Law Practice Management-- How To Identify Your Costs
Figuring out charges is a challenging law practice management task for most lawyers when analyzing their law office marketing strategies. In identifying fees for particular services, lawyers typically disappoint what they ought to charge. When making their law firm marketing strategies, too many lawyers are afraid of even charging the competitive price for their services. Even more, they make the prices choices typically without any data or conceptual framework. Additionally, rather of focusing their efforts on how they can justify getting top dollar for what they provide, they charge a charge that is frequently way too low and frequently really can frighten off prospective clients who think there is something missing from a service that is " inexpensive". Furthermore many attorneys don't understand that most purchasers in the marketplace by far are "value purchasers" and not looking for " inexpensive".
Before you sit down and begin believing through your law practice management pricing method you need some distinctions around prices typically utilized in law company marketing preparation. Do understand a law practice management law firm marketing strategy is not effective if you just attract people who want to pay the lowest charge for a service. Rather, you desire to focus your law practice management and law firm marketing strategies on attracting customers who will become long term properties to the firm.
There are essentially 4 ways of identifying just how much you should be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
This is one excellent method of identifying rates. Get your assistant to support you in this law practice management task and invest a long time discovering what the range of prices remains in the neighborhood. Have her do a " secret buyer" study by calling around as if he/she were a potential client and discover what your rivals state on the phone to her around pricing. She might require to call from her house phone to avoid caller ID. As another option you could have him/her call other assistants or paralegals at your competitors and offer to exchange your charges for their costs or you might do that with other lawyers yourself in your market. If you really wish to enter into it and have maximum data you can write maybe a couple of lots 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 recognize those responding and send them a copy of the results. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services used in your practice location. Now you will see what people are charging for services comparable to those you provide. You must be able to come up with a range of prices. Use this variety to set prices for your own services. My recommendation in law practice 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 fees.
Keep in mind that in basic it is not a excellent law practice management method to contend on cost. Most prospective customers will see prices that is too low as a signal that there is something missing either from the service, the provider, or the firm.
The Cost Approach in Law Practice Management Rates
This law practice management prices approach is really straightforward really. The most common mistake in law practice management using this technique is to disregard to consist of some kind of your expense.
OK, let me say it again. In law practice management often you count yourself out of the costs and you need to include yourself in the costs. Why? Frequently you are doing at least some of the technical work. Yes? Frequently you are doing at least some of the management work. Yes? As the owner of business you are due a sensible profit. Yes? If you are all 3 of these in one, you need to think about one wage as due you for your time and knowledge as the specialist and manager in addition to a profit of fifteen to thirty percent due you as the owner. So make sure to consist of a sensible expense for your technical and managerial operate in the costs part of this formula.
Fixed Rate Method in Law Practice Management Pricing
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 identify a fixed rate for numerous jobs and charge that rate no matter what. Another example utilizing this technique is how handled health care has utilized this system with medical professionals and healthcare facilities .
The "Rule of 3" in Law Practice Management Pricing
This " guideline of thumb" called the "rule of 3" used in law practice management is not what your Certified Public Accountant may 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 thinking in thirds. For the very first third we will take the overall amount of salaries/bonuses (not benefits just incomes-- advantages enter into the second third coming next) for the income generators and/or timekeepers (this includes you if you are producing revenue) and call that our very first 3rd. So accumulate the wages of the lawyers, paralegals, and legal secretaries who generate income or are timekeepers and call this your very first 3rd (lets just say that number was $100,000 to keep it basic). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" ( therefore that 2nd third is $100,000 and don't forget you if you are doing some handling partner type tasks since that part of your time goes here in overhead). Then take that exact 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 total quantity (in this example $300,000) and now figure out just how much you must charge per billable hour, per repaired rate or how numerous contingency charge cases won to be sure you hit the target we should hit offered our very first third number times three (in this i thought about this example $300,000).
This method reveals you how much per hour you need to charge. Because you know the number of billable hours each revenue generator can do per month, merely divide that into your overall of all thirds ($300,000) to see what you require to charge per billable hour to make your numbers come out properly. As long as you hit your targets you will be assured of a 15% to 30% net revenue from your operations. If you are the owner of the practice you are worthy of a reasonable earnings as well don't you agree? This technique is referred to as the Rule of Three. , if this approach is a bit too complicated do feel complimentary to call me and I will help you sort it out in a couple of minutes on the phone.
It is a great concept to believe through all of these prices approaches in determining your law practice management rates technique prior to setting a rate and moving ahead with a law company marketing plan to ensure you are completely exploring all choices. 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 speak to prospective customers so you never have a issue getting the charge you are worthy of.