Law Practice Management-- How To Identify Your Costs
When believing through their law company marketing plans, figuring out charges is a hard law practice management task for the majority of attorneys. In identifying costs for certain services, lawyers typically fall short of what they need to charge. When making their law company marketing plans, too numerous lawyers are scared of even charging the competitive rate for their services. Even more, they make the pricing decisions frequently without any information or conceptual structure. Additionally, instead 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 possible customers who believe there is something missing out on from a service that is " low-cost". Additionally many lawyers do not realize that most purchasers in the marketplace by far are " worth purchasers" and not trying to find " low-cost".
Prior to you sit down and start thinking through your law practice management rates technique you need some distinctions around rates typically used in law firm marketing preparation. Then include your pricing method to your law practice marketing plans. You need to be sure that you are charging a enough charge on whatever to guarantee you a good revenue not simply a great living. If you only attract people who want to pay the most affordable fee for a service, do understand a law practice management law company marketing strategy is not efficient. These are not loyal clients. Rather, you wish to focus your law practice management and law office marketing plans on bring in clients who will end up being long term assets to the company. Low price customers are not building your base of long term clients I can guarantee you that.
There are generally four methods of determining just how much you must be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Rates
This is one good method of figuring out rates. Get your assistant to support you in this law practice management job and invest some time discovering what the variety of rates remains in the neighborhood. Have her do a "mystery consumer" study by calling around as if he/she were a potential customer and discover 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 alternative you might 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 attorneys yourself in your market. If you really wish to enter it and have maximum data you can compose perhaps a few lots competitors in your market and say you are doing a cost study 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 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 individuals are charging for services comparable to those you provide. You need to be able to develop a variety of rates. Utilize this variety to set prices for your own services. My suggestion in law office marketing planning is to charge at the 75% level of the list. You ought to be at or in the top 25% of the fees.
Remember that in basic it is not a great law practice management technique to contend on cost. Many potential customers will see pricing that is too low as a signal that there is something missing out on either from the service, the company, or the firm.
The Expense Approach in Law Practice Management Rates
This law practice management rates approach is extremely uncomplicated actually. The most common mistake in law practice management using this technique is to neglect to consist of some form of your expense.
OK, let me say it once again. In law practice management typically you count yourself out of the expenses and you ought to include yourself in the costs. Why? Typically you are doing a minimum of a few of the technical work. Yes? Often you are doing at least a few of the management work. Yes? As the owner of the business you are due a reasonable revenue. Yes? If you are all three of these in one, you ought to consider one wage as due you for your time and know-how as the professional and supervisor in addition to a earnings of fifteen to thirty percent due you as the owner. So make sure to consist of a reasonable cost for your supervisory and technical operate in the expenditures part of this formula.
Fixed Rate Method in Law Practice Management Pricing
This is the method utilized by numerous car mechanics (it is called "the flat rate book") and other service providers. This method is where you identify a set rate for various jobs and charge that rate no matter what. Another example using this technique is how managed health care has utilized this system with hospitals and physicians .
The "Rule of Three" in Law Practice Management Rates
This " general rule" called the " guideline 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 believe about it and they will like it. To begin we are going to be thinking in thirds. For the first third we will take the overall quantity of salaries/bonuses (not benefits just salaries-- benefits enter into you could try this out the second third following) for the earnings generators and/or timekeepers (this includes you if you are generating profits) and call that our first 3rd. So accumulate the incomes of the lawyers, paralegals, and legal secretaries who generate profits or are timekeepers and call this your very first 3rd (lets just state that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( hence 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). Take that same number and we will call that your last third, which we will call gross revenues (another $100,000). What you need to do is take the total amount (in this example $300,000) and now determine just how much you should charge per billable hour, per fixed rate or how many contingency cost cases won to be sure you hit the target we must hit provided our very first 3rd number times 3 (in this example $300,000).
This approach reveals you just how much per hour you require to charge. Since you know the number of billable hours each profits generator can do each month, simply divide that into your total 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 strike your targets you will be guaranteed of a 15% to 30% net make money from your operations. After all if you are the owner of the practice you deserve a fair revenue too do not you agree? This approach is referred to as the Guideline of Three. , if this method is a bit too complicated do feel free to call me and I will assist you arrange it out in a couple of minutes on the phone.
It is a good concept to believe through all of these pricing techniques in identifying your law practice management rates method prior to setting a rate and moving ahead with a law practice marketing plan to guarantee you are completely exploring all choices. Remember the propensity for a lot of legal representatives is to price too low. Do not do that! In another article I will inform you how to speak to possible customers so you never have a problem getting the fee you should have.