upgrades of software, hardware, and office furniture and equipment.”
- How many hours per week are you willing to work, on average?
- Use the formula. “First, we are putting your taxes back in, using 30 percent as a rough estimate of your tax rate. Then we add expenses. That works out to the total amount of money you need to make in a year, which we divide by the number of hours you want to work in the workdays available in a year (365 days minus 2 weeks for vacation, 100 days for weekends, and 10 federal holidays equals 241 workdays.) divided by three. We divide by three because you have three jobs: lawyering, marketing, and business administration, and each of them take about the same amount of time. In other words, you can only bill about one-third of your time.”
Coming Up with the Hourly Rate
Glover cautions that the rate calculator is intended to provide only a rough estimate of what you should bill.
“But it’s also a fairly conservative estimate,” he says. “If you do need to take home the amount you enter in the first box, you really shouldn’t try to bill less than the result you get. The numbers won’t add up. Let’s say you’ve been asking around, and most lawyers with your skill level are billing out at $250, but the calculator says you only need to bill yourself out at about $125 to hit your revenue target. You could just bump your rate to $250 in order to go with the market, and just work less. Of course, then you will be competing for the same clients like everyone else billing at that level. What you should also consider, if your rate seems way lower than what you’ve learned from asking around, is that you might be able to market to a relatively untapped client base.”
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