Law Practice Management-- How To Identify Your Costs
Figuring out charges is a challenging law practice management job for a lot of attorneys when analyzing their law firm marketing plans. In identifying charges for specific services, lawyers typically fall short of what they need to charge. A lot of attorneys hesitate of even charging the competitive cost for their services when making their law firm marketing strategies. Further, they make the pricing decisions frequently with no information or conceptual structure. Additionally, instead of focusing their efforts on how they can validate getting leading dollar for what they use, they charge a fee that is typically way too low and often in fact can frighten possible clients who believe there is something missing from a service that is "cheap". Additionally numerous attorneys don't understand that a lot of purchasers in the marketplace without a doubt are "value buyers" and not looking for " low-cost".
Prior to you sit down and begin thinking through your law practice management pricing technique you require some distinctions around pricing frequently utilized in law firm marketing preparation. Do understand a law practice management law company marketing strategy is not efficient if you only bring in people who want to pay the lowest charge for a service. Instead, you want to focus your law practice management and law company marketing strategies on bring in clients who will end up being long term properties to the company.
There are generally 4 methods of determining how much you should be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Rates
This is one great way of determining rates. Get your assistant to support you in this law practice management job and invest a long time discovering what the variety of pricing remains in the neighborhood. Have her do a "mystery shopper" research study by calling around as if he/she were a possible client and discover out what your rivals state on the phone to her around rates. She may need to call from her home phone to avoid caller ID. As another choice you might have him/her call other assistants or paralegals at your rivals and use to exchange your fees for their charges or you might do that with other attorneys yourself in your market. If you actually desire to enter it and have maximum data you can write maybe a few dozen rivals in your marketplace and say you are doing a fee survey and if they would send you their cost list you will develop a composite list that does not identify 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 used in your practice area. Now you will see what individuals are charging for services similar to those you provide. You ought to be able to create a variety of prices. Use this range to set rates for your own services. My recommendation in law firm marketing planning is to charge at the 75% level of the list. You should be at or in the top 25% of the charges.
Keep in mind that in general it is not a good law practice management method to contend on rate. A lot of possible customers will see pricing that is too low as a signal that there is something missing either from the service, the service provider, or the company. And people who are trying to find a low rate will follow that low rate anywhere they can discover it instead of becoming long-lasting customers. So make certain that your price covers your costs and a affordable profit margin.
The Cost Approach in Law Practice Management Pricing
This law practice management prices method is very straightforward really. The most common mistake in law practice management using this technique is to disregard to include some type of your cost.
OK, let me state it once again. In law practice management often you count yourself out of the expenses and you ought to include yourself in the expenses. Why? Often 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 service you are due a best site affordable revenue. Yes? If you are all 3 of these in one, you need to think about one wage as due you for your time and proficiency as the professional and supervisor along with a profit of fifteen to thirty percent due you as the owner. So be sure to include a reasonable expense for your managerial and technical operate in the expenses part of this formula.
Fixed Rate Method in Law Practice Management Prices
This is the technique utilized by many car mechanics (it is called "the flat rate book") and other provider. This technique is where you determine a set rate for various jobs and charge that rate no matter what. If the mechanic invests less time than allotted for the job, he makes more. He makes less if he spends more time than allocated. In the end, it all evens out (well, generally to the mechanics' favor if you ask me). Another example utilizing this technique is how handled healthcare has utilized this system with healthcare facilities and doctors . If they prefer, lawyers can use this system.
The " Guideline of Three" in Law Practice Management Prices
This " general rule" called the "rule of three" used in law practice management is not what your Certified Public Accountant may inform you and it does not fail you either. Ask your CPA what they consider it and they will like it. To start we are going to be thinking in thirds. For the very first 3rd we will take the overall amount of salaries/bonuses (not advantages simply wages-- benefits enter into the second third coming next) for the revenue generators and/or timekeepers (this includes you if you are generating income) and call that our first third. So build up the salaries of the lawyers, paralegals, and legal secretaries who produce profits or are timekeepers and call this your first third (lets just state that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( therefore that second 3rd 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). Take that same number and we will call that your last 3rd, which we will call gross earnings (another $100,000). What you need to do is take the overall quantity (in this example $300,000) and now find out just how much you should charge per billable hour, per fixed rate or how lots of contingency fee cases won to be sure you struck the target we need to hit given our first third number times 3 (in this example $300,000).
This method shows you how much per hour you require to charge. If you are the owner of the practice you deserve a fair earnings as well do not you concur? If this method is a bit too confusing do feel free to call me and I will assist you sort it out in a few minutes on the phone.
It is a excellent concept to analyze all of these rates methods in determining your law practice management rates method prior to setting a cost and continuing with a law practice marketing strategy to guarantee you are completely exploring all options. Remember the tendency for a lot of attorneys is to price too low. Do not do that! In another article I will tell you how to speak to prospective customers so you never ever have a issue getting the cost you should have.