Law Practice Management-- How To Determine Your Costs
Identifying charges is a difficult law practice management task for a lot of attorneys when analyzing their law practice marketing plans. In identifying costs for particular services, attorneys typically disappoint what they need to charge. When making their law firm marketing strategies, too numerous lawyers are afraid of even charging the competitive rate for their services. Even more, they make the prices choices often with no data or conceptual framework. Additionally, instead of focusing their efforts on how they can validate getting leading dollar for what they use, they charge a cost that is frequently way too low and often in fact can scare off potential clients who think there is something missing from a service that is " inexpensive". In addition many lawyers do not recognize that many purchasers in the market by far are " worth purchasers" and not trying to find "cheap".
Before you sit down and begin believing through your law practice management prices strategy you require some distinctions around prices typically utilized in law firm marketing planning. Do understand a law practice management law company marketing strategy is not efficient if you just draw in individuals who desire to pay the least expensive fee for a service. Instead, you want to focus your law practice management and law firm marketing plans on bring in customers who will end up being long term possessions to the firm.
There are generally 4 ways of identifying how much you ought to be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Prices
This is one excellent way of figuring out pricing. Get your assistant to support you in this law practice management job and spend a long time discovering what the variety of rates is in the neighborhood. Have her do a "mystery shopper" research study by calling around as if he/she were a possible client and discover what your competitors state on the phone to her around prices. She may need to call from her house phone to avoid caller ID. As another option you might have him/her call other assistants or paralegals at your competitors and offer to exchange your fees for their costs or you might do that with other legal representatives yourself in your market. If you truly desire to get into it and have maximum data you can write maybe a few dozen rivals in your market and say you are doing a cost survey and if they would send you their fee list you will create a composite list that does not identify those reacting 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 offered in your practice area. Now you will see what people are charging for services similar to those you use. You need to be able to come up with a variety of prices. Use this variety to set prices for your own services. My suggestion in law practice 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.
Keep in mind that in general it is not a good law practice management technique to contend on price. Most potential clients will see prices that is too low as a signal that there is something missing either from the service, the service provider, or the firm. And individuals who are trying to find a low cost will follow that low cost any place they can find it instead of becoming long-term clients. So make certain that your cost covers your expenses and a affordable earnings margin.
The Expense Approach in Law Practice Management Prices
This law practice management rates method is extremely simple really. The most typical mistake in law practice management using this approach is to disregard to consist of some type of your expenditure.
In law practice management typically you count yourself out of the costs and you need to include yourself in the costs. Frequently you are doing at least some of the management work. If you are all 3 of these in one, you must think about one wage as due you for your time and competence as additional info the specialist and supervisor as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Rates
This is the technique used by lots of automobile mechanics (it is called "the flat rate book") and other provider. This method is where you determine a fixed rate for numerous tasks and charge that rate no matter what. He makes more if the mechanic spends less time than allotted for the job. If he spends more time than designated, he makes less. But in the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example utilizing this technique is how handled health care has actually utilized this system with medical professionals and hospitals . Attorneys can utilize this system if they prefer.
The "Rule of Three" in Law Practice Management Prices
This " guideline of thumb" called the "rule of three" used try this 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 consider it and they will like it. To start we are going to be believing in thirds. For the first 3rd we will take the overall amount of salaries/bonuses (not advantages just wages-- benefits go into the 2nd 3rd following) for the revenue generators and/or timekeepers (this includes you if you are generating profits) and call that our first 3rd. Include up the wages of the attorneys, paralegals, and legal secretaries who create income or are timekeepers and call this your first 3rd (lets just say that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your second third which we will call your "overhead" ( hence that 2nd 3rd is $100,000 and do not forget you if you are doing some handling partner type duties since that part of your time goes here in overhead). Then take that very same number and we will call that your last 3rd, which we will call gross profits (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now figure out how much you should charge per billable hour, per fixed rate or how many contingency charge cases won to be sure you struck the target we should hit provided our first 3rd number times three (in this example $300,000).
This approach shows you how much per hour you require to charge. Considering that you understand how lots of billable hours each revenue generator can do each month, merely divide that into your total of all thirds ($300,000) to see what you require to charge per billable hour to make your numbers come out correctly. As long as you strike your targets you will be guaranteed of a 15% to 30% net make money from your operations. After all if you are the owner of the practice you should have a reasonable revenue as well don't you agree? This technique is called the Rule of Three. If this approach is a bit too confusing do do not hesitate to call me and I will assist you sort it out in a couple of minutes on the phone.
It is a excellent concept to believe through all of these pricing techniques in identifying your law practice management prices strategy before setting a price and continuing with a law office marketing plan to ensure you are thoroughly exploring all alternatives. Remember the propensity for most legal representatives is to price too low. Don't do that! In another post I will tell browse around these guys you how to speak with potential clients so you never ever have a problem getting the cost you are worthy of.