Law Practice Management-- How To Determine Your Costs
Determining fees is a hard law practice management job for many lawyers when thinking through their law company marketing plans. In figuring out fees for particular services, attorneys typically fall short of what they should charge. When making their law firm marketing strategies, too numerous attorneys are scared of even charging the competitive rate for their services. Further, they make the rates choices often with no information or conceptual structure. Furthermore, rather 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 typically actually can frighten potential clients who think there is something missing out on from a service that is "cheap". Furthermore numerous lawyers do not understand that many buyers in the market by far are " worth purchasers" and not searching for " low-cost".
Before you sit down and start believing through your law practice management pricing method you require some distinctions around rates commonly used in law company marketing planning. Do know a law practice management law firm marketing strategy is not efficient if you only attract people who want to pay the lowest fee for a service. Rather, you desire to focus your law practice management and law company marketing plans on bring in clients who will become long term possessions to the company.
There are generally 4 methods of figuring out just how much you must be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Prices
This is one excellent way of identifying prices. Get your assistant to support you in this law practice management task and spend some time discovering what the series of pricing is in the community. Have her do a "mystery shopper" study by calling around as if he/she were a prospective client and discover what your rivals say on the phone to her around rates. She may require to call from her house phone to avoid caller ID. As another choice you could have him/her call other assistants or paralegals at your rivals and provide to exchange your charges for their fees or you could do that with other lawyers yourself in your market. If you really want to enter it and have optimal data you can write possibly a couple of dozen rivals in your market and say you are doing a fee study and if they would send you their cost list you will produce a composite list that does not recognize those responding and send them a copy of the outcomes. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services used in your practice location. Now you will see what people are charging for services comparable to those you provide. You should be able to create a series of prices. Utilize this range to set prices for your own services. My suggestion in law practice marketing planning is to charge at the 75% level of the list. You should be at or in the leading 25% of the fees.
Remember that in general it is not a great law practice management technique to complete on price. Many prospective 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 Expense Approach in Law Practice Management Rates
This law practice management pricing method is extremely straightforward truly. The most common mistake in law practice management utilizing this technique is to neglect to consist of some type of your cost.
OK, let me say it once again. In law practice management frequently you count yourself out of the expenses and you need to include yourself in the costs. Why? Frequently you are doing at least a few 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 affordable revenue. Yes? If you are all 3 of these in one, you need to click over here think about one salary as due you for your time and proficiency as the service technician and manager as well as a earnings of fifteen to thirty percent due you as the owner. So make sure to include a reasonable cost for your technical and managerial work in the costs part of this formula.
Fixed Rate Technique in Law Practice Management Prices
This is the approach utilized by many auto mechanics (it is called "the flat rate book") and other company. This approach is where you figure out a set rate for numerous tasks and charge that rate no matter what. If the mechanic spends less time than allocated for the job, he makes more. If he spends more time than designated, he makes less. In the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example using this technique is how managed healthcare has used this system with medical professionals and health centers . If they want, lawyers can utilize this system.
The " Guideline of 3" in Law Practice Management Pricing
This "rule of thumb" called the " guideline of three" utilized in law practice management is not what your CPA may inform you and it does not fail you either. Ask your Certified Public Accountant what they think about it and they will like it. To start we are going to be thinking in thirds. For the first 3rd we will take the overall amount of salaries/bonuses (not benefits just incomes-- benefits go into the 2nd 3rd following) for the income generators and/or timekeepers (this includes you if you are generating revenue) and call that our first third. So add up the wages of the lawyers, paralegals, and legal secretaries who produce earnings or are timekeepers and call this your very first third (lets simply say that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your second third which we will call your "overhead" (thus that 2nd third is $100,000 and don't forget you if you are doing some managing partner type duties since that part of your time goes here in overhead). Then take that exact same number and we will call that your last third, which we will call gross earnings (another $100,000). What you require to do is take the overall amount (in this example $300,000) and now determine how much you should charge per billable hour, per repaired rate or the number of contingency fee cases won to be sure you hit the target we should hit offered our very first third number times three (in this example $300,000).
This approach reveals you how much per hour you need to charge. Because you understand the number of billable hours each profits generator can do per month, merely 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 correctly. As long as you hit your targets you will be guaranteed of a 15% to 30% net revenue from your operations. If you are the owner of the practice you should have a reasonable profit as well don't you concur? This method is known as the Rule of 3. If this technique is a bit too complicated do feel complimentary to call me and I will help you sort it out in a few minutes on the phone.
It is a great idea to think through all of these rates techniques in identifying your law practice management prices technique before setting a cost and moving ahead with a law company marketing strategy to guarantee you are thoroughly checking out all options. In another post I will tell you how to speak to prospective customers so you never ever have a problem getting the charge you are worthy of.