Looking for a law firm business plan? You're in the right place.
A law firm earns money when work is done and receives it much later, so the plan has to answer questions that a shop or a restaurant never faces. How much cash does the firm need while unbilled work and unpaid invoices pile up? What does malpractice cover cost, and when can the first associate be paid for? How is client money kept out of the firm's own figures? A blank template names none of these.
In this article we'll walk through a complete sample plan for a small-business law firm in Portland, Oregon, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials, ending on a downside case.
Here's what the plan gives you to work from:
- The executive summary: shows how to state the funding request and the three-year result in the first page a lender or partner reads
- The market and competition tables: show how to place a small firm against online document services, other small firms and larger business firms without naming a price you cannot support
- The pricing mix: shows how hourly, flat-fee and monthly retainer work combine, and why each stream pays at a different speed
- The trust-account and insurance sections: show where client money sits, what the Oregon rules require and what cover a lawyer carries, so none of it is guessed
- The start-up budget and Year 1 by month: show how much cash a new practice needs before invoices turn into receipts, and which months lose money
- The five-year profit, cash flow and balance sheet: show the cost of each hire and how long unbilled time and receivables hold cash
- The downside case: gives an answer to "what if fees come in 20% short?", together with the steps the founder takes in response
This firm is fictional, so take what fits a practice of your own and change the rest.
In this plan
If you need a law firm business plan template for your own plan, start it in the Toolkit.
Executive Summary
Wy’East Law Firm is a Portland, Oregon law practice that opens on 1 January 2027. It advises owner-run businesses on forming a company, contracts, employing people and commercial leases. Elena Brandt, an Oregon lawyer, is the sole owner.
The firm needs $235,000: $125,000 of Elena’s savings and a $110,000 bank term loan, with a $50,000 working-capital line of credit sought alongside and left undrawn in the base case. The money goes to a $195,000 cash reserve, $22,000 of equipment and fit-out, and $18,000 of templates, registration and launch work. A law firm is paid after it works, so unbilled time and unpaid invoices are the biggest call on cash after the early losses.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $291,700 | $565,000 | $790,000 |
| Net income after start-up costs | ($101,400) | ($1,847) | $102,425 |
| Closing cash | $77,068 | $43,109 | $102,020 |
Revenue comes from three sources: hourly work, flat-fee matters and monthly counsel plans. Year 1 loses money because the firm pays Elena, a part-time administrator and, from July, a paralegal before the fee base can cover them. A senior associate joins in month 16. Year 2 loses $1,847 and Year 3 is the first profitable year. Year 2 cash is the thin point.
Client money is kept out of the figures. Retainers, advance fees and money held for clients sit in a lawyer trust account and reach the firm’s revenue and cash only when a fee is earned. Malpractice cover is carried through the Oregon State Bar’s Professional Liability Fund, with firm-level cover added on top.
The financials include two stress tests. In the first, fees land 20% under plan; Elena slows hiring, trims marketing and her own pay, keeps the first office and stops distributions, and cash stays positive at every year end. In the second, fees match plan but clients pay late, realisation drops and bad debt rises; cash then falls to about $15,000 even with a response, and the line of credit is drawn.
The Firm and Its Licence
Legal name: Wy’East Law Firm, P.C., an Oregon professional corporation. Owner: Elena Brandt, 100%. Office: 1,100 square feet, leased, in inner Southeast Portland. Opens: 1 January 2027. Before opening: the lease is drafted, the bank is setting up the trust account, and the engagement letter and fee agreement templates are written. Three clients have signed engagement letters to start in January: a restaurant group and a construction subcontractor on hourly work, and a medical practice that moves onto a counsel plan in March. Two accountants and a commercial broker have agreed to refer clients; none has committed to a volume.
Mission
Give Portland’s owner-run businesses a lawyer who prices the common jobs up front and answers the phone between jobs.
Targets through 2030
- 10 monthly counsel-plan clients by December 2027.
- $565,000 of revenue in 2028, with operating profit before interest and tax.
- Profit after tax in 2029, the third year, with the first loan repayment of principal that year.
- A team of three lawyers and two paralegals, with a part-time administrator, by 2030.
Three ways the firm is paid
| Service | How it is priced | Year 1 share of revenue |
|---|---|---|
| Hourly work: employment advice, contract negotiation, early-stage disputes | $325 an hour for Elena; $140 for a paralegal | 46% |
| Flat-fee matters: company formation, employment policies, lease and contract review | $1,900, $3,200 and $2,400 on average | 31% |
| Monthly counsel plans | About $1,200 a month, with up to four attorney hours included | 23% |
The firm does not take personal injury, family, criminal or large litigation matters. A dispute that goes beyond a demand letter or early negotiation is referred to a litigation firm.
Licence, malpractice cover and trust account
Elena holds an Oregon State Bar licence in good standing. Oregon lawyers in private practice with an Oregon office are required to carry primary malpractice cover through the Bar’s Professional Liability Fund (PLF), under PLF Policy 3.180. The firm is planned as an Oregon professional corporation; its own counsel confirms the structure against the Bar’s rules and the Secretary of State’s requirements before filing.
