Law Practice Management-- How To Identify Your Costs
Identifying charges is a tough law practice management task for many attorneys when analyzing their law firm marketing plans. In determining charges for specific services, lawyers often fall short of what they ought to charge. When making their law company marketing plans, too many lawyers are scared of even charging the competitive price for their services. Even more, they make the prices choices often without any data or conceptual structure. In addition, instead of focusing their efforts on how they can justify getting top dollar for what they offer, they charge a cost that is typically way too low and typically actually can scare off prospective customers who believe there is something missing from a service that is " low-cost". Additionally many lawyers do not realize that the majority of purchasers in the market by far are " worth purchasers" and not looking for " inexpensive".
Before you sit down and start thinking through your law practice management rates strategy you need some differences around rates commonly used in law company marketing planning. Do know a law practice management law firm marketing strategy is not reliable if you only draw in individuals who want to pay the most affordable fee for a service. Instead, you want to focus your law practice management and law firm marketing plans on bring in clients who will become long term assets to the firm.
There are generally four ways of figuring out just how much you should be charging for your services. Lets move right into those now.
The Market Method In Law Practice Management Rates
This is one great way of figuring out pricing. Get your assistant to support you in this law practice management task and invest some time finding what the range of prices remains in the community. Have her do a "mystery buyer" study by calling around as if he/she were a potential client and learn what your rivals say on the phone to her around pricing. She might need to call from her house phone to prevent caller ID. As another option you might have him/her call other assistants or paralegals at your competitors and use to exchange your costs for their fees or you could do that with other lawyers yourself in your market. If you actually desire to enter into it and have maximum data you can compose perhaps a few dozen rivals in your marketplace and say you are doing a charge survey and if they would send you their charge list you will create a composite list that does not determine those reacting and send them a copy of the results. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most typical services provided in your practice area. Now you will see what individuals are charging for services comparable to those you use. You should have the ability to come up with a range of costs. Use this range to set rates for your own services. My suggestion in law office 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 basic it is not a excellent law practice management technique to contend on cost. The majority of possible clients will see pricing that is too low as a signal that there is something missing either from the service, the company, or the company.
The Expense Approach in Law Practice Management Pricing
This law practice management rates method is extremely uncomplicated truly. The most common mistake in law practice management using this method is to neglect to consist of some kind of your expense.
In law practice management often you count yourself out of the expenditures and you need to include yourself in the expenditures. 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 knowledge as the service technician and supervisor as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Prices
This is the method utilized by many car mechanics (it is called "the flat rate book") and other service providers. This approach is where you determine a set rate for various jobs and charge that rate no matter what. He makes more if the mechanic spends less time than set aside for the task. If he spends more time than designated, he earns less. In the end, it all evens out (well, normally to the mechanics' favor if you ask me). Another example using this method is how managed healthcare has utilized this system with medical facilities and medical professionals . If they desire, legal representatives useful link can utilize this system.
The " Guideline of 3" in Law Practice Management Rates
This " guideline" called the "rule of three" utilized in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your Certified Public Accountant what they think of it and they will like it. To begin we are going to be believing in thirds. For the first third we will take the overall amount of salaries/bonuses (not advantages just wages-- advantages go into the 2nd third following) for the profits generators and/or timekeepers (this includes you if you are generating earnings) and call that our very first 3rd. Add up the salaries 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 easy). Whatever that number is take that number once again and it is your 2nd 3rd 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). 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 total amount (in this example $300,000) and now find out just how much you should charge per billable hour, per fixed rate or how lots of contingency charge cases won to be sure you hit the target we need to strike given our very first third number times 3 (in this example $300,000).
This method shows you just how much per hour you require to charge. Considering that you understand how numerous billable hours each earnings generator can do per 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 earnings from your operations. If you are the owner of the practice you deserve a fair profit as well don't you agree? This technique is referred to as the Rule of Three. , if this technique is a bit too confusing do feel totally free to contact me and I will assist you arrange it out in a few minutes on the phone.
It is a great concept to believe through all of these prices techniques in determining your law practice management prices technique before setting a price and moving ahead with a law firm marketing plan to guarantee you are completely exploring all alternatives. Keep in mind the propensity for many legal representatives is to price too low. Do not do that! In another post I will tell you how to talk to possible customers so you never have a problem getting the charge you should have.