Law Practice Management-- How To Determine Your Costs
Identifying costs is a hard law practice management task for many attorneys when thinking through their law company marketing plans. In figuring out charges for certain services, attorneys typically fall short of what they should charge. Too many lawyers are afraid of even charging the competitive rate for their services when making their law firm marketing plans.
Before you sit down and start believing through your law practice management rates method you require some distinctions around rates typically used in law firm marketing planning. Then include your pricing technique to your law practice marketing strategies. You require to be sure that you are charging a enough charge on everything to ensure you a excellent earnings not simply a great living. Do understand a law practice management law office marketing strategy is ineffective if you only draw in people who want to pay the most affordable cost for a service. These are not devoted customers. Rather, you want to focus your law practice management and law practice marketing intend on drawing in clients who will become long term properties to the company. Low price customers are not developing your base of long term customers I can guarantee you that.
There are basically 4 ways of identifying just how much you must be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Prices
This is one great way of determining prices. Get your assistant to support you in this law practice management job and invest some time discovering what the variety of pricing remains in the neighborhood. Have her do a "mystery buyer" research study by calling around as if he/she were a potential client and discover what your competitors say on the phone to her around pricing. 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 rivals and offer to exchange your fees for their costs or you could do that with other lawyers yourself in your market. If you truly desire to enter it and have maximum information you can write maybe a couple of dozen competitors in your marketplace and state you are doing a cost study and if they would send you their fee list you will create a composite list that does not determine those reacting and send them a copy of the results. To keep it basic for them include a stamped, self-addressed envelope with a list of the most common services offered in your practice location. Now you will see what people are charging for services similar to those you use. You need to have the ability to develop a range of rates. Use this variety to set costs for your own services. My recommendation in law office marketing preparation is to charge at the 75% level of the list. So you ought to be at or in the leading 25% of the costs.
Keep in mind that in basic it is not a good law practice management technique to compete on cost. Most prospective customers 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 firm. And people who are trying to find a low price will follow that low rate wherever they can discover it instead of becoming long-term clients. Be sure that your rate covers your costs and a reasonable revenue margin.
The Expense Technique in Law Practice Management Pricing
This law practice management rates approach is extremely simple actually. One merely identifies what the expenses are to deliver services or items and adds on a reasonable revenue, somewhere between fifteen percent at the least and perhaps thirty three percent at the most. The most common mistake in law practice management using this technique is to overlook to consist of some type of your cost. Solo and small company lawyers tend to not include their own salary!
In law practice management frequently you count yourself out of the expenses and you need to include yourself in the costs. Frequently you are doing at least some of the management work. If you are all three of these in one, you ought to think about one salary as due you for your time and expertise as the professional and manager as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Rates
This is the technique utilized by numerous auto mechanics (it is called "the flat rate book") and other service companies. This method is where you identify a fixed rate for numerous tasks and charge that rate no matter what. He makes more if the mechanic spends less time than allocated for the task. He makes less if he spends more time than allocated. But in the end, all of it evens out (well, normally to the mechanics' favor if you ask me). Another example using this approach is how handled health care has utilized this system with health centers and physicians . Lawyers can use this system if they desire.
The " Guideline of 3" in Law Practice Management Prices
This " general rule" called the "rule of 3" used in law practice management is not what anchor your CPA might tell you and it does not fail you either. Ask your CPA what they believe about it and they will like it. To start we are going to be believing in thirds. For the first third we will take the total amount of salaries/bonuses (not benefits simply wages-- advantages enter into the 2nd third coming next) for the profits generators and/or timekeepers (this includes you if you are producing revenue) and call that our first 3rd. So add up the wages of the legal representatives, paralegals, and legal secretaries who create income or are timekeepers and call this your very first third (lets just say that number was $100,000 to keep it simple). Whatever that number is take that number once again and it is your second third which we will call your "overhead" (thus that second 3rd is $100,000 and don't forget you if you are doing some managing partner type responsibilities because that part of your time goes here in overhead). Then take that very same number and we will call that your last third, which we will call gross profits (another $100,000). What you need to do is take the overall quantity (in this example $300,000) and now figure out how much you need to charge per billable hour, per repaired rate or the number of contingency cost cases won to be sure you hit the target we need to hit provided our first 3rd number times three (in this example $300,000).
This method shows you how much per hour you need to charge. If you are the owner of the practice you are worthy of a fair revenue as well don't you agree? If this technique is a bit too complicated do feel complimentary to call me and I will assist you arrange it out in a couple of minutes on the phone.
It is a great idea to think through all of these pricing methods in identifying your law practice Continued management pricing technique prior to setting a cost and moving ahead with a law firm marketing plan to guarantee you are completely checking out all options. In another short article I will tell you how to speak to potential customers so you never ever have a problem getting the fee you are worthy of.