Law Practice Management-- How To Determine Your Costs
Figuring out fees is a tough law practice management task for many attorneys when believing through their law office marketing plans. In determining costs for particular services, attorneys frequently disappoint what they should charge. When making their law firm marketing strategies, too many lawyers are scared of even charging the competitive price for their services. Further, they make the rates decisions typically with no information or conceptual structure. In addition, instead of focusing their efforts on how they can validate getting top dollar for what they provide, they charge a cost that is often way too low and typically actually can frighten off potential clients who believe there is something missing from a service that is " inexpensive". Additionally lots of lawyers don't understand that many buyers in the marketplace without a doubt are "value buyers" and not looking for " inexpensive".
Before you sit down and begin believing through your law practice management rates technique you need some distinctions around rates typically used in law company marketing planning. Add your pricing method to your law company marketing strategies. You require to be sure that you are charging a adequate cost on whatever to ensure you a excellent revenue not just a good living. Do understand a law practice management law practice marketing strategy is not reliable if you just draw in individuals who wish to pay the most affordable charge for a service. These are not loyal customers. Rather, you wish to focus your law practice management and law office marketing strategies on drawing in clients who will end up being long term properties to the company. Low price customers are not constructing your base of long term customers I can promise you that.
There are generally four ways of determining just how much you need to be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Rates
This is one excellent way of determining prices. Get your assistant to support you in this law practice management task and spend some time discovering what the series of rates remains in the neighborhood. Have her do a " secret consumer" study by calling around as if he/she were a prospective customer and learn what your rivals say on the phone to her around prices. She might need 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 rivals and offer to exchange your fees for their fees or you might do that with other attorneys yourself in your market. If you truly wish to get into it and have optimal data you can write possibly a few dozen rivals in your marketplace and state you are doing a fee study 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 outcomes. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. Now you will see what people are charging for services comparable to those you provide. You should be able to develop a series of prices. Use this range to set prices for your own services. My suggestion in law office marketing preparation is to charge at the 75% level of the list. So you need to be at or in the leading 25% of the charges.
Bear in mind that in general it is not a good law practice management technique to compete on rate. A lot of prospective customers will see rates that is too low as a signal that there is something missing either from the service, the supplier, or the firm. And people who are looking for a low rate will follow that low rate wherever they can discover it instead of ending up being long-lasting clients. Be sure that your cost covers your costs and a sensible revenue margin.
The Cost Technique in Law Practice Management Rates
This law practice management pricing technique is very simple actually. One just identifies what the costs are to deliver services or items and includes on a reasonable profit, someplace between fifteen percent at the least and maybe thirty 3 percent at the most. The most common mistake in law practice management using this approach is to overlook to include some kind of your expense. Solo and small firm attorneys tend to not include their own salary!
In law practice management typically you count yourself out of the expenses and you need to include yourself in the costs. Often you are doing at least some of the management work. If you are all 3 of these in one, you ought to think about one income as due you for your time and competence as the service technician and manager as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Rates
This is the method utilized by many auto mechanics (it is called "the flat rate book") and other see it here provider. This method is where you determine a set rate for various tasks and charge that rate no matter what. He makes more if the mechanic spends less time than allocated for the task. He makes less if he invests more time than designated. In the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example using this approach is how managed health care has actually utilized this system with hospitals and doctors . Attorneys can utilize this system if they prefer.
The "Rule of Three" in Law Practice Management Rates
This "rule of thumb" called the "rule of three" used in law practice management is not what your CPA might tell 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 first 3rd we will take the overall amount of salaries/bonuses (not benefits just salaries-- benefits enter into the second third following) for the earnings generators and/or timekeepers (this includes you if you are generating revenue) and call that our very first third. So accumulate the salaries of the attorneys, paralegals, and legal secretaries who generate revenue or are timekeepers and call this your very first third (lets just 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 2nd 3rd is $100,000 and don't forget you if you are doing some handling partner type responsibilities because that part of your time goes here in overhead). Take that exact same number and we will call that your last 3rd, which we will call gross revenues (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 need to charge per billable hour, per repaired rate or the number of contingency cost cases won to be sure you struck the target we must strike given our very first 3rd number times 3 (in this example $300,000).
This method shows you how much per hour you need to charge. If you are the owner of the practice you are worthy of a fair earnings as well do not you concur? If this technique is a bit too confusing do feel complimentary to contact 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 pricing approaches in identifying your law practice management rates strategy prior to setting a cost and moving ahead with a law firm marketing plan to ensure you are thoroughly checking out all choices. Keep in mind the propensity for many attorneys is to price too low. Don't do that! In another article I will tell you how to speak with potential clients so you never have a issue getting the cost you deserve.