Law Firm Break-Even Point: About $42K Monthly Revenue

Fixed costs $30.5K/mo Year 1 overhead

Contribution margin 72% After variable costs

Break-even revenue $42.3K/mo Cover fixed base

Break-even timing Month 6 Model payback point

Break-even calculator

Use this calculator to test whether monthly legal revenue covers direct costs and the fixed monthly overhead.

Lean Base Full

Monthly revenue Revenue is the cash you bring in before direct costs and overhead. $ Low revenue High revenue Variable expenses These are direct costs that rise with legal work and client intake. $ Lower costs Higher costs

Money available to cover fixed costs $49,500 $65,000 revenue - $15,500 variable expenses

Margin ratio

76%

Covers fixed costs

Yes

Fixed monthly costs This is the monthly cost base your contribution margin must cover. $ Lower overhead Higher overhead

Break-even chart Revenue Total costs

Which legal services expenses are fixed, and which move with sales?

Cost classification

Break-even is only useful if overhead stays in fixed costs and revenue-linked items stay in contribution margin. Here’s the quick math logic: fixed costs set the hurdle, while variable percentages reduce each dollar earned.

Expense	Cost	Break-Even Treatment	Common Mistake
Office Rent, $4,500 per month	Fixed	Include in monthly overhead for the full planning range.	Reducing rent when case volume is low.
Utilities & Internet, $750 per month	Fixed	Treat as monthly overhead in operating break-even.	Linking the full bill to billable hours.
Professional Liability Insurance, $1,200 per month	Fixed	Include as required firm overhead before profit.	Leaving it below the line as optional spend.
Year 1 core payroll: founding attorney, 0.5 FTE paralegal, office manager	Fixed	Use recurring salaries as fixed payroll in the first operating year.	Treating partner draws as overhead unless booked as salary.
Associate Attorney and Marketing Coordinator payroll	Semi-fixed	Add in hiring steps as roles start later and scale by FTE.	Smoothing future hires across all months.
Legal Research Database Access, 8% in first year	Variable	Deduct from revenue when calculating contribution margin.	Calling it fixed because it sounds like a subscription.
Marketing and Client Acquisition, 10% in first year	Variable	Model as revenue-linked selling expense inside margin.	Double-counting it with the annual marketing budget.
External Legal Support (Contractors), 5% in first year	Variable	Deduct as case volume and client work rise.	Budgeting contractors as idle fixed staff.

How does break-even change as this legal practice moves from lean to base to full?

Scenario table

As the firm adds staff, fixed overhead rises faster than the margin improves, so break-even revenue moves up in each setup. The fuller model is more efficient on variable cost, but it still needs more monthly revenue to cover payroll and office expense.

Planning assumptions only; actual results will move with case mix, pricing, and staffing.

Scenario	Monthly Revenue	Variable Costs	Fixed Costs	CM Ratio	Operating Profit	Break-Even Signal
Lean solo-led practice	$423,611	$118,611	$305,000	72%	$0	Highest break-even risk; this setup needs about $424k a month.
Base boutique practice	$602,532	$126,532	$476,000	79%	$0	Midpoint case, but it still needs about $603k a month to avoid losses.
Full multi-attorney practice	$725,882	$108,882	$617,000	85%	$0	Better margin, but the larger team still pushes break-even to about $726k a month.

What breaks the break-even plan for this law firm?

Stress test

The base plan reaches break-even at about $423k of revenue. The biggest downside risk is weaker collections: a 10% shortfall pushes the needed billed revenue to about $470k, and higher overhead or margin pressure lifts it further.

Stress Case	Changed Assumption	Break-Even Revenue	Revenue Gap	Risk Signal
Current plan	No change.	$423k	$0 cushion	Base case reaches break-even in Month 6.
Revenue shortfall	Collections fall 10%, so only 90% of billings are collected.	$470k	$47k gap	Weaker collections force more billed work for the same cash.
Fixed-cost pressure	Monthly overhead rises by $5k from rent, payroll, or insurance.	$493k	$70k gap	Extra fixed cost makes every slow month harder to absorb.
Margin pressure	Variable expense rises from 28% to 33%, cutting contribution margin to 67%.	$455k	$32k gap	Higher contractor use or lower realization pushes break-even up.
Combined pressure	$5k more overhead and 33% variable load.	$529k	$106k gap	This is the downside case where the firm needs much more revenue just to stand still.

What should a legal services founder verify before signing the lease and hiring?

Founder checklist

Confirm you can land about 25 blended matters a month, or roughly 139 billable hours at the Year 1 mix, before you lock in rent and hiring. If the referral pipeline, pricing, and Month 2 cash do not support Month 6 break-even, wait.

1Demand proof25 matters/mo

Verify you can book about 25 blended matters a month, or roughly 139 billable hours at the Year 1 mix, before you sign a lease or add staff.

2Launch CAC$350 CAC

Test the referral and paid pipeline against a $350 customer acquisition cost and a $25,000 Year 1 marketing budget, or intake will miss plan.

3Rate card$220-$350/hr

Check that pricing at $250, $350, $280, and $220 an hour still leaves about 72% after variable costs, so overhead and payroll can get paid.

4Base overhead$8.8K/mo

Confirm fixed nonpayroll overhead stays near $8,800 a month, because that load sets the floor the firm has to cover before it feels profitable.

5Headcount ramp2.5 FTE

Keep Year 1 staffing near 2.5 full-time equivalents, since the associate starts in Month 13 and the marketing hire waits until Month 19.

6Cash reserveMonth 2 / $800K

Make sure Month 2 cash still clears the $800,000 minimum and the $83,500 startup capex, or pause the lease and equipment spend.