Law Practice Management-- How To Determine Your Costs
Determining charges is a challenging law practice management job for most lawyers when thinking through their law company marketing plans. In determining charges for certain services, lawyers typically disappoint what they need to charge. When making their law firm marketing plans, too numerous lawyers are scared of even charging the competitive price for their services. Even more, they make the rates choices often with no data or conceptual framework. In addition, instead of focusing their efforts on how they can justify getting top dollar for what they use, they charge a cost that is often way too low and often really can frighten potential clients who think there is something missing out on from a service that is " low-cost". Furthermore numerous attorneys don't recognize that the majority of purchasers in the marketplace by far are "value purchasers" and not searching for " inexpensive".
Prior to you sit down and begin thinking through your law practice management pricing method you need some differences around pricing commonly utilized in law company marketing planning. Do understand a law practice management law company marketing plan is not efficient if you just draw in people who want to pay the most affordable fee for a service. Rather, you desire to focus your law practice management and law firm marketing plans on bring in customers who will become long term assets to the company.
There are generally 4 methods of figuring out just how much you need to be charging for your services. Lets move right into those now.
The Market Method In Law Practice Management Pricing
This is one great way of figuring out pricing. Get your assistant to support you in this law practice management job and spend a long time finding what the series of prices is in the community. Have her do a "mystery shopper" research study by calling around as if he/she were a potential customer and learn what your competitors state on the phone to her around pricing. She might need to call from her house phone to avoid caller ID. As another option you might have him/her call other assistants or paralegals at your rivals and use to exchange your costs for their charges or you could do that with other attorneys yourself in your market. If you actually desire to get into it and have maximum information you can write possibly a few dozen competitors in your marketplace and state you are doing a cost survey and if they would send you their fee list you will develop a composite list that does not recognize those responding and send them a copy of the outcomes. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services offered in your practice location. Now you will see what people are charging for services comparable to those you use. You ought to have the ability to create a range of rates. Utilize this variety to set costs for your own services. My suggestion in law company marketing preparation is to charge at the 75% level of the list. You should be at or in the leading 25% of the fees.
Keep in mind that in general it is not a good law practice management technique to compete on cost. Many potential clients will see prices that is too low as a signal that there is something missing either from the service, the company, or the firm.
The Expense Technique in Law Practice Management Rates
This law practice management rates method is really uncomplicated really. The most typical mistake in law practice management utilizing this approach is to neglect to consist of some kind of your expenditure.
OK, let me state it once again. In law practice management typically you count yourself out of the expenses and you should include yourself in the expenses. Why? Frequently you are doing a minimum of some of the technical work. Yes? Frequently you are doing a minimum of some of the management work. Yes? As the owner of business you are due a sensible earnings. Yes? If you are all three of these in one, you must think about one income as due you for your time and know-how as the professional and supervisor as well as a profit of fifteen to thirty percent due you as the owner. Be sure to include a affordable expense for your managerial and technical work in the costs part of this formula.
Fixed Rate Technique in Law Practice Management Pricing
This is the technique used by lots of automobile mechanics (it is called "the flat rate book") and other service suppliers. This method is where you figure out a set rate for different jobs and charge that rate no matter what. Another example using this technique is how handled health care has utilized this system with medical facilities and medical professionals .
The "Rule of 3" in Law Practice Management Prices
This " guideline" called the "rule of three" utilized in law practice management is not what your Certified Public Accountant might inform you and it does not fail you either. Ask your Certified Public Accountant what they think of it and they will like it. To begin we are going to be thinking in thirds. For the first 3rd we will take the overall quantity of salaries/bonuses (not benefits just wages-- benefits go into the 2nd third following) for the income generators and/or timekeepers (this includes you if you are producing profits) and call that our very first third. Add up the salaries of the legal representatives, paralegals, and legal secretaries who produce profits or are timekeepers and call this your first 3rd (lets simply say that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your 2nd third which we will call your "overhead" ( therefore that second third is $100,000 and don't forget you if you are doing some handling partner type responsibilities because that part of your time goes here in overhead). Then take that very same number and we will call that your last 3rd, which we will call gross revenues (another $100,000). What you need to do is take the total quantity (in this example index $300,000) and now figure out how much you should charge per billable hour, per repaired rate or how numerous contingency charge cases won to be sure you struck the target we must strike provided our first third number times 3 (in this example $300,000).
This approach shows you how much per hour you require to charge. Since you understand the number of billable hours each earnings generator can do per month, merely divide that into your overall of all thirds ($300,000) to see what you require to charge per billable hour to make your numbers come out correctly. As long as you hit your targets you will be guaranteed of a 15% to 30% net benefit from your operations. After all if you are the owner of the practice you are worthy of a fair revenue as well don't you concur? This approach is called the Guideline of 3. , if this method is a bit too complicated do feel complimentary to call me and I will assist you arrange it out in a couple of minutes on the phone.
It is a good concept to think through all of these pricing methods in determining your law practice management rates strategy prior to setting a price and moving ahead with a law company marketing plan to guarantee you are completely exploring all choices. In another short article I will tell you how to speak to prospective clients so you never have a issue getting the fee you should have.