Portland’s Market for Business Legal Work
Oregon businesses that need a lawyer
The SBA’s Office of Advocacy counts 417,747 small businesses in Oregon, 99.4% of the state’s businesses (2025 state profile, as summarised in search results; the SBA document returned an error and was not opened). That total counts sole proprietors with no staff, who rarely keep a lawyer on retainer. The target is narrower: businesses with employees, a lease or customer contracts, and an owner who has no in-house counsel.
Pay for lawyers and paralegals
BLS data show lawyers’ median pay at $159,670 in May 2025, with employment expected to rise 5% between 2025 and 2035. For paralegals and legal assistants it reports a median of $62,890 and projects little or no change over the same decade. The plan follows that split. Lawyers are the scarce, expensive hour, so paralegals take the drafting and document work that does not need a licence, and the senior associate is hired only when the founder’s hours are full.
Why no price list is quoted
No primary source publishes an Oregon price list for small-business legal work, so the plan does not quote one. The firm’s own prices are set against its cost: an hourly rate that covers a lawyer’s pay, insurance and a share of overhead, and flat fees set from the hours each job takes. The rates are tested in the downside case rather than defended with a survey.
Competition
| Alternative | What it offers | Why a client picks it | How Wy’East differs by design |
|---|---|---|---|
| Online document and formation services | Templates and filings for a set fee | Lowest cost, immediate | A lawyer reads the facts, advises and takes responsibility for the result |
| Other solo and small general-practice firms in Portland | Business, estate and property work | Established referrals, personal relationships | Published flat fees for the common jobs and a monthly plan for continuing advice |
| Larger Portland business firms | Deep specialist teams | Capacity for complex deals | Priced and staffed for businesses too small to be a priority there |
| Accountants and registered agents who offer formation | Filing and entity maintenance | Already trusted by the owner | Legal advice on the agreement, the employment terms and the lease |
| The owner, with templates | No fee | Cost and speed | Review before a problem becomes a dispute |
Names and prices are left out because each provider publishes its own and changes them. The rows describe the alternatives; they do not rank them.
SWOT
| Strengths | Weaknesses |
|---|---|
| Ten years of business-law experience, including in-house | One lawyer: when Elena is in a hearing or away, work waits |
| Published flat fees that are easy to buy and to compare | No local brand; every client starts from zero |
| Malpractice cover is a known, published cost: a basic $3,500 assessment per lawyer in 2026 | Year 1 loses money and draws on the reserve |
| Opportunities | Threats |
|---|---|
| Referrals from accountants, bankers and commercial brokers | Online services pressing prices on routine documents |
| Formation clients who later need a monthly plan | Slow-paying clients stretching receivables |
| A second and third lawyer on work Elena cannot reach | A hire leaving, or a claim, in the early years |
Who Hires the Firm
The owner-run business with 2 to 25 employees
Typical clients include a restaurant group, a landscaping contractor, a design studio, a medical practice, a craft manufacturer or a software reseller. The owner knows the trade, has signed a lease or two without a lawyer, and finds out the employment paperwork is thin when the first dispute or audit arrives.
How owners get legal help now
Some use online templates, some ask an accountant, and some call a friend who is a lawyer. The commonest failure is a contract or policy that was never written for the business’s own facts.
The event that sends them to a lawyer
A resignation with a dispute attached, a landlord’s lease with a personal guarantee, a new partner, a customer who will not pay, or a buyer who asks to see the paperwork.
The founder forming a new company
A founder forming an LLC or corporation with a partner usually needs an operating agreement and a written split of ownership. This is where the 22 formation packages in Year 1 come from, and where many monthly plans start.
What owners weigh, in order
A fixed price for a known job. A lawyer who explains the risk in plain language. A prompt reply. A bill with no surprises.
Winning and Pricing Matters
From first call to engagement letter
A 30-minute first consultation, a conflict check, a written fee proposal within two working days, and an engagement letter before any work starts. Elena takes every first consultation in Year 1.
Fifty new clients in 2027
About 50 new clients from about 105 first consultations, a close rate of 48%. About 34 of the 50 begin with a flat-fee matter, which accounts for 40 flat-fee matters because some clients buy more than one. The other 16 begin with hourly work. Ten of the 50 move onto a monthly counsel plan by December.
| Lead source | New clients | Share |
|---|---|---|
| Referral partners (accountants, bankers, commercial brokers, insurance agents) | 20 | 40% |
| Search ads and online profiles | 11 | 22% |
| Workshops for business owners | 9 | 18% |
| Chamber and association events | 7 | 14% |
| Elena’s own contacts | 3 | 6% |
The funnel after the first year
Year 1 revenue of $291,700 is the most aggressive number in the plan for a practice with no prior client base. It rests on the three signed clients, the referral partners and 50 new clients won in the year, and the stress cases show what happens if it falls short. After Year 1 the plan expects 35% of the prior year’s hourly and flat-fee revenue to repeat from existing clients (a planning figure, not a statistic), plan fees continue, and the rest comes from new clients.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| First consultations | 105 | 129 | 146 | 158 | 167 |
| New clients (48% close rate) | 50 | 62 | 70 | 76 | 80 |
| Marketing spend per new client | $760 | $516 | $514 | $526 | $525 |
| Revenue carried from earlier clients | – | $229,700 | $366,100 | $490,000 | $608,900 |
| Revenue from clients won in the year | $291,700 | $335,300 | $423,900 | $495,000 | $511,100 |
| Revenue per new client | $5,834 | $5,408 | $6,055 | $6,513 | $6,389 |
Year 2 revenue is 94% above Year 1 mostly because Year 1 is a partial year: the plan clients, the paralegal and the pipeline all start from zero, and the 10 plan clients alone bring $148,300 in Year 2.
