Law Practice Management-- How To Determine Your Costs
Identifying fees is a challenging law practice management task for many attorneys when believing through their law firm marketing plans. In identifying costs for particular services, lawyers frequently fall short of what they need to charge. Too many attorneys are scared of even charging the competitive rate for their services when making their law firm marketing plans.
Before you sit down and begin thinking through your law practice management pricing strategy you need some differences around pricing commonly used in law firm marketing planning. Do understand a law practice management law company marketing strategy is not efficient if you only attract people who want to pay the lowest fee for a service. Instead, you want to focus your law practice management and law company marketing plans on bring in customers who will end up being long term properties to the firm.
There are basically four methods of figuring out how much you ought to be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Prices
This is one excellent way of determining pricing. Get your assistant to support you in this law practice management task and invest a long time discovering what the variety of prices remains in the community. Have her do a "mystery shopper" study by calling around as if he/she were a possible client and learn what your rivals say on the phone to her around pricing. She might require to call from her home phone to avoid caller ID. As another option you might have him/her call other assistants or paralegals at your competitors and offer to exchange your charges for their costs or you could do that with other legal representatives yourself in your market. If you truly wish to enter into it and have optimal data you can compose maybe a couple of dozen competitors in your market and say you are doing a cost survey and if they would send you their cost list you will create a composite list that does not recognize those responding and send them a copy of the results. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. Now you will see what individuals are charging for services similar to those you use. You ought to be able to develop a series of rates. Use this variety to set rates for your own services. My suggestion in law firm marketing planning is to charge at the 75% level of the list. So you must be at or in the leading 25% of the costs.
Bear in mind that in basic it is not a excellent law practice management strategy to contend on cost. Most prospective clients will see prices that is too low as a signal that there is something missing out on either from the service, the service provider, or the company. And individuals who are trying to find a low price will follow that low price wherever they can find it rather than becoming long-term clients. Be sure that your cost covers your costs and a sensible revenue margin.
The Cost Method in Law Practice Management Pricing
This law practice management pricing approach is really straightforward actually. One simply determines what the expenses are to provide products or services and includes on a sensible profit, someplace between fifteen percent at the least and maybe thirty 3 percent at the most. The most typical mistake in law practice management utilizing this technique is to neglect to consist of some type of your expense. Solo and little company attorneys tend to not include their own wage!
In law practice management typically you count yourself out of the costs and you must include yourself in the expenditures. Typically you are doing at least some of the management work. If you are all 3 of these in one, you must think about one wage as due you for your time and knowledge as the service technician and supervisor as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Prices
This is the method used by many vehicle mechanics (it is called "the flat rate book") and other service suppliers. This method is where you identify a fixed rate for various tasks and charge that rate no matter what. Another example using this method is how managed health care has utilized this system with doctors and medical facilities .
The " Guideline of Three" in Law Practice Management Pricing
This "rule of thumb" called the "rule of three" utilized in law practice management is not what your Certified Public Accountant may inform you and check that it does not fail you either. Ask your Certified Public Accountant what they think about it and they will like it. To start we are going to be believing in thirds. For the very first 3rd we will take the total quantity of salaries/bonuses (not advantages simply salaries-- advantages enter into the 2nd 3rd following) for the income generators and/or timekeepers (this includes you if you are creating revenue) and call that our first third. Include up the incomes of the lawyers, paralegals, and legal secretaries who produce earnings or are timekeepers and call this your very first 3rd (lets just say that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( hence that 2nd third is $100,000 and don't forget you if you are doing some handling partner type tasks because that part of your time goes here in overhead). Then take that exact same number and we will call that your last third, which we will call gross earnings (another $100,000). What you require to do is take the total amount (in this example $300,000) and now figure out just how much you should charge per billable hour, per repaired rate or the number of contingency charge cases won to be sure you struck the target we need to hit given our very first third number times three (in this example $300,000).
This technique shows you how much per hour you require to charge. If you are the owner of the practice you should have a reasonable earnings as well do not you agree? If this method is a bit too complicated do feel totally free to call me and I will help you arrange it out in a couple of minutes on the phone.
It is a excellent concept to believe through all of these prices approaches in identifying your law practice management rates method prior to setting a rate and continuing with a law office marketing strategy to guarantee you are thoroughly checking out all options. Keep in mind the propensity for most attorneys is to price too low. Do not do that! In another article I will inform you how to speak with prospective clients so you never have a issue getting the charge you are worthy of.