Law Practice Management-- How To Identify Your Charges
Determining fees is a tough law practice management task for many lawyers when thinking through their law company marketing strategies. In determining costs for specific services, attorneys typically fall short of what they should charge. Too many attorneys are scared of even charging the competitive price for their services when making their law firm marketing plans.
Before you sit down and begin thinking through your law practice management rates method you require some differences around pricing frequently utilized in law company marketing planning. Do know a law practice management law firm marketing strategy is not reliable if you just draw in people who desire to pay the least expensive cost for a service. Rather, you desire to focus your law practice management and law company marketing plans on bring in clients who will end up being long term possessions to the firm.
There are basically 4 methods of identifying just how much you need to be charging for your services. Lets move right into those now.
The Marketplace Technique In Law Practice Management Prices
This is one excellent way of identifying rates. Get your assistant to support you in this law practice management job and spend a long time discovering what the series of pricing remains in the neighborhood. Have her do a "mystery buyer" study by calling around as if he/she were a possible client and discover what your competitors say on the phone to her around prices. She might need to call from her home phone to avoid caller ID. As another alternative you could have him/her call other assistants or paralegals at your competitors and use to exchange your costs for their costs or you might do that with other lawyers yourself in your market. If you actually want to enter it and have optimal information you can compose maybe a couple of lots competitors in your market and say you are doing a cost study and if they would send you their fee list you will develop a composite list that does not identify those responding and send them a copy of the outcomes. To keep it easy for them consist of 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 provide. You ought to be able to come up with a variety of costs. Utilize this range to set costs for your own services. My recommendation in law company marketing planning is to charge at the 75% level of the list. So you should be at or in the top 25% of the costs.
Remember that in general it is not a good law practice management strategy to compete on rate. Most potential clients will see pricing that is too low as a signal that there is something missing out on either from the service, the provider, or the company.
The Expense Technique in Law Practice Management Prices
This law practice management pricing technique is really straightforward really. The most common error in law practice management utilizing this method is to overlook to include some type of your cost.
OK, let me say it once again. In law practice management frequently you count yourself out of the expenditures and you must include yourself in the costs. Why? Frequently you are doing at least a few of the technical work. Yes? Typically you are doing a minimum of some of the management work. Yes? As the owner of the organisation you are due a reasonable profit. Yes? If you are all three of these in one, you must special info consider one income as due you for your time and know-how as the service technician and manager along with a revenue of fifteen to thirty percent due you as the owner. Be sure to consist of a reasonable cost for your technical and supervisory work in the costs part of this formula.
Fixed Rate Technique in Law Practice Management Rates
This is the method utilized by numerous automobile mechanics (it is called "the flat rate book") and other company. This approach is where you identify a fixed rate for various jobs and charge that rate no matter what. If the mechanic invests less time than allocated for the job, he makes more. He makes less if he invests more time than allocated. But in the end, it all evens out (well, normally to the mechanics' favor if you ask me). Another example utilizing this method is how handled healthcare has utilized this system with physicians and medical facilities . Attorneys can utilize this system if they prefer.
The "Rule of Three" in Law Practice Management Prices
This " guideline" 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 CPA what they consider it and they will like it. To start we are going to be thinking in thirds. For the first third we will take the total amount of salaries/bonuses (not benefits simply wages-- advantages enter into the second third following) for the profits generators and/or timekeepers (this includes you if you are generating earnings) and call that our first third. Add up the salaries of the legal representatives, paralegals, and legal secretaries who generate earnings or are timekeepers and call this your first 3rd (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 2nd third which we will call your "overhead" ( therefore that second 3rd is $100,000 and don't forget you if you are doing some managing partner type duties because that part of your time goes here in overhead). Take that very same number and we will call that your last third, which we will call gross profits (another $100,000). What you require to do is take the total amount (in this example $300,000) and now figure out just how much you should charge per billable hour, per repaired rate or how many contingency cost cases won to be sure you hit the target we should strike provided our very first third number times 3 (in this example $300,000).
This technique shows you how much per hour you need to charge. Given that you know the number of billable hours each profits generator can do each month, merely 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 correctly. As long as you hit your targets you will be assured of a 15% to 30% net make money from your operations. After all if you are the owner of the practice you are worthy of a reasonable revenue too don't you agree? This approach is called the Guideline of Three. If this technique is a bit too confusing do feel complimentary to contact me and I will help you sort it out in a couple of minutes on the phone.
It is a good idea to analyze all of these rates methods in determining your law practice management prices method prior to setting a price and moving ahead with a law practice marketing strategy to ensure you are thoroughly checking out all alternatives. Keep in mind the propensity for many attorneys is to price too low. Do not do that! In another post I will inform you how to speak to prospective clients so you never have a problem getting the charge you are worthy of.