Law Practice Management-- How To Determine Your Costs
Identifying fees is a challenging law practice management job for many lawyers when believing through their law firm marketing plans. In determining charges for particular services, attorneys frequently fall brief of what they should charge. Too lots of lawyers are afraid of even charging the competitive rate for their services when making their law company marketing plans.
Before you sit down and begin thinking through your law practice management pricing strategy you require some distinctions around prices frequently utilized in law firm marketing planning. Do know a law practice management law firm marketing strategy is not efficient if you just draw in people who desire to pay the most affordable cost for a service. Instead, you want to focus your law practice management and law company marketing plans on attracting customers who will become long term properties to the firm.
There are basically 4 ways of determining how much you should be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Rates
This is one great way of determining pricing. Get your assistant to support you in this law practice management task and invest some time finding what the variety of rates is in the neighborhood. Have her do a "mystery consumer" 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 pricing. She might require to call from her house phone to prevent caller ID. As another alternative you could have him/her call other assistants or paralegals at your competitors and offer to exchange your fees for their fees or you might do that with other legal representatives yourself in your market. If you truly desire to get into it and have maximum information you can write perhaps a couple of lots competitors in your market and state you are doing a fee 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 consist of 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 provide. You need to be able to come up with a variety of costs. Utilize this variety to set prices for your own services. My suggestion in law firm marketing planning is to charge at the 75% level of the list. You ought to be at or in the leading 25% of the charges.
Keep in mind that in basic it is not a excellent law practice management technique to compete on cost. 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 service provider, or the firm.
The Cost Approach in Law Practice Management Rates
This law practice management prices method is extremely straightforward actually. One just determines what the expenses are to deliver service or products and includes on a affordable profit, somewhere in between fifteen percent at the least and perhaps thirty three percent at the most. The most common mistake in law practice management using this approach is to overlook to include some type of your cost. Solo and small firm lawyers tend to not include their own salary!
In law practice management often you count yourself out of the expenditures and you must include yourself in the expenses. 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 salary as due you for your time and expertise as the technician and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Prices
This is the approach used by many vehicle mechanics (it is called "the flat rate book") and other service providers. This approach is where you identify a set rate for various jobs and charge that rate no matter what. Another example utilizing this approach is how managed health care has actually utilized this imp source system with medical professionals and health centers .
The " Guideline of Three" in Law Practice Management Rates
This " general rule" called the "rule of 3" utilized in law practice management is not what your CPA may tell you and it does not fail you either. Ask your Certified Public Accountant what they consider it and they will like it. To begin we are going to be believing in thirds. For the very first 3rd we will take the overall amount of salaries/bonuses (not benefits read here just salaries-- benefits go into the 2nd third following) for the profits generators and/or timekeepers (this includes you if you are generating income) and call that our first third. So build up the salaries of the attorneys, paralegals, and legal secretaries who generate revenue or are timekeepers and call this your very first third (lets simply state that number was $100,000 to keep it basic). Whatever that number is take that number once again and it is your second third which we will call your "overhead" ( therefore 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). Take that same number and we will call that your last 3rd, which we will call gross earnings (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now find out just how much you need to charge per billable hour, per repaired rate or the number of contingency charge cases won to be sure you struck the target we must strike offered our first third number times three (in this example $300,000).
This method shows you just how much per hour you need to charge. Considering that you know how many billable hours each revenue generator can do monthly, simply 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 ensured of a 15% to 30% net benefit from your operations. After all if you are the owner of check my reference the practice you should have a fair profit as well do not you concur? This technique is called the Guideline of Three. If this technique is a bit too complicated do feel free to contact me and I will help you arrange it out in a few minutes on the phone.
It is a great concept to think through all of these pricing approaches in determining your law practice management rates strategy before setting a cost and continuing with a law practice marketing plan to ensure you are thoroughly checking out all alternatives. Remember the propensity for the majority of attorneys is to price too low. Do not do that! In another short article I will inform you how to talk to prospective customers so you never ever have a problem getting the charge you should have.