Fee schedule
Flat fees are set from the hours a job takes. A formation package at $1,900 includes the operating agreement or bylaws and the ownership records, and excludes government filing fees, which the client pays. An employment policy package averages $3,200, and a lease or contract review averages $2,400. Hourly rates are $325 for Elena, $265 for the senior associate and $140 for a paralegal. Fees hold through Year 1 and rise 3% a year after that.
The monthly counsel plan
A plan costs about $1,200 a month and includes up to four attorney hours, a same-day reply on routine questions and a yearly review of the client’s contracts. Unused hours do not roll over, and extra work is billed at the standard rate. The plan fee is paid into the trust account at the start of each month and moved to the firm’s operating account at month end, once it is earned.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Counsel-plan clients at year end | 10 | 15 | 19 | 23 | 26 |
Plan clients are shown net of an annual loss of about one client in eight. Growth slows after Year 2 because lawyer hours, not demand, become the limit.
Where the Referrals Come From
Marketing spend by channel
Marketing costs $38,000 in 2027: $12,000 of launch work paid from the start-up capital and $26,000 of running spend. That takes 13% of the year’s revenue, then 4.6% in Year 3 and 3.8% in Year 5 as referrals and plan renewals do more of the work. Divided among about 50 new clients, it comes to roughly $760 each, about 40% of one formation package.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website and brand (launch) | $9,500 | A clear site with fixed prices, a booking link and a page for each of the four services |
| Photography and directory profiles (launch) | $2,500 | A complete, consistent listing wherever a business owner searches for a lawyer |
| Referral partner programme | $5,000 | Coffees, a one-page referral guide and a thank-you for each introduction; about 20 clients |
| Search ads and online profiles | $7,500 | Searches such as "business lawyer Portland" and "employment handbook Oregon"; about 11 clients |
| Workshops for business owners | $4,500 | Monthly sessions on forming a company, hiring and signing a lease; about 9 clients |
| Chamber and association events | $3,500 | Memberships and a table at two events; about 7 clients |
| Website content and email | $3,500 | One practical guide a month, aimed at the questions owners ask before a hire or a lease |
| Client newsletter and thank-yous | $2,000 | A quarterly note to clients and referrers that prompts repeat work and introductions |
Milestones
- January 2027: website live, trust account open, first engagement letters signed.
- July 2027: paralegal joins; monthly revenue passes $28,000.
- December 2027: 10 counsel-plan clients and $34,850 of monthly revenue.
- April 2028: senior associate joins, with work already waiting for the first week.
How the Practice Runs
Life of a matter
- Conflict check and engagement letter before any work.
- Flat-fee work is paid into the trust account and moved to the firm in stages as each stage is finished.
- Hourly work is recorded in six-minute units in the practice-management system and invoiced within ten days of month end, payable in 30 days.
- A lawyer reviews and signs off every document before it leaves the firm.
Client money and the trust account
Money that belongs to clients or others is not firm income and never enters the firm’s revenue, cash or balance sheet. Oregon Rule of Professional Conduct 1.15-1, in the version corrected effective 1 May 2025, requires funds held for clients, including advances for costs and expenses, to be kept in a separate lawyer trust account, in an interest-bearing account at a financial institution chosen with reasonable care. Records of the funds must be kept for five years after the representation ends. Legal fees and expenses paid in advance go into the trust account and are withdrawn only as earned or incurred, unless the fee is a properly drawn "earned on receipt" or nonrefundable fee under Rule 1.5(c)(3).
The firm adopts the stricter practice. Every flat fee and counsel-plan payment is deposited in trust and drawn as it is earned, and none relies on the earned-on-receipt exception. The consequence for the financials is that revenue is recognised, and cash reaches the firm, at the point the fee is earned, not when the client pays. Costs the firm advances for a client, such as recording or filing fees, are billed back at cost and left out of both revenue and expenses. Interest on the trust account is not firm income in the model. An outside bookkeeper reconciles the trust account each month, at $7,200 in Year 1. The firm checks the current text of Rules 1.5 and 1.15-1 on the Bar’s site before opening the account.
Open item: IOLTA. Rule 1.15-2 shows as reserved in the version of the rules read for this plan. The Bar’s current requirements for designating an account for pooled client funds, and for where its interest goes, were not located and are unresolved here. The firm confirms them with the Bar before opening the account.
Malpractice cover and other policies
The PLF’s 2026 primary plan gives each covered lawyer $300,000 per claim and $300,000 for all claims each year, with defence costs counted inside those limits, plus a $75,000 expense allowance for defence costs and no deductible. The 2026 assessment is $3,500 for each licensee. The PLF also offers optional excess cover for firms, above the primary limit. The model carries one $3,500 assessment per lawyer in the year the lawyer joins, sets the 2027 figure equal to 2026, and adds firm excess cover, general liability, cyber and workers’ compensation cover, and key-person disability cover on Elena at about $2,400 a year. Insurance is $11,400 in Year 1, $16,600 in Year 2 and $22,900 by Year 5. The excess, general and disability premiums are planning estimates, not quotes.
