Law Practice Management-- How To Determine Your Charges
When thinking through their law firm marketing plans, figuring out charges is a difficult law practice management task for the majority of attorneys. In identifying fees for certain services, lawyers typically fall brief of what they need to charge. When making their law firm marketing plans, too numerous attorneys are scared of even charging the competitive price for their services. Even more, they make the pricing decisions frequently without any information or conceptual framework. In addition, instead of focusing their efforts on how they can validate getting top dollar for what they provide, they charge a charge that is typically way too low and typically in fact can frighten prospective customers who believe there is something missing out on from a service that is " low-cost". Furthermore numerous attorneys do not understand that the majority of buyers in the market by far are " worth purchasers" and not searching for " low-cost".
Prior to you sit down and begin believing through your law practice management rates technique you require some distinctions around pricing typically utilized in law company marketing preparation. Do know a law practice management law firm marketing plan is not reliable if you just attract people who desire to pay the least expensive fee for a service. Instead, you want to focus your law practice management and law company marketing strategies on attracting clients who will end up being long term properties to the firm.
There are essentially 4 methods of determining how much you need to be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
This is one great way of figuring out rates. Get your assistant to support you in this law practice management job and spend some time discovering what the series of rates is in the community. Have her do a "mystery consumer" study by calling around as if he/she were a potential customer and learn what your competitors say on the phone to her around pricing. She may require 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 could do that with other lawyers yourself in your market. If you actually wish to get into it and have maximum information you can write perhaps a few lots competitors in your market and say you are doing a cost survey and if they would send you their cost list you will develop a composite list that does not determine those reacting and send them a copy of the outcomes. 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 people are charging for services comparable to those you offer. You need to have the ability to develop a variety of prices. Use this variety to set prices for your own services. My recommendation in law company marketing preparation is to charge at the 75% level of the list. So you need to be at or in the top 25% of the charges.
Keep in mind that in general it is not a great law practice management strategy to compete on rate. 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 supplier, or the company. And individuals who are trying to find a low rate will follow that low cost anywhere they can find it rather than becoming long-lasting clients. Be sure that your rate covers your expenses and a affordable profit margin.
The Cost Technique in Law Practice Management Prices
This law practice management rates method is extremely simple actually. One simply identifies what the costs are to deliver products or services and includes on a affordable earnings, someplace between fifteen percent at the least and perhaps thirty three percent at the most. The most typical mistake in law practice management utilizing this approach is to disregard to consist of some type of your cost. Solo and small company lawyers tend to not include their own income!
In law practice management frequently you count yourself out of the expenditures and you need to include yourself in the costs. Often you are doing at least some of the management work. If you are all 3 of these in one, you need to consider one income as due you for your time and expertise as the service technician and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Prices
This is the technique used by many auto mechanics (it is called "the flat rate book") and other service suppliers. This approach is where you identify a fixed rate for various tasks and charge that rate no matter what. Another example utilizing this technique is how managed health care has actually utilized this system with physicians and healthcare facilities .
The "Rule of Three" in Law Practice Management Rates
This " guideline of thumb" called the "rule of 3" used in law practice management is not what your CPA 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 start we are going to be believing in thirds. For the very first third we will take the overall quantity of salaries/bonuses (not benefits simply incomes-- advantages go into the 2nd third following) for the profits generators and/or timekeepers (this includes you if you are producing income) and call that our very first 3rd. So build up the salaries of the legal representatives, paralegals, and legal secretaries who produce revenue or are timekeepers and call this your first 3rd (lets just state that number was $100,000 to keep it simple). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" ( hence that second third is $100,000 and do not forget you if you are doing some managing partner type responsibilities because 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 revenues (another $100,000). What you require to do is take the total amount (in this example $300,000) and now determine how much you must charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you struck the target we need to hit given our first 3rd number times 3 (in this example $300,000).
This approach shows you just how much per hour you need to charge. Given that you know the number of billable hours each income generator can do per month, simply divide that into your total 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 strike your targets you will be guaranteed of a 15% to 30% net benefit from your operations. If you are the owner of the practice you deserve a reasonable profit as well do not you agree? This method is understood as the Rule of Three. , if this method is a bit too confusing do feel free to contact me and I will help you sort it out in a couple of minutes on the phone.
It is a great idea to think through all of these rates techniques in identifying your law practice management prices technique prior to setting a price and moving ahead with a law office marketing read this article strategy to guarantee you are thoroughly checking out all options. Remember the propensity for many legal representatives is to price too low. Don't do that! In another post I will inform you how to talk to prospective customers so you never have a problem getting the charge you should have.