Law Practice Management-- How To Determine Your Charges
Determining fees is a tough law practice management job for a lot of lawyers when believing through their law company marketing strategies. In figuring out costs for certain services, lawyers typically fall brief of what they ought to charge. Too many attorneys are afraid of even charging the competitive cost for their services when making their law company marketing strategies.
Before you sit down and start believing through your law practice management prices strategy you require some distinctions around rates typically used in law company marketing preparation. Do understand a law practice management law firm marketing plan is not reliable if you only attract individuals who desire to pay the most affordable cost for a service. Rather, you desire to focus your law practice management and law firm marketing strategies on bring in clients who will end up being long term assets to the company.
There are basically 4 methods of identifying how much you ought to be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
This is one great way of figuring out rates. Get your assistant to support you in this law practice management task and invest a long time discovering what the series of pricing remains in the community. Have her do a " secret consumer" study by calling around as if he/she were a potential customer and discover out what your competitors state on the phone to her around rates. She might need to call from her house phone to avoid caller ID. As another alternative you might have him/her call other assistants or paralegals at your rivals and provide to exchange your costs for their charges or you might do that with other attorneys yourself in your market. If you actually wish to enter into it and have maximum information you can write maybe a couple of lots rivals in your marketplace 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 determine those responding and send them a copy of the results. To keep it basic for them include a stamped, self-addressed envelope with a list of the most common services used in your practice area. Now you will see what people are charging for services comparable to those you provide. You need to be able to create a variety of prices. Utilize this range to set prices for your own services. My recommendation in law practice marketing planning is to charge at the 75% level of the list. You must be at or in the top 25% of the fees.
Keep in mind that in basic it is not a excellent law practice management strategy to compete on cost. A lot of prospective customers will see rates that is too low as a signal that there is something missing out on either from the service, the service provider, or the firm. And people who are searching for a low price will follow that low rate anywhere they can discover it rather than ending up being long-lasting customers. Be sure that your cost covers your costs and a sensible revenue margin.
The Cost Approach in Law Practice Management Rates
This law practice management rates technique is extremely straightforward truly. One simply identifies what the costs are to provide services or items and adds on a sensible earnings, somewhere between fifteen percent at the least and maybe thirty three percent at the most. The most typical error in law practice management utilizing this technique is to neglect to include some kind of your cost. Solo and little company lawyers tend to not include their own wage!
In law practice management frequently you count yourself out of the expenses 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 ought to consider one income as due you for your time and know-how as the professional and manager as well as a profit of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Prices
This is the approach utilized by numerous auto mechanics (it is called "the flat rate book") and other service companies. This approach is where you figure out a set rate for numerous tasks and charge that rate no matter what. He makes more if the mechanic spends less time than set aside for the job. He makes less if he invests more time than designated. 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 used this system with hospitals and physicians . If they prefer, lawyers can use this system.
The "Rule of Three" in Law Practice Management Pricing
This " guideline of thumb" called the " guideline of three" utilized in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your CPA what they consider it and they will like it. To begin we are going to be believing in thirds. For the first 3rd we will take the overall quantity of salaries/bonuses (not benefits just wages-- benefits enter into the 2nd third following) for the profits generators and/or timekeepers (this includes you if you are producing profits) and call that our very first third. So build up the wages of the attorneys, paralegals, and legal secretaries who create earnings or are timekeepers and call this your very first third (lets just say that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your second 3rd which we will call your "overhead" ( therefore that second third is $100,000 and do not forget you if you are basics doing some managing partner type responsibilities since that part of your time goes here in overhead). Take that exact same number and we will call that your last third, which we will call gross revenues (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now determine how much you need to charge per billable hour, per fixed rate or how many contingency cost cases won to be sure you hit the target we need to strike provided our very first third number times three (in this example $300,000).
This method reveals you just how much per hour you need to charge. Because you know how lots of billable hours each revenue generator can do per month, just divide that into your overall of all thirds ($300,000) to see what you need to charge per billable hour to make your numbers come out properly. As long as you strike your targets you will be guaranteed of a 15% to 30% net make money from your operations. If you are the owner of the practice you should have a fair profit as well don't you concur? This technique is called the Rule of 3. If this method is a bit too complicated do do not hesitate to call me and I will assist you sort it out in a few minutes on the phone.
It is a great concept to believe through all of these prices techniques in identifying your law practice management pricing method before setting a rate and moving ahead with a law company marketing strategy to ensure you are completely checking out all choices. In another post I will inform you how to speak to prospective customers so you never have a problem getting the charge you deserve.