Law Practice Management-- How To Determine Your Costs
Figuring out fees is a challenging law practice management job for the majority of lawyers when thinking through their law company marketing strategies. In determining charges for certain services, lawyers frequently fall brief of what they ought to charge. Too many attorneys are afraid of even charging the competitive cost for their services when making their law company marketing plans.
Before you sit down and start believing through your law practice management pricing method you need some differences around prices frequently used in law firm marketing planning. Include your pricing method to your law company marketing strategies. You require to be sure that you are charging a adequate cost on whatever to guarantee you a excellent earnings not just a great living. Do know a law practice management law firm marketing plan is not efficient if you only draw in people who wish to pay the least expensive cost for a service. These are not faithful customers. Rather, you want to focus your law practice management and law practice marketing intend on attracting clients who will become long term assets to the company. Low price customers are not developing your base of long term customers I can guarantee you that.
There are basically 4 ways of figuring out how much you must be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Prices
This is one excellent method of identifying rates. Get your assistant to support you in this law practice management task and invest a long time discovering what the series of prices is in the neighborhood. Have her do a " secret buyer" research study by calling around as if he/she were a possible client and find out what your competitors state on the phone to her around prices. She might need to call from her house phone to prevent caller ID. As another alternative you might have him/her call other assistants or paralegals at your competitors and provide to exchange your fees for their charges or you could do that with other lawyers yourself in your market. If you really wish to enter it and have maximum information you can compose possibly a few dozen rivals in your marketplace and say you are doing a charge survey and if they would send you their fee list you will develop a composite list that does not recognize those reacting and send them a copy of the results. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services used in your practice location. Now you will see what people are charging for services similar to those you provide. You need to have the ability to develop a series of rates. Use this range to set costs for your own services. My suggestion in law practice marketing preparation is to charge at the 75% level of the list. So you should be at or in the top 25% of the charges.
Keep in mind that in general it is not a excellent law practice management technique to compete 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 supplier, or the company. And individuals who are searching for a low cost will follow that low cost anywhere they can find it instead of becoming long-lasting clients. So make certain that your rate covers your costs and a sensible revenue margin.
The Cost Approach in Law Practice Management Rates
This law practice management rates approach is really uncomplicated really. One just identifies what the official source expenses are to provide services or items and adds on a reasonable earnings, somewhere between fifteen percent at the least and perhaps thirty three percent at the most. The most typical mistake in law practice management using this approach is to disregard to include some form of your expense. Solo and small firm lawyers tend to not include check that their own income!
In law practice management typically you count yourself out of the expenditures and you must 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 need to think about one wage as due you for your time and competence as the service technician and supervisor as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Pricing
This is the technique used by numerous car mechanics (it is called "the flat rate book") and other provider. This technique is where you determine a fixed rate for various jobs and charge that rate no matter what. If the mechanic spends less time than allotted for the task, he makes more. If he spends more time than designated, he earns less. However in the end, everything levels (well, typically to the mechanics' favor if you ask me). Another example using this technique is how handled healthcare has actually utilized this system with medical facilities and physicians . If they desire, lawyers can utilize this system.
The "Rule of Three" in Law Practice Management Rates
This "rule of thumb" called the "rule of 3" 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 believe about it and they will like it. To start we are going to be believing in thirds. For the very first third we will take the total amount of salaries/bonuses (not benefits simply salaries-- advantages go into the 2nd third following) for the earnings generators and/or timekeepers (this includes you if you are creating earnings) and call that our very first third. So build up the wages of the attorneys, paralegals, and legal secretaries who produce profits or are timekeepers and call this your first third (lets simply state that number was $100,000 to keep it easy). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" ( therefore that second 3rd is $100,000 and do not forget you if you are doing some managing partner type duties because 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 profits (another $100,000). What you require to do is take the total quantity (in this example $300,000) and now determine how much you must charge per billable hour, per repaired rate or how numerous contingency fee cases won to be sure you struck the target we should strike provided our first third number times 3 (in this example $300,000).
This approach shows you how much per hour you need to charge. Since you know 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 properly. As long as you strike your targets you will be assured of a 15% to 30% net revenue from your operations. After all if you are the owner of the practice you deserve a fair earnings as well do not you concur? This technique is called the Rule of 3. If this technique is a bit too complicated do feel free to call me and I will help you sort it out in a couple of minutes on the phone.
It is a good concept to believe through all of these pricing methods in determining your law practice management prices method prior to setting a cost and continuing with a law practice marketing strategy to ensure you are thoroughly exploring all options. Remember the tendency for many lawyers is to price too low. Do not do that! In another article I will inform you how to talk to potential customers so you never ever have a problem getting the cost you should have.