Work in progress and receivables
Fees are earned before they are collected, so the model holds cash against them. The balance combines time worked but not yet billed and invoices not yet paid. Hourly work takes about 100 days from time recorded to cash: a month of work before billing, 30-day terms and slow payers. Flat fees and plan fees are paid into trust before the work and drawn as they are earned, so they leave almost no receivable. Weighted by revenue, the blend is about 49 days in Year 1 and 45 in Year 5, and the financial model holds 48 throughout. The balance below is calculated on average annual revenue. On the December 2027 run-rate of $34,850 a month, Year 1 receivables would be about $16,600 higher, so Year 1 closing cash is flattered by about that amount.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Unbilled time and receivables at year end | $38,361 | $74,301 | $103,890 | $129,534 | $147,288 |
Billing discipline is the control. Invoices go out monthly, reminders at 15 and 30 days, and the firm pauses non-urgent work on a matter more than 60 days overdue, as its engagement letter allows. A bad-debt allowance of 1.5% of revenue covers fees billed and never collected (1.6% in Year 1), on top of the 88% realisation on time worked.
Hours available against revenue
Revenue has to be earned by hours. The table shows the planned hours worked on client matters by group, including the time spent on flat-fee and counsel-plan work, and the revenue each hour brings in.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Founder hours | 865 | 1,150 | 1,150 | 1,150 | 1,150 |
| Associate hours | – | 700 | 1,300 | 1,900 | 2,550 |
| Paralegal hours | 520 | 1,000 | 1,500 | 2,100 | 2,200 |
| Total hours | 1,385 | 2,850 | 3,950 | 5,150 | 5,900 |
| Revenue per hour worked | $211 | $198 | $200 | $191 | $190 |
| Revenue as a share of those hours at collected rates | – | 89% | 91% | 87% | 83% |
Elena’s hours stop at 1,150 because management, sales and supervision take the rest. That is a high figure for a lawyer who also runs the firm, and it is a planning figure. It holds only because Elena takes no court appearances, the administrator and paralegal do intake and drafting, and flat-fee matters use templates. If she bills 1,000 hours instead, about $44,000 of Year 2 revenue moves to the associate and paralegals or is lost, which is inside the 20% fee stress. The collected rate is the standard rate less 12% for write-downs: $286 for Elena, $233 for the senior associate and $123 for a paralegal in Year 1. The gap between revenue and the hours at those rates is time that goes unbilled to leave, training and jobs that take longer than the fee allows. Revenue per hour falls over time because paralegals do a larger share of the hours.
Practice software
Practice-management and trust-accounting software, document assembly, e-signature, a secure client portal, legal research and password and email security. Annual spend grows from $11,000 to $28,000 by Year 5.
Office and lease
1,100 square feet in inner Southeast Portland, at a full-service rent near $34 a square foot ($37,400 in Year 1), with an office for each lawyer, a shared paralegal desk and a small meeting room. The lease runs five years and Elena guarantees it personally. When the second associate arrives in Year 4, the firm takes about 1,400 square feet at roughly $36.
Hiring path
Elena and a part-time administrator at launch, a paralegal from month 7, a senior associate from month 16, a second paralegal from month 30 and a second senior associate from month 42. The stress cases show which hires are delayed or dropped if fees fall short. Associates are hired with four to six years of experience so that they can work with limited supervision while Elena is selling.
Standing obligations
- Oregon State Bar licence and annual fee ($683 for an active member in 2026) for each lawyer, and continuing legal education.
- PLF primary coverage for each lawyer, and an annual exemption request only where cover is not required.
- A lawyer trust account, monthly reconciliation and the five-year record rule.
- Written engagement letters and fee agreements for every client.
- Conflict-checking at intake and a written file-retention policy.
Vendors and landlord
Software vendors, an outside bookkeeper, a commercial landlord and an insurance broker. None is hard to replace.
Management Team
Elena Brandt, founder and managing attorney
Elena has ten years in practice. She spent four years as an associate at a mid-size Portland business firm and six as in-house counsel at a regional building-supply wholesaler, where she negotiated supplier contracts, handled employment questions and managed the company’s outside counsel. She has been an Oregon State Bar member since 2017 with no disciplinary history. The $125,000 she invests took ten years to save. She left to run a smaller practice with direct contact with owners.
What Elena has not done before
She has not built a client base from nothing, has not hired lawyers and has little courtroom experience. The plan answers with a fixed weekly referral schedule, a recruiting budget of $5,500 in Year 2 and a standing referral of any contested case to a litigation firm.
If the only lawyer is unavailable
Elena is the only lawyer until month 16. A reciprocal arrangement with a nearby small firm covers urgent matters if she is ill, key-person disability cover is in the insurance line, and the PLF’s cover applies to her work throughout.
Advisers
A retired managing partner of a Portland firm reviews the first-year numbers each quarter, and an outside accountant prepares the tax return.
Conflicts and the former employer
Elena’s former employer, the building-supply wholesaler, is a former client for conflict purposes, and Oregon’s rule on duties to former clients (Rule 1.9) governs what she may do against it. The firm’s conflict list names the wholesaler, its principal suppliers and its officers from day one. The firm does not act against the wholesaler in a matter related to her work there, does not use its confidential information, and does not count on the wholesaler for clients. A conflict found at intake is declined, not managed around.
