Law Practice Management-- How To Determine Your Costs
Determining costs is a hard law practice management job for a lot of lawyers when thinking through their law company marketing strategies. In identifying charges for specific services, attorneys often disappoint what they need to charge. When making their law company marketing plans, too lots of lawyers are scared of even charging the competitive price for their services. Even more, they make the prices choices typically with no information or conceptual structure. Furthermore, instead of focusing their efforts on how they can validate getting leading dollar for what they offer, they charge a fee that is frequently way too low and typically in fact can scare off prospective customers who believe there is something missing out on from a service that is " low-cost". Additionally many attorneys don't realize that many buyers in the market by far are "value purchasers" and not trying to find " low-cost".
Prior to you sit down and start thinking through your law practice management pricing technique you require some differences around rates commonly used in law firm marketing planning. Do know a law practice management law firm marketing plan is not efficient if you only draw in individuals who desire to pay the least expensive cost for a service. Instead, you desire to focus your law practice management and law company marketing strategies on bring in customers who will end up being long term assets to the firm.
There are basically 4 methods of determining how much you should be charging for your services. Lets move right into those now.
The Market Method In Law Practice Management Rates
This is one good way of determining rates. Get your assistant to support you in this law practice management job and invest some time discovering what the variety of prices is in the community. Have her do a " secret buyer" study by calling around as if he/she were a possible customer and find out what your rivals state on the phone to her around prices. She may require to call from her home phone to avoid caller ID. As another alternative you could have him/her call other assistants or paralegals at your competitors and use to exchange your charges for their fees or you might do that with other attorneys yourself in your market. If you really desire to enter into it and have maximum information you can write possibly a couple of dozen competitors in your market and state you are doing a fee study and if they would send you their charge list you will create a composite list that does not recognize those responding and send them a copy of the outcomes. To keep it simple for them consist of 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 similar to those you provide. You should have the ability to come up with a variety of rates. Use this variety to set prices for your own services. My suggestion in law office marketing planning is to charge at the 75% level of the list. So you need to be at or in the top 25% of the charges.
Remember that in general it is not a good law practice management method to complete on rate. Most potential customers will see rates that is too low as a signal that there is something missing out on either from the service, the company, or the firm.
The Cost Method in Law Practice Management Rates
This law practice management pricing method is very straightforward truly. The most typical error in law practice management utilizing this technique is to neglect to consist of some kind of your expenditure.
OK, let me say it again. In law practice management frequently you count yourself out of the costs and you should include yourself in the expenses. Why? Frequently you are doing a minimum of a few 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 affordable earnings. Yes? If you are all 3 of these in one, you must consider one wage as due you for your time and know-how as the service technician and manager along with a earnings of fifteen to thirty percent due you as the owner. So be sure to consist of a reasonable expense for your technical and supervisory operate in the expenditures part of this formula.
Fixed Rate Technique in Law Practice Management Rates
This is the approach utilized by lots of automobile mechanics (it is called "the flat rate book") and other company. This technique is where you figure out a fixed rate for numerous jobs and charge that rate no matter what. If the mechanic invests less time than set aside for the task, he makes Look At This more. If he spends more time than designated, he earns less. But in the end, it all levels (well, typically to the mechanics' favor if you ask me). Another example using this method is how handled health care has used this system with doctors and medical facilities . If they desire, legal representatives can use this system.
The " Guideline of Three" in Law Practice Management Prices
This " guideline of thumb" called the "rule of 3" used in law practice management is not what your CPA might inform you and it does not fail you either. For the very first third we will take the total quantity of salaries/bonuses (not benefits just salaries-- benefits go into the 2nd 3rd coming next) for the profits generators and/or timekeepers (this includes you if you are producing revenue) and call that our first third. 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 fixed rate or how lots of contingency charge cases won to be sure you struck the target we must strike offered our very first third number times 3 (in this example $300,000).
This technique shows 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 help you arrange it out in a few minutes on the phone.
It is a good concept to believe through all of these rates techniques in determining your law practice management pricing technique prior to setting a cost and moving ahead with a law company marketing plan to guarantee you are completely exploring all options. In another post I will inform you how to speak to prospective customers so you never ever have a issue getting the fee you deserve.