When you're first starting, figuring out your hourly billing rate as a lawyer can be a tricky thing. But it's essential to get this right early on. We've put to...
When you're first starting, figuring out your hourly billing rate as a lawyer can be a tricky thing. But it's essential to get this right early on. We've put together four steps in this article to determine your hourly billing rate.
A lawyer's hourly billing rate is the amount charged for each hour of work.
Some lawyers use time-tracking software to track time as they work on a case, while others just estimate the time and bill clients based on that estimate.
The most effective, organised and transparent method of tracking time is with legal software. This ensures the client is aware of every hour worked and isn’t at the mercy of the lawyer claiming a certain amount of hours.
A lawyer's billing rate will be based on these factors:
The first thing is to identify the number of hours a case requires.
You'll also have to discern the average rate for your type of case. Then compare it against the average rate lawyers in your area charge. You can contact a few local law firms and ask for their rates.
Finally, you need to factor in the overhead cost, such as the cost of office space and staff. You can contact a local firm and ask for their rates. Once you have this information, you can calculate your hourly billing rate.
Many lawyers make the mistake of picking a random figure as their hourly rate. They forget to factor in recurring monthly expenses and the cost of running the firm.
Instead, follow these steps to determine a profitable hourly rate.
Let's assume you want to make $120,000 in yearly salary.
And the cost of running your law firm is $3000 per month. That's an annual expense of $36,000. Let's also assume you want to earn a profit margin of 60%.
Which means you’ve got to make an additional amount of $93,600 ({120,000 + 36,000} x 60%).
Hence, your total revenue / cost of running the business (yearly) is: $120,000 + $36,000 + $93,600 = $249,600.
Your billable hours refer to the number of hours you’re open to working.
If you don't work on weekends and public holidays, you have roughly 252 days to work.
To be realistic, you can't work all 252 days. You have to be at optimal performance, so let's remove 20 days of vacation. After that, you're now left with 232 days of work.
Now, how many hours are you willing to work per day?
Let's assume you plan to work the regular 8 hours daily; that's 1856 hours (232 x 8).
Again, not all these hours are billable. You can easily automate some tasks thanks to legal software like mattero. So let's assume you bill 65% of 1856 hours. That's an estimate of 1206 hours.
This means you have 1206 hours to make a yearly income of $249,600.
Now we've identified that you have 1206 billable hours to work and make a yearly income of $249,600.
All that remains is to divide your yearly income by the number of billable hours.
Your devised rate is ($249,600 ÷ 1206), approximately $207 per hour.
Consider the following to know if you'll charge a flat hourly rate or if the fee will differ.
The complexity of the case: Cases differ, and you should determine if you want to charge different hourly rates for different cases.
For example, working on a high-profile case may be more demanding than crafting the agreement conditions of a prenup document. Generally, some practice areas are more complex than others.
Your reputation & experience: If you've been in the game for a long while and have a successful track record, you can confidently charge higher prices.
Some lawyers charge as low as $50 per hour, while others charge as high as $1000 to $2000 per hour. The difference between these types of lawyers is their value and experience.
Increase your value by improving the quality of legal service rendered to clients. Also, as you gain more experience in your practice area, you'll become a force in the industry.
If you’re hiring any lawyer, be sure that the amount they're charging comes with years of experience and expertise.
You don’t have to go through the hassle of manual time tracking. And you shouldn’t.
Thanks to legal tech like mattero, you can automate your billing and invoicing process.
With mattero, you can easily view all your documents, time notes, contact details, and time spent in one place.
As you work on any client case, your time is automatically tracked. You don't have to log time on manually. Each hour worked is an hour paid.
Ready to engage in transparent time-tracking? Then start your free trial today. Let us do the heavy lifting for you.
Start using mattero for free
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