Lender terms and collateral
Elena is the sole shareholder of Wy’East Law Firm, P.C. and guarantees the loan personally. The bank requires quarterly accounts and a monthly trust-account reconciliation certificate, which shows that client funds sit apart from its security.
Questions a lender asks
| Question | Answer in the plan |
|---|---|
| What work is already signed? | Three engagement letters for January, and referral agreements with two accountants and a commercial broker, with no volume committed. Year 1 revenue beyond that is a forecast. |
| What does the bank hold as security? | A personal guarantee and security over firm assets, including receivables. Equipment is $22,000. Client trust funds are not available. |
| What if Elena is unable to work? | Key-person disability cover, a reciprocal arrangement with a nearby firm and PLF cover. Before month 16 there is no second lawyer. |
| What if cash is short? | A $50,000 working-capital line, left undrawn in the base case, and a hiring test: the associate starts only if cash on 1 March 2028 is above $60,000. |
| What does Year 2 look like month by month? | The model has no monthly view of Year 2. The cash section estimates a mid-year low of $15,000 to $25,000 under the year-end figure. |
| Who is at risk of a conflict? | The former employer and its counterparties, handled as above. |
Financial Model
The model runs five years, with monthly detail for Year 1 and annual totals after it. The inputs come first so each figure can be traced. Revenue means fees earned; money held for clients in the trust account appears in no table.
What the launch costs and who pays
| Use of funds | Amount |
|---|---|
| Laptops, monitors, scanner, phones, secure network | $12,000 |
| Office furniture and fit-out | $10,000 |
| Professional corporation registration and trust-account set-up | $1,500 |
| Engagement and fee agreement templates, accountant set-up, lease review | $4,500 |
| Launch: website, branding, directory profiles | $12,000 |
| Cash reserve for unbilled work and receivables | $195,000 |
| Total uses | $235,000 |
| Source of funds | Amount |
|---|---|
| Founder's savings | $125,000 |
| Bank term loan | $110,000 |
| Total sources | $235,000 |
Savings from Elena cover $125,000 (53%) and a $110,000 bank loan covers the rest: seven years, 10.25%, interest only for the first 24 months. The rate is a planning figure rather than a lender's quote, and approval is not guaranteed. The expected route is a conventional bank term loan to a professional practice, with an SBA-guaranteed loan as the alternative; SBA publishes its own programme terms. The expected security is a personal guarantee plus a charge over firm assets, receivables included. The $22,000 of equipment is a small part of that security, and money in the client trust account is not available to a lender because it belongs to clients. A $50,000 working-capital line of credit is sought alongside the loan. The line is not modelled and stays undrawn in the base case; the billing stress below shows the year it would be needed. The $195,000 reserve is the cash left after equipment and start-up costs. It falls to $77,068 at the end of Year 1 and $43,109 at the end of Year 2. Across the two years the firm loses $85,247 before start-up costs and ties up $74,301 in unbilled work and unpaid invoices, so the working-capital drain is the second-largest use of the reserve after the operating losses.
What the figures rest on
- Hourly work bills at $325 an hour for Elena, $265 for the senior associate and $140 for a paralegal. Realisation is set at 88%: of every $100 of time at standard rates, $88 is billed and kept after write-downs and discounts. The collected rates are $286, $233 and $123 an hour. Year 1 hourly work is 370 hours of Elena's time and 232 hours of paralegal time.
- Flat fees are $1,900 for a company formation package, $3,200 for an employment policy package and $2,400 for a lease or contract review. Year 1 holds 22 formations, 8 employment packages and 10 lease or contract reviews, 40 matters in all. Volumes in Years 2 to 5 are 30, 34, 36 and 38 formations; 14, 18, 21 and 24 employment packages; and 18, 24, 28 and 30 lease reviews. Government filing fees are paid by the client and are not revenue.
- Monthly counsel plans average $1,200, with up to four attorney hours included and about 3.5 used. The firm ends Year 1 with 10 plan clients and then 15, 19, 23 and 26. Those figures are net of a loss of about one client in eight each year. Plan fees are paid into trust and drawn monthly as earned.
- Fees step up 3% a year from Year 2. Elena works about 865 hours on client matters in Year 1 and 1,150 a year after that; paralegal and associate hours are in the capacity table. Revenue is 83% to 91% of what the planned hours would earn at collected rates in Years 2 to 5, which leaves room for unbilled time.
- Unbilled time and receivables are modelled as 48 days of revenue. Hourly work takes about 100 days from time recorded to cash: a month of work before billing, 30-day terms and slow payers. Flat fees and plan fees are paid into trust before the work and drawn as they are earned, so they leave almost no receivable; flat fees are given 10 days and plans none. Weighted by revenue, the blend is about 49 days in Year 1 and 45 in Year 5, and the model holds 48. That ties up $38,361 at the end of Year 1 and $147,288 by Year 5. The Year 1 balance is calculated on average revenue; on the December 2027 run-rate of $34,850 a month it would be about $16,600 higher, so Year 1 closing cash is flattered by about that amount. A bad-debt and write-off allowance of about 1.5% of revenue is charged separately. Direct costs of about 2.2% of revenue are card and bank fees across all receipts.
- Client money is excluded. Retainers, advance fees, advances for costs and funds held for others stay in the lawyer trust account and are not revenue, cash or liabilities in this model. A fee moves to the firm when it is earned. Costs advanced for clients are billed back at cost and left out of both revenue and expenses. Interest on the trust account is not firm income.
