Law Practice Management-- How To Identify Your Costs
Identifying charges is a tough law practice management job for a lot of attorneys when thinking through their law firm marketing strategies. In figuring out charges for specific services, attorneys often fall short of what they ought to charge. Too numerous attorneys are scared of even charging the competitive price for their services when making their law firm marketing strategies.
Before you sit down and start believing through your law practice management prices technique you need some distinctions around rates typically used in law company marketing preparation. Do know a law practice management law company marketing plan is not efficient if you only bring in people who want to pay the lowest fee for a service. Instead, you desire to focus your law practice management and law company marketing plans on drawing in customers who will become long term assets to the firm.
There are essentially four methods of identifying just how much you ought to 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 identifying prices. Get your assistant to support you in this law practice management job and spend a long time discovering what the variety of pricing remains in the community. Have her do a " secret buyer" research study by calling around as if he/she were a possible customer and learn what your competitors state on the phone to her around prices. She may need to call from her house phone to prevent caller ID. As another choice you could have him/her call other assistants or paralegals at your competitors and offer to exchange your costs for their costs or you might do that with other lawyers yourself in your market. If you truly wish to enter into it and have maximum data you can write possibly a couple of lots competitors in your marketplace and say you are doing a cost survey 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 common services used in your practice location. Now you will see what people are charging for services similar to those you use. You must be able to come up with a variety of rates. Use this variety to set rates for your own services. My recommendation in law practice marketing preparation is to charge at the 75% level of the list. You must be at or in the top 25% of the charges.
Bear in mind that in general it is not a great law practice management strategy to compete on cost. Most prospective customers will see rates that is too low as a signal that there is something missing out on either from the service, the provider, or the firm. And people who are searching for a low cost will follow that low rate wherever they can find it rather than ending up being long-lasting customers. Be sure that your rate covers your expenses and a reasonable profit margin.
The Cost Approach in Law Practice Management Pricing
This law practice management pricing technique is extremely uncomplicated truly. The most common mistake in law practice management utilizing this technique is to disregard to include some form of your expenditure.
OK, let me state it once again. In law practice management often you count yourself out of the expenditures and you need to include yourself in the expenditures. Why? Frequently you are doing at least some of the technical work. Yes? Typically you are doing at least some 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 think about one salary as due you for your time and know-how as the professional and manager along with a revenue of fifteen to thirty percent due you as the owner. So be sure to consist of a affordable cost for your managerial and technical see page operate in the costs part of this formula.
Fixed Rate Method in Law Practice Management Pricing
This is the technique used by many car mechanics (it is called "the flat rate book") and other company. This technique is where you determine a fixed rate for various tasks and charge that rate no matter what. If the mechanic spends less time than set aside for the task, he makes more. He makes less if he invests more time than designated. In the end, it all evens out (well, generally to the mechanics' favor if you ask me). Another example using this method is how managed healthcare has actually utilized this system with medical facilities and medical professionals . Attorneys can utilize this system if they want.
The " Guideline of 3" in Law Practice Management Prices
This " guideline" called the " guideline of three" utilized in law practice management is not what your Certified Public Accountant may inform you and it does not fail you either. Ask your CPA what they think of it and they will like it. To start we are going to be thinking in thirds. For the very first third we will take the overall amount of salaries/bonuses (not advantages just wages-- benefits enter into the 2nd 3rd following) for the revenue generators and/or timekeepers (this includes you if you are producing income) and call that our very first third. So accumulate the wages of the attorneys, paralegals, and legal secretaries who create revenue or are timekeepers and call this your very first 3rd (lets simply say that number was $100,000 to keep it simple). Whatever that number is take that number once again and it is your second third which we will call your "overhead" ( hence that 2nd 3rd is $100,000 and do not forget you if you are doing some handling partner type duties since that part of your time goes here in overhead). Then take that exact same number and we will call that your last third, which we will call gross profits (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now figure out how much you need to charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you struck the target we must strike offered our very first third number times three (in this example $300,000).
This method reveals you how much per hour you require to charge. If you are the owner of the practice you are worthy of a reasonable profit as well do not you agree? If this technique is a bit too confusing do feel complimentary to contact me and I will assist you arrange it out in a few minutes on the phone.
It is a good concept to believe through all of these rates approaches in determining your law practice management prices method before setting a price and continuing with a law office marketing plan to guarantee you are completely exploring all choices. Keep in mind the tendency for most lawyers is to price too low. Do not do that! In another article I will inform you how to speak to potential clients so you never ever have a issue getting the cost you deserve.