How to Break Down Your Budget

Budgets are vital to the health of your business. However, they can become complex when creating a comprehensive one. Read 8 Figure Firm’s blog to learn more about how to break down your budget.

What is a budget?

Budgets serve as financial roadmaps for your organization based on your projected revenue and expenses across the year. They offer numerous benefits and help keep your team aligned while also serving as a foundation to measure your company’s goal-reaching capability. A comprehensive budget will include revenues, sales, payroll, marketing spending, and other expenses and provide a document for reference every month to keep your business’s finances aligned.

How do you break down your budget?

It can be overwhelming to build out your budget. But with our recommendations, you can easily calculate your revenue and expected expenses. Following a template each time you create your budget puts you on the right track toward building a predictable eight-figure business. Let’s look at the four main areas you should focus on when breaking down your budget.


Calculating your expected revenue for the year is often the trickiest part of breaking down your budget. Your firm’s goal should ultimately be to generate predictable revenue each month or predictable revenue during different times of the year. 

First, look at your marketing plan to calculate the baseline expected revenue for each month. To do this, take the monthly marketing spend and divide it by the cost of acquisition for a case. This equals the number of new clients you can expect to generate with your marketing. Next, take the number of new clients and multiply that number by your average fee. This equals your expected revenue for the month.

However, we know a few factors can make this estimate difficult to calculate. Here are some to consider:

  • The seasonal flow of your firm
  • The time on desk for a typical case
  • If you work on contingency or cash flow 


When looking at seasonal flow, reference your revenue from the past few years to see if there are any patterns. Ideally, you’ll be able to determine which months are slow and which are busy. If certain times of the year are consistently busier or slower than others, you can use past years’ revenue to estimate the revenue for those months in the upcoming year. 

If you work on contingency, that will affect how you estimate your revenue. You’ll need to look at the typical time on desk for your cases, the average number of cases settled, and the typical settlement amount. Once you have these numbers, you can begin to map out when you can expect to receive payment from cases. 

For example, let’s say you discover the following details:

  • You typically sign ten clients in January
  • Have a 70% settlement rate at an average of $20,000 a settlement
  • Cases take ten months to settle


With this information, you can expect seven of your ten clients to settle by October of that year, and these cases would generate a total of $140,000 in settlements. This is just an example, so it’s important to note that your numbers will vary depending on your firm. 


An important and large part of your firm’s annual budget is payroll. When calculating this section of your budget, make sure to reference your hiring plan. Your hiring plan should show you what positions you will need to hire over the next year and when you plan to hire those new employees.

In this section, you’ll want to start with all of your active payroll expenses. You can break these down by role or by the department. Your active payroll expenses will be what you’re paying all of your current employees. We recommend dividing the annual salary to calculate the monthly cost to examine your monthly payroll expenses best. 

Next, you’ll need to look at when you plan on hiring new employees and how much those employees will cost. If you expect to hire another legal assistant in July at a monthly salary of $2,000, you will need to add that additional $2,000 to the payroll expenses starting in July until the end of the year.

It’s crucial that you take the time to calculate your expected new employees in your hiring plan so that these additional expenses down the road don’t catch you off guard. Part of creating a predictable business is learning how to calculate predictable growth. 


The next part of your budget will be your marketing expenses. These should already be laid out clearly in your strategic marketing plan. Your marketing plan will outline what you plan to spend your money on based on your specific marketing goals. Your marketing might be spent on a variety of the following: 

  • LSA
  • Paid Social Media
  • Organic Social Media
  • PPC
  • SEO
  • Content Creation
  • Customer Journey
  • Referral Strategy


We recommend that you break down the marketing portion of your budget by each marketing initiative you have created. Then you can easily plug in how much you’ve allotted to spend each month on each of those initiatives. Check your budget throughout the year to see how your firm’s actual marketing expenses compare to what you originally budgeted. 


Lastly, you want to take a look at your operational expenses. These costs will come from a multitude of sources:

  • Software
  • Technology
  • IT, Internet, and Phone Service
  • Office Supplies
  • Miscellaneous Fees
  • State and Local Bar Dues


These are just a few of the possible expenses you can expect to include in this section of your budget. Take a close look at every department to ensure you know all software, items, or services needed by each team.

Speak to the Experts

It can be difficult creating a budget for your business. However, creating a comprehensive budget helps provide direction for you and your executive team. It also offers multiple benefits to your business and can reduce issues along the way. 

Although they have many benefits, it can be challenging to write an effective budget. Here at 8 Figure Firm, we can help you through the process with ONE.Coach, our proven program to help you grow your firm. 

If you’re ready to take your law firm to the next level, register for ONE.Coach today. We’ll help you turn your law firm into a law business.