Law Practice Management-- How To Determine Your Costs
Identifying charges is a difficult law practice management job for many lawyers when thinking through their law practice marketing strategies. In figuring out costs for specific services, attorneys frequently fall short of what they need to charge. Too many attorneys are scared of even charging the competitive cost for their services when making their law firm marketing strategies. Even more, they make the rates decisions frequently without any data or conceptual structure. Furthermore, rather of focusing their efforts on how they can validate getting top dollar for what they provide, they charge a charge that is often way too low and typically actually can scare off potential clients who believe there is something missing from a service that is "cheap". Additionally lots of attorneys don't realize that a lot of purchasers in the marketplace by far are " worth purchasers" and not searching for " low-cost".
Prior to you sit down and begin thinking through your law practice management pricing strategy you need some distinctions around prices commonly used in law company marketing preparation. Do know a law practice management law firm marketing strategy is not efficient if you only attract people who want to pay the most affordable charge for a service. Instead, you want to focus your law practice management and law firm marketing strategies on attracting customers who will become long term assets to the firm.
There are basically 4 methods of figuring out just how much you must be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Pricing
This is one great way of determining rates. Get your assistant to support you in this law practice management job and spend some time finding 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 customer and discover what your competitors state on the phone to her around rates. She might require to call from her home phone to prevent caller ID. As another choice you might have him/her call other assistants or paralegals at your competitors and provide to exchange your fees for their charges or you could do that with other lawyers yourself in your market. If you actually want to enter into it and have optimal information you can write perhaps a couple of dozen competitors in your marketplace and state you are doing a cost survey and if they would send you their cost list you will create a composite list that does not determine those responding 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 used in your practice area. Now you will see what individuals are charging for services comparable to those you offer. You should have the ability to create a variety of costs. Utilize this range to set prices for your own services. My recommendation in law company marketing planning is to charge at the 75% level of the list. So you need to be at or in the top 25% of the fees.
Keep in mind check my blog that in basic it is not a great law practice management technique to complete on cost. Many possible clients will see prices that is too low as a signal that there is something missing out on either from the service, the provider, or the firm. And individuals who are looking for a low cost will follow that low rate wherever they can discover it rather than becoming long-term clients. So make sure that your price covers your expenses and a sensible revenue margin.
The Cost Method in Law Practice Management Pricing
This law practice management prices technique is really uncomplicated truly. One simply determines what the expenses are to provide services or products and includes on a reasonable revenue, someplace between fifteen percent at the least and possibly thirty 3 percent at the most. The most typical error in law practice management using this approach is to overlook to consist of some form of your cost. Solo and small firm lawyers tend to not include their own income!
OK, let me state it again. In law practice management frequently you count yourself out of the expenses and you ought to include yourself in the expenses. Why? Often you are doing a minimum of some of the technical work. Yes? Often you are doing a minimum of a few of the management work. Yes? As the owner of the company you are due a sensible revenue. Yes? If you are all three of these in one, you must think about one wage as due you for your time and competence as the specialist and supervisor along with a earnings of fifteen to thirty percent due you as the owner. So be sure to consist of a reasonable cost for your managerial and technical operate in the expenses part of this formula.
Fixed Rate Approach in Law Practice Management Prices
This is the approach utilized by lots of car mechanics (it is called "the flat rate book") and other service companies. This technique is where you figure out a set rate for numerous tasks and charge that rate no matter what. Another example utilizing this approach is how managed health care has utilized this system with healthcare facilities and medical professionals .
The "Rule of 3" in Law Practice Management Pricing
This "rule of thumb" called the " guideline of 3" used in law practice management is not what your CPA may tell you and it does not fail you either. For the first 3rd we will take the more info here total amount of salaries/bonuses (not advantages just salaries-- advantages go into the second third coming next) for the earnings generators and/or timekeepers (this includes you if you are producing income) and call that our very first 3rd. What you need to do is take the total quantity (in this example $300,000) and now figure out how much you should charge per billable hour, per repaired rate or how numerous contingency fee cases won to be sure you struck the target we should hit offered our first third number times 3 (in this example $300,000).
This approach shows you just how much per hour you need to charge. Since you understand the number of billable hours each revenue generator can do each month, simply 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 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 should have a fair revenue as well do not you agree? This technique is referred to as the Rule of Three. If this method is a bit too confusing do do not hesitate to contact me and I will help you arrange it out in a couple of minutes on the phone.
It is a excellent concept to believe through all of these prices approaches in identifying your law practice management pricing strategy before setting a price and moving ahead with a law firm marketing plan to ensure you are completely checking out all options. In another article I will tell you how to speak to prospective clients so you never have a problem getting the cost you are worthy of.