Law Practice Management-- How To Determine Your Costs
Figuring out costs is a hard law practice management job for a lot of lawyers when believing through their law company marketing strategies. In determining fees for certain services, attorneys often fall short of what they need to charge. Too many lawyers are afraid of even charging the competitive rate for their services when making their law firm marketing strategies.
So prior to you sit down and begin thinking through your law practice management prices strategy you need some differences around pricing frequently utilized in law firm marketing preparation. Add your rates technique to your law company marketing plans. You need to be sure that you are charging a adequate fee on whatever to guarantee you a good profit not just a good living. Do know a law practice management law office marketing strategy is not efficient if you only draw in individuals who wish to pay the most affordable charge for a service. These are not loyal customers. Rather, you want to focus your law practice management and law practice marketing strategies on bring in customers who will end up being long term assets to the company. Low cost customers are not constructing your base of long term clients I can assure you that.
There are generally 4 ways of determining how much you ought to be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Pricing
This is one great way of determining rates. Get your assistant to support you in this law practice management task and spend some time finding what the range of prices remains in the community. Have her do a "mystery consumer" research study by calling around as if he/she were a possible client and find out what your competitors say on the phone to her around prices. She may need to call from her home phone to prevent 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 charges or you might do that with other legal representatives yourself in your market. If you really want to get into it and have optimal information you can write possibly a couple of lots rivals in your market and say you are doing a charge survey and if they would send you their fee list you will create a composite list that does not identify those responding and send them a copy of the outcomes. To keep it basic for them include a stamped, self-addressed envelope with a list of the most common services provided 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 come up with a series of prices. Utilize this variety to set costs for your own services. My suggestion in law practice marketing preparation is to charge at the 75% level of the list. So you must be at or in the top 25% of the costs.
Remember that in general it is not a great law practice management technique to compete on rate. A lot of prospective clients will see prices that is too low as a signal that there is something missing either from the service, the service provider, or the firm. And people who are trying to find a low price will follow that low rate anywhere they can discover it rather than ending up being long-term customers. Be sure that your rate covers your costs and a affordable profit margin.
The Expense Method in Law Practice Management Rates
This law practice management rates technique is really uncomplicated really. One merely identifies what the expenses are to deliver services or items and adds on a reasonable earnings, somewhere in between fifteen percent at the least and maybe thirty three percent at the most. The most typical error in law practice management using this technique is to disregard to consist of some form of your expense. Solo and small company attorneys tend to not include their own salary!
In law practice management frequently you count yourself out of the expenses and you should include yourself in the expenditures. Often you are doing at least some of the management work. If you are all 3 of these in one, you ought to think about one wage as due you for your time and know-how as the specialist and supervisor as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Pricing
This is the method utilized by many auto mechanics (it is called "the flat rate book") and other service companies. This approach is where you identify a set rate for various jobs and charge that rate no matter what. Another example utilizing this method is how handled health care has used this system with doctors and healthcare facilities .
The " Guideline of 3" in Law Practice Management Rates
This " guideline" called the "rule of three" utilized in law practice management is not what your Certified Public Accountant might inform you and it does not fail you either. Ask your CPA what they consider it and they will like it. To begin we are going to be believing in thirds. For the very first third we will take the total amount of salaries/bonuses (not benefits just salaries-- benefits go into the 2nd third following) for the earnings generators and/or timekeepers (this includes you if you are generating revenue) and call that our first third. Add up the salaries of the lawyers, paralegals, and legal secretaries who generate profits or are timekeepers and call this your first third (lets just say that number was pop over here $100,000 to keep it easy). Whatever that number is take that number once again and it is your 2nd 3rd which we will call your "overhead" (thus that 2nd third is $100,000 and don't forget you if you are doing some managing partner type tasks because that part of your time goes here in overhead). Then take that very same number and we will call that your last 3rd, which we will call gross earnings (another $100,000). What you need to do is take the total amount (in this example $300,000) and now figure out how much you must charge per billable hour, per repaired rate or the number of contingency charge cases won to be sure you hit the target we must strike provided our very first 3rd number times three (in this example $300,000).
This approach shows you how much per hour you require to charge. If you are the owner of the practice you should have a fair earnings as well do not you concur? If this approach is a bit too complicated do feel totally free to call me and I will assist you arrange it out in a couple of minutes on the phone.
It is a excellent idea to believe through all of these pricing methods in identifying your law practice management rates method before setting a rate and moving ahead with a law firm marketing strategy to ensure you are thoroughly exploring all alternatives. In another short article I will tell you how to speak to potential clients so you never have a issue getting the fee you are worthy of.