Law Practice Management-- How To Identify Your Costs
When believing through their law firm marketing strategies, figuring out fees is a hard law practice management job for the majority of attorneys. In determining charges for particular services, lawyers often fall short of what they should charge. When making their law firm marketing strategies, too many lawyers are afraid of even charging the competitive cost for their services. Further, they make the prices decisions often with no information or conceptual framework. Additionally, rather of focusing their efforts on how they can justify getting top dollar for what they offer, they charge a fee that is typically way too low and typically in fact can terrify off prospective clients who think there is something missing from a service that is " low-cost". In addition numerous attorneys don't understand that the majority of purchasers in the marketplace by far are " worth purchasers" and not trying to find "cheap".
Prior to you sit down and start believing through your law practice management rates method you need some differences around prices frequently utilized in law firm marketing planning. Do know a law practice management law firm marketing plan is not effective if you just bring in people who want to pay the least expensive cost for a service. Instead, you want to focus your law practice management and law company marketing strategies on drawing in customers who will become long term properties to the firm.
There are essentially four ways of determining how much you should be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
This is one good method of identifying prices. Get your assistant to support you in this law practice management task and spend a long time discovering what the series of rates remains in the community. Have her do a " secret buyer" study by calling around as if he/she were a possible customer and discover what your competitors state on the phone to her around pricing. She may need to call from her house phone to prevent caller ID. As another choice you could have him/her call other assistants or paralegals at your rivals and offer to exchange your charges for their costs or you might do that with other attorneys yourself in your market. If you really want to enter it and have maximum data you can compose perhaps a few dozen competitors in your market and say 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 results. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services used in your practice location. Now you will see what people are charging for services comparable to those you provide. You ought to be able to develop a series of rates. Utilize this variety to set rates for your own services. My recommendation in law office marketing preparation is to charge at the 75% level of the list. You need to be at or in the leading 25% of the fees.
Remember that in general it is not a excellent law practice management strategy to compete on price. The majority of possible customers will see rates that is too low as a signal that there is something missing either from the service, the supplier, or the firm.
The Cost Technique in Law Practice Management Prices
This law practice management rates approach is very uncomplicated actually. One simply identifies what the costs are to deliver service or products and includes on a sensible revenue, someplace in between fifteen percent at the least and maybe thirty 3 percent at the most. The most typical error in law practice management utilizing this approach is to disregard to consist of some kind of your expenditure. Solo and little firm attorneys tend to not include their own salary!
OK, let me say it once again. In law practice management typically you count yourself out of the expenses and you ought to include yourself in the expenses. Why? Frequently you are doing a minimum of some of the technical work. Yes? Often you are doing at least a few of the management work. Yes? As the owner of the organisation you are due a sensible revenue. Yes? If you are all 3 of these in one, you ought to consider one income as due you for your time and proficiency as the technician and supervisor along with a profit of fifteen to thirty percent due you as the owner. Be sure to consist of a affordable expense for your technical and managerial work in the expenses part of this formula.
Fixed Rate Approach in Law Practice Management Rates
This is the approach used by many automobile mechanics (it is called "the flat rate book") and other service companies. This approach is where you figure out a fixed rate for various tasks and charge that rate no matter what. If the mechanic spends less time than allocated for the task, he makes more. He makes less if he invests more time than allotted. In the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example using this approach is how managed health care has actually utilized this system with doctors and hospitals . If they want, legal representatives can utilize this system.
The " Guideline of 3" in Law Practice Management Prices
This " guideline" called the "rule of 3" 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 start we are going to be thinking in thirds. For the very first third we will take the total amount of salaries/bonuses (not benefits just incomes-- benefits go into the second 3rd coming next) for the profits generators and/or timekeepers (this includes you if you are generating earnings) and call that our first 3rd. Include up the incomes of the lawyers, paralegals, anonymous and legal secretaries who generate earnings or are timekeepers and call this your very first third (lets simply state that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your 2nd third which we will call your "overhead" (thus that 2nd third is $100,000 and do not forget you if you are doing some managing partner type duties since that part of your time goes here in overhead). Then take that exact 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 overall quantity (in this example $300,000) and now figure out how much you need to charge per billable hour, per repaired rate or how numerous contingency fee cases won to be sure you hit the target we need to hit given our very first third number times three (in this example $300,000).
This technique reveals you how much per hour you need to charge. If you are the owner of the practice you deserve a reasonable earnings as well don't you agree? If this method is a bit too confusing do feel free to contact me and I will assist you arrange it out in a couple of minutes on the phone.
It is a great idea to think through all of these pricing methods in identifying your law practice management prices strategy prior to setting a price and continuing with a law practice marketing plan to guarantee you are completely exploring all options. Keep in mind the tendency for a lot of attorneys is to price too low. Don't do that! In another article I will tell you how to talk to possible clients so my website you never have a problem getting the charge you deserve.