Law Firm Break-Even Analysis: $45K Monthly Revenue Target

Fixed costs $34.8K/mo Year 1 base

Contribution margin 82% After variable costs

Break-even revenue $42.5K/mo Cover fixed base

Break-even timing Month 32 Model turns positive

Break-even calculator

Check whether monthly revenue covers variable expenses and fixed costs for a law firm.

Lean Base Full

Monthly revenue Revenue sets the pool that covers variable and fixed costs. $ Low revenue High revenue Variable expenses These are direct costs that move with client work. $ Low direct cost High direct cost

Money available to cover fixed costs $72,250 $85,000 revenue - $12,750 variable expenses

Margin ratio

85%

Covers fixed costs

Yes

Fixed monthly costs These are the monthly costs the margin has to cover. $ Lean overhead Heavy overhead

Break-even chart Revenue Total costs

Which law firm expenses stay fixed, and which move with revenue?

Cost classification

Break-even gets cleaner when fixed overhead is separated from revenue-linked fees. Here, payroll, rent, insurance, and core software set the monthly floor, while matter-related fees reduce contribution margin as revenue grows.

Expense	Cost	Break-Even Treatment	Common Mistake
Office Rent	Fixed	Include $5,000/month in overhead from Month 1 through Month 60.	Tying rent to case volume.
Founding Attorney Lead payroll	Fixed	Include $180,000/year, or $15,000/month, as recurring salary load.	Treating owner pay as leftover profit.
Paralegal and Office Manager Admin Assistant payroll	Fixed	Include $100,000/year combined, or about $8,333/month, in first-year overhead.	Ignoring support staff in break-even.
Professional Liability Insurance	Fixed	Include $1,200/month as required operating overhead.	Leaving malpractice coverage outside break-even.
Legal Research Database Subscriptions and Case Management Software Subscription	Semi-fixed	Include $2,200/month, then step up only when capacity or tooling changes.	Assuming software scales smoothly with every matter.
Court Filing & Deposition Fees	Variable	Model at 5% of revenue in the first year.	Mixing pass-through trust funds with firm revenue.
External Expert Witness Fees	Variable	Model at 3% of revenue in the first year.	Burying litigation support in overhead.
Referral Fees External Counsel	Variable	Model at 6% of revenue in the first year.	Missing the margin drag from referred work.

How does break-even shift from a lean solo law practice to a base growth setup and then a full multi-attorney firm?

Scenario table

Break-even rises as the firm adds staff and fixed overhead, but the margin also improves as higher-rate work lifts the contribution margin. The base setup is the key checkpoint, with break-even near Month 32.

Planning assumptions only; client mix, staffing, and utilization can move the break-even line.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean solo practice	$37.5K	$6.8K	$30.8K	82%	$0	Best fit for an early solo practice with the lightest overhead.
Base growth firm	$48.2K	$7.0K	$41.2K	85.5%	$0	Month 32 is the break-even checkpoint, so staffing is the swing factor.
Full multi-attorney firm	$57.2K	$6.3K	$50.9K	89%	$0	Year 5 EBITDA reaches $986K, so the cushion is strongest if demand holds.

What breaks this law firm's break-even plan?

Stress test

The first year only breaks even at about $450,000 of revenue, against $369,000 of fixed monthly costs and 18% variable expenses. If collections slow, CAC stays above $1,500, or staff and expert fees rise before demand, the plan slips fast.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$450,000	$0 cushion	Only Month 32 break-even, so cash stays tight.
Revenue shortfall	Year 1 revenue falls 10% to about $405,000.	$450,000	$37,000 gap	Slower intake or collections turns the base plan into a loss.
Fixed-cost pressure	Fixed costs rise 10% to about $406,000 a year.	$495,000	$45,000 gap	Rent, staff, and software push break-even higher.
Margin pressure	Variable expenses rise from 18% to 23%.	$479,000	$29,000 gap	More filing, expert, and referral fees eat margin.
Combined pressure	Revenue drops 10%, fixed costs rise 10%, and variable expenses climb to 23%.	$528,000	$94,000 gap	A small miss becomes a real cash squeeze.

What should the founder verify before signing the lease and adding payroll?

Founder checklist

Test the model against reality before you lock in rent and headcount. The firm needs enough collected billable hours, margin, and cash to carry about $34.8K of monthly Year 1 cost, then survive to Month 32 break-even.

1Billable volume166 hrs/mo

Verify practice-area demand can produce at least 166 collected billable hours a month, or Year 1 break-even slips.

2Fixed load$34.8K/mo

Confirm the office, software, insurance, and base payroll fit a $34.8K monthly fixed load before you sign the lease.

3Margin mix82% CM

Check that court, expert, travel, and referral fees still leave about an 82% contribution margin, or the hour target climbs fast.

4Hiring ramp$100K/yr

Keep support payroll tight, and do not add the $100,000 associate until Year 2 demand is strong enough to carry it.

5Cash runwayMonth 32

Hold enough cash to absorb Year 1 EBITDA of -$388K and Year 2 EBITDA of -$330K through the Month 32 break-even point.

6Intake cost$1.5K CAC

Test intake before the $25,000 Year 1 marketing budget is spent, and keep CAC near $1,500 so new matters stay worth the spend.