Law Practice Management-- How To Determine Your Costs
Identifying charges is a challenging law practice management task for most attorneys when believing through their law company marketing strategies. In determining fees for certain services, attorneys often fall brief of what they need to charge. Too numerous lawyers are afraid of even charging the competitive rate for their services when making their law firm marketing strategies.
Before you sit down and start believing through your law practice management prices strategy you need some distinctions around pricing frequently used in law company marketing planning. Do understand a law practice management law firm marketing plan is not reliable if you just bring in individuals who want to pay the most affordable cost for a service. Rather, you want to focus your law practice management and law firm marketing plans on drawing in clients who will end up being long term possessions to the company.
There are generally 4 ways of figuring out how much you should be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Prices
This is one great way of identifying prices. Get your assistant to support you in this law practice management task and invest a long time finding what the series of rates is in the community. Have her do a " secret buyer" study by calling around as if he/she were a potential client and learn what your competitors state on the phone to her around pricing. She may require to call from her home phone to prevent caller ID. As another alternative you might have him/her call other assistants or paralegals at your competitors and offer to exchange your fees for their charges or you might do that with other lawyers yourself in your market. If you really want to enter it and have optimal information you can write maybe a few dozen competitors in your marketplace and say you are doing a cost survey and if they would send you their charge list you will create a composite list that does not identify those reacting and send them a copy of the outcomes. To keep it simple 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 individuals are charging for services similar to those you provide. You ought to be able to come up with a series of rates. Use 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 top 25% of the costs.
Keep in mind that in basic it is not a excellent law practice management strategy to compete on cost. A lot of prospective clients will see rates that is too low as a signal that there is something missing out on either from the service, the provider, or the firm.
The Cost Approach in Law Practice Management Rates
This law practice management pricing technique is extremely uncomplicated really. The most common mistake in law practice management utilizing this technique is to overlook to consist of some type of your cost.
OK, let me say it once again. In law practice management typically you count yourself out of the expenses and you must include yourself in the expenses. Why? Often you are doing at least some of the technical work. Yes? Frequently you are doing at least a few of the management work. Yes? As the owner of business you are due a reasonable profit. Yes? If you are all 3 of these in one, you should consider one income as due you for your official website time and knowledge as the specialist and manager along with a profit of fifteen to thirty percent due you as the owner. So be sure to consist of a affordable cost for your technical and managerial work in the expenses part of this formula.
Fixed Rate Method in Law Practice Management Pricing
This is the approach used by lots of auto mechanics (it is called "the flat rate book") and other provider. This approach is where you identify a set rate for various tasks 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 invests more time than designated. However in the end, everything evens out (well, typically to the mechanics' favor if you ask me). Another example using this method is how handled healthcare has used this system with physicians and medical facilities . Legal representatives can use this system if they prefer.
The " Guideline of Three" in Law Practice Management Prices
This " guideline" called the "rule of 3" used in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your Certified Public Accountant what they consider it and they will like it. To start we are going to be believing in thirds. For the very first 3rd we will take the total amount of salaries/bonuses (not advantages simply incomes-- benefits enter into the second 3rd following) for the revenue generators and/or timekeepers (this includes you if you are producing profits) and call that our very first third. So build up the incomes of the legal representatives, paralegals, and legal secretaries who produce revenue or are timekeepers and call this your very first 3rd (lets just say that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( hence that 2nd third is $100,000 and do not forget you if you are doing some managing partner type tasks 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 earnings (another $100,000). What you require to do is take the total amount (in this example $300,000) and now figure out how much you should charge per billable hour, per repaired rate or the number of contingency fee cases won to be sure you struck the target we should hit offered our first 3rd number times three (in this example $300,000).
This technique shows you how much per hour you require to charge. If you are the owner of the practice you deserve a fair profit as well don't you agree? If this technique is a bit too confusing do feel totally free to contact me and I will assist you arrange it out in a few minutes on the phone.
It is a excellent idea to believe through all of these prices techniques in identifying your law practice management rates technique prior to setting a price and moving ahead with a law company marketing plan to ensure you are thoroughly exploring all choices. In another post I will inform you how to speak to possible clients so you never have a problem getting the cost you should have.