Why is my break-even rate higher than I expected?

Most lawyers underestimate how few hours are actually billable. After admin, marketing, and non-billable client work, a solo often bills only 1,200 to 1,500 hours a year. Dividing full overhead by that smaller number pushes the break-even rate up sharply.

What is realization and why does it matter?

Realization is the share of billed hours you actually collect after write-offs, discounts, and non-payment. If you collect 90 percent of what you bill, your effective rate is lower than your nominal rate, so the tool lets you divide by realization to protect your margin.

What counts as overhead for a solo firm?

Rent or home-office allocation, malpractice insurance, bar and license dues, CLE, legal research and practice-management software, marketing, any staff or virtual assistant, phones, and accounting. Include everything that is not your own take-home pay; your salary target is added separately.

How do I set the profit margin?

The break-even rate covers costs and your salary but leaves nothing for reinvestment, slow months, or growth. A margin of 10 to 25 percent on top builds a cushion and funds the firm. Set it based on how much reserve and reinvestment capacity you want.

Is hourly the only way to price legal work?

No. Many firms move to flat or value-based fees, but you still need to know your cost per hour to price a flat fee profitably. Use this break-even hourly rate as the floor when you estimate the hours a flat-fee matter will consume.

Attorney Hourly Rate Break-Even Calculator

Setting an hourly rate by copying competitors is how solo firms quietly lose money. This calculator works backward from your real numbers: total annual cost and the hours you can actually bill, then layers on realization and a profit margin to produce a rate that keeps the lights on and pays you.

How it works

The break-even rate is total annual cost divided by realistically billable hours. A quote rate then adds margin and corrects for collection losses:

total cost   = target salary + total annual overhead
break-even   = total cost / annual billable hours
with margin  = break-even / (1 − profit margin)
quote rate   = with margin / realization rate

Dividing by (1 − margin) adds the margin as a markup on cost, and dividing by realization grosses the rate up so that the amount you actually collect still hits your target.

Example and tips

A solo wanting 120,000 in salary with 80,000 of overhead has 200,000 of total cost. Billing 1,400 hours a year gives a break-even of about 143 per hour. Add a 15 percent margin and 90 percent realization and the rate to quote is about 187 per hour. Be honest about billable hours: assuming 2,000 billable hours when you can only deliver 1,400 understates your break-even by a third and guarantees you work below cost.