Law Practice Management-- How To Identify Your Costs
When thinking through their law firm marketing strategies, determining fees is a difficult law practice management task for many attorneys. In identifying fees for certain services, lawyers often fall short of what they must charge. A lot of lawyers hesitate of even charging the competitive price for their services when making their law office marketing plans. Even more, they make the rates decisions frequently without any data or conceptual framework. In addition, rather of focusing their efforts on how they can justify getting top dollar for what they provide, they charge a cost that is often way too low and often really can frighten prospective customers who think there is something missing from a service that is " inexpensive". Additionally numerous lawyers don't realize that most purchasers in the market by far are " worth buyers" and not trying to find " low-cost".
Before you sit down and start thinking through your law practice management pricing method you require some differences around rates typically utilized in law firm marketing planning. Do understand a law practice management law firm marketing plan is not efficient if you just attract individuals who want to pay the most affordable charge for a service. Rather, you desire to focus your law practice management and law company marketing plans on drawing in customers who will become long term possessions to the company.
There are basically four methods of figuring out how much you need to be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Rates
This is one great way of identifying pricing. Get your assistant to support you in this law practice management job and spend some time discovering what the range of rates is in the neighborhood. Have her do a " secret buyer" study by calling around as if he/she were a potential client and find out what your competitors say on the phone to her around pricing. She might require to call from her home phone to avoid caller ID. As another choice you could have him/her call other assistants or paralegals at your rivals and use to exchange your fees for their charges or you could do that with other legal representatives yourself in your market. If you really wish to enter it and have optimal data you can write maybe a couple of dozen rivals in your marketplace and state you are doing a charge study and if they would send you their cost list you will develop a composite list that does not recognize those reacting and send them a copy of the results. 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 location. Now you will see what people are charging for services similar to those you offer. You should be able to develop a series of prices. Utilize this variety to set costs for your own services. My recommendation in law office marketing preparation is to charge at the 75% level of the list. So you need to be at or in the top 25% of the fees.
Remember that in basic it is not a good law practice management method to contend on price. Many potential clients will see prices that is too low as a signal that there is something missing either from the service, the company, or the company. And individuals who are looking for a low rate will follow that low cost anywhere they can discover it instead of becoming long-lasting clients. So make certain that your cost covers your expenses and a sensible earnings margin.
The Cost Approach in Law Practice Management Pricing
This law practice management prices approach is very uncomplicated really. One just identifies what the expenses are to deliver services or products and includes on a affordable revenue, someplace in between fifteen percent at the least and maybe thirty three percent at the most. The most common error in law practice management utilizing this method is to neglect to include some type of your expenditure. Solo and little company attorneys tend to not include their own salary!
OK, let me say it once again. In law practice management typically you count yourself out of the costs and you need to include yourself in the expenditures. Why? Frequently you are doing at least a few of the technical work. Yes? Often you are doing at least a few of the management work. Yes? As the owner of business you are due a reasonable earnings. Yes? If you are all three of these in one, you must consider one income as due you for your time and proficiency as the professional and supervisor as well as a earnings of fifteen to thirty percent due you as the owner. So be sure to include a affordable cost for your supervisory and technical work in the expenses part of this formula.
Fixed Rate Method in Law Practice Management Rates
This is the method utilized by many auto mechanics (it is called "the flat rate book") and other service suppliers. This technique is where you figure out a fixed rate for various tasks and charge that rate no matter what. Another example using this method is how managed health care has utilized this system with hospitals and physicians .
The " Guideline of 3" in Law Practice Management Rates
This " guideline of thumb" called the "rule of three" utilized in law practice management is not what your Certified Public Accountant may tell you and it does not fail you either. For the very first third we will take the total quantity of salaries/bonuses (not benefits just salaries-- advantages go into the second 3rd coming next) for the revenue generators and/or timekeepers (this includes you if you are creating income) and call that our very first 3rd. What you need to do is take the overall quantity (in this example $300,000) and now figure out how much you need to charge per billable hour, per repaired rate or how lots of contingency charge cases won to be sure you hit the target we need to strike given our first 3rd number times three (in this example $300,000).
This technique reveals you how much per hour you need to charge. If you are the owner of the practice you are worthy of a reasonable earnings as well don't you concur? If this technique is a bit too complicated do feel totally free to contact me and I will assist you sort it out in a few minutes on the phone.
It is a excellent concept to analyze all of these pricing methods in determining your law practice management prices technique prior to setting a rate and moving ahead with a law firm marketing plan to ensure you are completely checking out all choices. Remember the tendency for many attorneys is to price too low. Don't do that! In another article I will tell you how to speak to Find Out More prospective customers so you never have a problem getting the fee you should have.