Figuring out what to charge is hard when you are just starting out. It is made harder by bar associations, which are wary of allowing any discussion of fees on their discussion lists. (This is primarily due to Goldfarb v. Virginia State Bar, in which the Supreme Court found the Fairfax County Bar Association’s minimum-fee schedule for title examinations constituted illegal price-fixing.) But whether or not you are going to charge hourly rates, you need to know what your time is worth.
You can get a feel for the going rates in your town by asking other lawyers what they charge, but I think it is better to start from your bottom line: what do you need to make, and what hourly rate will get you there. If the market will bear a higher price, great! But if the going rate is lower than you need, you might need to go back and work on your business plan.
To find out the hourly rate you need to charge, use this calculator.
About This Calculator
If you want to know how we arrived at that hourly rate, here’s the equation:
( ( Income / .7 ) + ( Expenses * 12 ) ) / ( ( Hours / 5 / 3 ) * 241 )
In other words, first, we are putting your taxes back in, using 30% as a rough estimate of your tax rate. Then we add expenses. That works out to the total amount of money you need to make in a year, which we divide by the number of hours you want to work in the workdays available in a year (365 days minus 2 weeks for vacation, 100 days for weekends, and 10 federal holidays equals 241 workdays.) divided by three. We divide by three because you have three jobs: lawyering, marketing, and business administration, and each of them take about the same amount of time. In other words, you can only bill about one-third of your time.
This is a rough estimate of the hourly rate you need to charge, obviously. But it’s also a fairly conservative estimate. If you do need to take home the amount you enter in the first box, you really shouldn’t try to bill less than the result you get. The numbers won’t add up.
What to Do if Your Rate Seems Low
Let’s say you’ve been asking around, and most lawyers with your skill level are billing out at $250, but the calculator says you only need to bill yourself out at about $125 to hit your revenue target. You could just bump your rate to $250 in order to go with the market, and just work less. Of course, then you will be competing for the same clients like everyone else billing at that level.
What you should also consider, if your rate seems way lower than what you’ve learned from asking around, is that you might be able to market to a relatively untapped client base. The access-to-justice gap is huge, and if you can charge half the going rate and still meet your income target, why not give it a try? You might have an easier time getting clients that way.
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Last updated August 3rd, 2023