- On-costs are 27% of wages and cover payroll taxes, health cover, Oregon paid-leave and unemployment contributions, workers' compensation and a retirement match (15% for the part-time administrator). The personnel table shows launch wages; 3% annual rises appear as their own line from Year 2.
- The office is 1,100 square feet in inner Southeast Portland at about $34 a square foot a year, full-service, moving to roughly 1,400 square feet at about $36 in Year 4. Insurance is one PLF assessment per lawyer at the 2026 figure of $3,500, with firm excess, general liability, cyber, workers' compensation and key-person disability cover on Elena added at planning estimates (about $2,400 a year for the disability policy).
- Tax combines the 21% federal corporate rate with Oregon's 6.6% corporate excise rate (the Department of Revenue's rate on the first $1 million of taxable income). The engine deducts the Oregon tax before applying the federal rate, so the combined rate is about 26.2%: Year 4 tax of $32,686 is on pre-tax profit of $124,688. Year 3 uses all $85,247 of the Year 1 and 2 losses against $108,527 of pre-tax profit, leaving $23,280 taxable. The model applies the carryforward in full and tests no statutory limit on loss offset; the accountant confirms the rule. An S corporation election, common for professional corporations, would push this tax onto Elena's personal return, so corporate rates are a cautious stand-in.
- Two Oregon taxes are not computed. The Department of Revenue says C corporations pay the minimum tax or the calculated tax, whichever is greater, and does not state the C corporation minimum on that page. The Corporate Activity Tax requires registration within 30 days of reaching $750,000 of commercial activity, which Year 3 revenue of $790,000 passes. The tax is $250 plus 0.57% of taxable activity over $1 million, after a 35% subtraction for cost inputs or labour costs, whichever is greater. Year 4 revenue of $985,000 is within $15,000 of the $1 million line, so a better year or a price rise would cross it early, and Year 5 revenue of $1,120,000 is above it. On about $706,000 of Year 5 labour costs the subtraction would take taxable activity below $1 million, so no tax is modelled. The accountant confirms this each year.
- Distributions of $40,000 (Year 4) and $60,000 (Year 5) follow loan principal payments and come out of surplus cash only.
Fees earned by stream
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Hourly legal work (employment, contracts, disputes) | $134,300 | $231,000 | $339,000 | $433,000 | $474,000 |
| Flat-fee matters (formation, policies, leases) | $91,400 | $149,000 | $191,000 | $222,000 | $249,000 |
| Monthly counsel plans | $66,000 | $185,000 | $260,000 | $330,000 | $397,000 |
| Total revenue | $291,700 | $565,000 | $790,000 | $985,000 | $1,120,000 |
| Growth on prior year | – | 94% | 40% | 25% | 14% |
Hourly work stays the biggest line but slips from 46% of revenue in Year 1 to 42% by Year 5. Counsel plans grow from 23% to 35%, and they are the line the firm most wants: they repeat monthly and are paid in advance into trust, so they collect fastest. Flat fees carry the launch, because a formation or a policy package can be sold in one meeting and is paid before the work is done.
The first twelve months
| Month | Hourly legal work (employment, contracts, disputes) | Flat-fee matters (formation, policies, leases) | Monthly counsel plans | Total revenue | EBITDA |
|---|---|---|---|---|---|
| Jan 2027 | $4,000 | $1,900 | $0 | $5,900 | ($23,695) |
| Feb 2027 | $5,700 | $4,300 | $0 | $10,000 | ($19,685) |
| Mar 2027 | $7,450 | $9,400 | $1,200 | $18,050 | ($11,812) |
| Apr 2027 | $8,600 | $9,400 | $2,400 | $20,400 | ($9,514) |
| May 2027 | $9,150 | $9,400 | $3,600 | $22,150 | ($7,802) |
| Jun 2027 | $9,700 | $9,400 | $4,800 | $23,900 | ($6,091) |
| Jul 2027 | $13,400 | $9,400 | $6,000 | $28,800 | ($1,298) |
| Aug 2027 | $14,600 | $9,400 | $7,200 | $31,200 | $1,049 |
| Sep 2027 | $15,200 | $6,200 | $8,400 | $29,800 | ($320) |
| Oct 2027 | $15,200 | $9,400 | $9,600 | $34,200 | $3,983 |
| Nov 2027 | $15,450 | $6,200 | $10,800 | $32,450 | $2,271 |
| Dec 2027 | $15,850 | $7,000 | $12,000 | $34,850 | $4,619 |
Revenue builds from $5,900 in January to $34,850 in December as the pipeline fills, the paralegal joins in July and counsel plans accumulate. Operating profit before interest, depreciation and tax (EBITDA) is negative in every month apart from August, October, November and December. September is close to level, at a loss of $320, because the plan has fewer new flat-fee matters in September and November. The lowest month-end cash balance is reached at the end of Oct, at about $56,000 after allowing for the 48 days it takes for work to become cash.
