Law Firm Budgeting 101: A No‑Stress Playbook for Solo & Small Firms

Oct 02 2025 13:00

By Law Firm Foundry Consulting

 

Running a law firm means wearing the CFO hat—even if numbers aren’t your thing. A clear, lightweight budget turns guesswork into confident decisions about hiring, marketing, pricing, and your paycheck. This guide walks you through a simple approach you can finish in an afternoon (or in one focused session with us) and keep updated in under 30 minutes a month.

Why a Budget Matters (Even If You Hate Spreadsheets)

  • Protect your paycheck. Know exactly what the firm must earn to cover you, your team, and overhead.

  • Ease money stress. Replace anxiety with a short list of monthly targets you can actually hit.

  • Make smarter moves. Decide when to raise rates, if you can hire, and how much to reinvest in marketing with data, not vibes.

You don’t need to become a finance person. You just need a clear picture of what it costs to run your practice—and what it takes to grow with intention.

Step 1: List Your Real Costs

Break expenses into fixed (don’t change much month to month) and variable (tied to caseload or marketing).

Fixed examples: malpractice insurance, software, rent/virtual office, bar dues, phone, bookkeeping.

Variable examples: contractors, referral fees, expert costs, paid ads, court filing & service fees.

Quick tip: Pull the last 3 months of statements and average them—close enough is good enough.

Step 2: Set Your Take‑Home & Profit Targets

What do you want to earn personally ? Add: taxes, retirement, savings buffer, and a profit margin (start at 10–20%). This ensures the business pays you and funds growth.

  • Owner pay (monthly)

  • Taxes & benefits (estimate 25–35%)

  • Profit (10–20%+ for growth and cushion)

Step 3: Do the Break‑Even Math (Simple Version)

Break‑even revenue = Fixed costs + Variable costs + Owner pay + Profit target

Now translate revenue into matters or hours based on how you bill:

  • Flat fee: Required matters per month = Break‑even ÷ Average fee

  • Hourly: Required hours per month = Break‑even ÷ (Billable rate × Realization rate)

  • Contingency/hybrid: Use a rolling 3–6 month average of collected fees to set a conservative monthly target.

Aim for a 10–15% buffer above break‑even to handle slow months.

Step 4: Pressure‑Test Your Pricing

Run your current rates against the target above. If the math says you must work unsustainably to hit your number, you likely need to raise rates , tighten scope, or package services (e.g., tiered flat‑fee bundles, limited‑scope offerings).

Sanity checks:

  • Does your effective hourly (after write‑offs) match your market and experience?

  • Are you under‑pricing initial consults or not charging for them at all?

  • Are flat fees aligned with typical matter effort—not best‑case scenarios?

Step 5: Make a 12‑Month Cash‑Flow Plan

Cash flow—not profit—creates stress. Smooth the ride with:

  • Sinking funds: Park money monthly for annual/quarterly costs (malpractice, taxes, bar dues).

  • Operating reserve: Target 1–3 months of baseline expenses.

  • Collections rhythm: Upfront deposits, clear milestones for flat fees, offer payment plans with autopay.

Step 6: Choose a Tracking Cadence You’ll Actually Do

Keep this lightweight:

  • Monthly: Review bank balance, A/R, pipeline, and progress to revenue target. Adjust marketing and capacity.

  • Quarterly: Evaluate rates, staffing, and big purchases. Re‑set targets if your mix of work changes.

  • Annually: Refresh the budget, renegotiate vendors, prune subscriptions.

Common Pitfalls We See (And Fix)

  • Wishful pricing: Fees set on hope, not hours or scope.

  • Subscriptions creep: $29 tools that quietly turn into hundreds per month.

  • Inconsistent intake: Busy seasons hide gaps. Build pipeline habits now.

  • No reserve: One slow month shouldn’t trigger panic. Automate transfers to savings.

A 60‑Minute Quick‑Start (What We Do in Our Session)

In a focused, one‑hour Zoom, we’ll help you:

  1. Map fixed/variable expenses (no spreadsheet overwhelm).

  2. Set owner pay and a realistic profit goal.

  3. Calculate break‑even and monthly revenue targets.

  4. Pressure‑test pricing and fee structures.

  5. Walk away with a custom one‑page worksheet and a short action plan.

Your First Action Items (Today)

  • List your top 10 expenses and cancel one you don’t need.

  • Pick a revenue target for this month (good‑enough estimate is fine).

  • Decide one pricing tweak (raise consult fee, add a minimum, or scope guardrails).

Ready to Get Clarity on the Money Side?

If you want help building a budget you’ll actually use—and a revenue plan that supports your life and values—schedule a complimentary 30‑minute strategy call. We’ll talk through where you are and make a plan to move forward.

Call: (281) 695‑5897
Email: leigh@lawfirmfoundryconsulting.com
Book a free consultation: From the Services page → Creating Budget & Revenue Goals