Staffing and payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and managing attorney | $130,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Office administrator (part time, 20 hours a week) | $29,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Paralegal | $64,000 | Month 7 | 1 | 1 | 1 | 1 | 1 |
| Senior associate attorney | $105,000 | Month 16 | – | 1 | 1 | 1 | 1 |
| Second paralegal | $64,000 | Month 30 | – | – | 1 | 1 | 1 |
| Second senior associate attorney | $105,000 | Month 42 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $239,090 | $379,743 | $460,493 | $572,148 | $627,710 |
Elena starts alone with a part-time administrator. The paralegal joins in month 7, as the first plan clients arrive, the senior associate in month 16, a second paralegal in month 30 and a second senior associate in month 42. Elena draws $130,000 from the first month, so every profit line is struck after her pay. The paralegal's $64,000 sits near the BLS national median of $62,890. The associates' $105,000 and Elena's $130,000 are planning figures: the BLS median of $159,670 for lawyers covers every level and employer, so it is not used as a benchmark here. The administrator's $29,000 is a part-time salary.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $291,700 | $565,000 | $790,000 | $985,000 | $1,120,000 |
| Direct costs (card and bank fees) | ($6,406) | ($12,409) | ($17,350) | ($21,633) | ($24,598) |
| Gross profit | $285,294 | $552,591 | $772,650 | $963,367 | $1,095,402 |
| Payroll incl. on-costs | ($239,090) | ($379,742) | ($460,493) | ($572,147) | ($627,710) |
| Rent | ($37,400) | ($38,500) | ($39,700) | ($50,800) | ($52,300) |
| Utilities | ($2,400) | ($2,500) | ($2,600) | ($3,100) | ($3,200) |
| Marketing | ($26,000) | ($32,000) | ($36,000) | ($40,000) | ($42,000) |
| Insurance | ($11,400) | ($16,600) | ($17,200) | ($22,100) | ($22,900) |
| Professional fees | ($5,500) | ($6,500) | ($7,500) | ($8,500) | ($9,000) |
| Software subscriptions | ($11,000) | ($16,000) | ($20,000) | ($25,000) | ($28,000) |
| Outside bookkeeping and monthly trust-account reconciliation | ($7,200) | ($8,400) | ($9,600) | ($10,800) | ($12,000) |
| Bar dues, continuing legal education and licences | ($3,200) | ($4,800) | ($5,200) | ($7,000) | ($7,600) |
| Phones, supplies and postage | ($3,600) | ($4,400) | ($5,200) | ($6,000) | ($6,500) |
| Equipment replacement and new-hire kit | $0 | ($4,500) | ($4,000) | ($7,500) | ($4,500) |
| Recruiting and onboarding | ($2,000) | ($5,500) | ($2,500) | ($5,500) | ($1,000) |
| Bad debt and write-off allowance | ($4,800) | ($8,500) | ($11,800) | ($14,800) | ($16,800) |
| Annual pay raises (3% a year) | $0 | ($11,392) | ($28,044) | ($53,054) | ($78,783) |
| EBITDA | ($68,296) | $13,257 | $122,812 | $137,065 | $183,109 |
| Depreciation | ($3,829) | ($3,829) | ($3,829) | ($3,829) | ($3,829) |
| Interest | ($11,275) | ($11,275) | ($10,456) | ($8,549) | ($6,436) |
| Income tax | $0 | $0 | ($6,103) | ($32,686) | ($45,309) |
| Net income before start-up costs | ($83,400) | ($1,847) | $102,425 | $92,002 | $127,535 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($18,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($101,400) | ($1,847) | $102,425 | $92,002 | $127,535 |
Year 1 closes with a loss of $83,400 before start-up costs and $101,400 after them. Year 2 loses $1,847 as the senior associate joins in month 16 and takes time to fill. Year 3 is the first year of real margin, at 15.5% EBITDA. Year 4 dips to 13.9% as the second senior associate, the bigger office and compounding pay raises arrive in the same year; Year 5 reaches 16.3%, the highest of the five. Net income is lower in Year 4 than in Year 3 mainly because income tax rises from $6,103 to $32,686 once the early losses are used up. Income tax is zero in Years 1 and 2.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($135,932) | ($33,959) | $76,664 | $70,187 | $113,610 |
| Equipment and fit-out | ($22,000) | $0 | $0 | $0 | $0 |
| Funding received | $235,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | $0 | ($17,752) | ($19,660) | ($21,773) |
| Owner distributions | $0 | $0 | $0 | ($40,000) | ($60,000) |
| Net change in cash | $77,068 | ($33,959) | $58,912 | $10,527 | $31,837 |
| Closing cash | $77,068 | $43,109 | $102,020 | $112,547 | $144,385 |
Year-end cash never goes below zero. Its low point is $43,109 at the end of Year 2, after receivables grow by $35,941 in the year and the associate has been on payroll for nine months. Two limits make that figure look safer than it is. First, the Year 1 closing balance is flattered by about $16,600 for the reason given in the inputs above. Second, the model has no monthly view of Year 2. The associate starts in April 2028, and the first three months of the associate's pay with on-costs come to about $33,300, paid before the first associate fees reach cash about 100 days after the work. The low point is therefore likely to fall in mid-Year 2, perhaps $15,000 to $25,000 under the year-end figure. That is an estimate, not an engine output. It leaves cash positive but thin, which is why the line of credit is sought, and why the hire is made only if cash on 1 March 2028 is above $60,000 and the previous quarter's fees were on plan. Loan principal repayments begin in Year 3, after two years of interest only. Distributions begin in Year 4.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $77,068 | $43,109 | $102,020 | $112,547 | $144,385 |
| Accounts receivable | $38,361 | $74,301 | $103,890 | $129,534 | $147,288 |
| Equipment and fit-out (net) | $18,171 | $14,343 | $10,514 | $6,686 | $2,857 |
| Total assets | $133,600 | $131,753 | $216,425 | $248,767 | $294,530 |
| Bank loan | $110,000 | $110,000 | $92,248 | $72,588 | $50,815 |
| Paid-in capital | $125,000 | $125,000 | $125,000 | $125,000 | $125,000 |
| Retained earnings | ($101,400) | ($103,247) | ($822) | $51,180 | $118,715 |
| Total liabilities and equity | $133,600 | $131,753 | $216,425 | $248,767 | $294,530 |
Margins, break-even and loan cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -23.4% | 2.4% | 15.6% | 13.9% | 16.4% |
| Net margin (before start-up costs) | -28.6% | -0.3% | 13.0% | 9.3% | 11.4% |
| Payroll incl. pay raises as share of revenue | 82% | 69% | 62% | 63% | 63% |
| Revenue per full-time equivalent at year end | $116,680 | $161,429 | $175,556 | $179,091 | $203,636 |
| Average monthly revenue | $24,308 | $47,083 | $65,833 | $82,083 | $93,333 |
| Monthly revenue needed to cover operating costs | $30,128 | $45,954 | $55,369 | $70,405 | $77,732 |
| Debt service cover (EBITDA / interest + principal) | -6.1x | 1.2x | 4.4x | 4.9x | 6.5x |
Break-even here means average monthly revenue at or above the "needed" row of the ratios table. Year 1 averages $24,308 against $30,128 needed, a loss. Year 2 averages $47,083 against $45,954, ahead by about $1,100 a month, a margin a bank would watch closely. Debt service cover is negative in Year 1 (a loss while interest is paid), 1.2x in Year 2 when only interest falls due, and 4.4x in Year 3 once principal starts.
Two stress tests: fees 20% short, and clients paying late
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $233,360 | $452,000 | $632,000 | $788,000 | $896,000 |
| Net income before start-up costs | ($102,239) | ($3,279) | $39,343 | $69,740 | $117,760 |
| Net income after start-up costs | ($120,239) | ($3,279) | $39,343 | $69,740 | $117,760 |
| Closing cash | $65,901 | $37,698 | $39,446 | $72,840 | $158,453 |
Two stress cases follow. The first takes 20% off every revenue line in every year. Elena's response: the senior associate and the second paralegal start six months later, the second senior associate is not hired, marketing is cut by 20%, Elena takes a 20% pay cut, the firm keeps its first office and distributions stop. With those moves cash stays positive at every year end, never below $37,698, and profit returns from Year 3. Year 2 comes out slightly worse than the base case, a loss of $3,279 against $1,847, because the lost fees outweigh the savings; the response protects cash, not Year 2 profit. Equity ends Year 1 at $4,761, so thin that the firm would speak to the bank before a covenant date. Year 5 cash beats the base case only because nothing is distributed and the second associate is never hired. Without the response, closing cash in the same case is ($109,608) at the end of Year 2.
The second case tests the risk that most often hurts a law firm: the work is done and the money does not arrive. A fee cut flatters cash, because smaller revenue means smaller receivables. This case keeps revenue at plan and changes how fees convert to cash. Hourly realisation falls from 88% to 76%, hourly work takes about 150 days to reach cash so the blended lockup is 72 days instead of 48, and bad debt rises to 5% of revenue from about 1.5%. The response keeps every hire, because the hires earn the revenue, and takes the founder pay cut, the marketing cut, no distributions and no larger office.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Net income after start-up costs, billing stress, no response | ($128,308) | ($51,079) | $37,579 | $35,009 | $73,167 |
| Closing cash, billing stress, no response | $34,592 | ($63,968) | ($81,791) | ($138,550) | ($168,855) |
| Net income after start-up costs, billing stress with the response | ($90,088) | ($10,669) | $79,810 | $66,442 | $95,120 |
| Closing cash, billing stress with the response | $72,812 | $14,662 | $39,070 | $53,744 | $105,392 |
With the response, cash stays positive but falls to $14,662 at the end of Year 2, and the firm loses $10,669 that year. That is the case in which the $50,000 line of credit is drawn. Without the response, cash is ($63,968) at the end of Year 2, more than the line would cover. The base case is therefore sound against a drop in fees, and weaker against a slowdown in payment.
Sources
Each entry says if the page could not be opened. Rule 1.15-2 and the Bar’s IOLTA requirements are not covered by any source here.
- Oregon State Bar Professional Liability Fund, Do I need coverage?, What is my coverage? and Assessments and exemptions (2026 primary coverage, limits and $3,500 assessment).
- Oregon State Bar, Oregon Rules of Professional Conduct, as corrected effective May 1, 2025, Rule 1.15-1.
- Oregon State Bar, Licensing fee FAQ (2026 active member fee of $683, read from the page).
- Bureau of Labor Statistics, Lawyers and Paralegals and legal assistants, Occupational Outlook Handbook, May 2025 wage data.
- SBA Office of Advocacy, Oregon 2025 state profile. Figures as summarised in search results; the PDF returned an error and was not opened.
- Oregon Department of Revenue, Corporation excise and income tax (6.6% on the first $1 million of taxable income and the minimum-tax wording, read from the page) and Corporate Activity Tax.
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