Law Practice Management-- How To Determine Your Charges
Identifying charges is a tough law practice management task for the majority of lawyers when analyzing their law practice marketing plans. In determining costs for particular services, lawyers often disappoint what they must charge. When making their law firm marketing plans, too numerous attorneys are afraid of even charging the competitive price for their services. Even more, they make the rates decisions frequently with no information or conceptual framework. Additionally, rather of focusing their efforts on how they can justify getting leading dollar for what they offer, they charge a fee that is frequently way too low and typically really can frighten possible clients who believe there is something missing from a service that is " low-cost". In addition numerous lawyers don't recognize that most purchasers in the market by far are "value buyers" and not searching for " low-cost".
Before you sit down and start believing through your law practice management pricing technique you require some differences around prices typically used in law firm marketing planning. Do understand a law practice management law firm marketing plan is not effective if you only bring in people who desire to pay the least expensive charge for a service. Rather, you desire to focus your law practice management and law firm marketing strategies on attracting clients who will become long term properties to the company.
There are essentially four methods of identifying just how much you need to be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Rates
This is one excellent 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 prices is in the community. Have her do a " secret consumer" study by calling around as if he/she were a prospective customer and discover what your competitors state on the phone to her around prices. She may require to call from her house phone to prevent caller ID. As another choice you could have him/her call other assistants or paralegals at your rivals and use to exchange your charges for their fees or you might do that with other attorneys yourself in your market. If you really want to enter it and have optimal information you can compose possibly a few dozen competitors in your marketplace and say you are doing a fee study and if they would send you their fee list you will produce a composite list that does not identify those reacting and send them a copy of the outcomes. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most typical services provided in your practice area. Now you will see what individuals are charging for services comparable to those you use. You must have the ability to come up with a series of costs. Use this range to set rates for your own services. My suggestion in law practice marketing preparation is to charge at the 75% level of the list. You should be at or in the top 25% of the charges.
Keep in mind that in general it is not a good law practice management method to contend on price. The majority of potential clients will see pricing that is too low as a signal that there is something missing out on either from the my company service, the supplier, or the company.
The Cost Approach in Law Practice Management Prices
This law practice management pricing technique is very simple really. The most common error in law practice management utilizing this method is to disregard to consist of some form of your expense.
In law practice management typically you count yourself out of the costs and you must include yourself in the expenses. 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 revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Prices
This is the method used by numerous vehicle 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 utilizing this method is how handled health care has used this system with medical facilities and doctors .
The "Rule of 3" in Law Practice Management Pricing
This " guideline" called the "rule of 3" utilized in law practice management is not what your Certified Public Accountant may tell you and it does not fail you either. Ask your CPA what they think of it and they will like it. To begin we are going to be thinking in thirds. For the very first 3rd we will take the total amount of salaries/bonuses (not advantages simply salaries-- benefits enter into the 2nd 3rd coming next) for the profits generators and/or timekeepers (this includes you if you are generating income) and call that our very first 3rd. So accumulate the incomes of the attorneys, paralegals, and legal secretaries who create profits or are timekeepers and call this your very first 3rd (lets simply state that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your 2nd third which we will call your "overhead" ( hence that second 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 exact same number and we will call that your last 3rd, which go now we will call gross profits (another $100,000). What you need to do is take the total quantity (in this example $300,000) and now find out just how much you should charge per billable hour, per fixed rate or how lots of contingency charge cases won to be sure you hit the target we must hit given our first 3rd number times three (in this example $300,000).
This approach reveals you just how much per hour you need look these up to charge. Considering that you understand the number of billable hours each income generator can do each month, merely divide that into your overall 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 profit from your operations. If you are the owner of the practice you deserve a reasonable earnings as well do not you agree? This technique is referred to as the Rule of Three. If this approach is a bit too confusing do feel free to call me and I will help you sort it out in a couple of minutes on the phone.
It is a excellent idea to think through all of these pricing methods in determining your law practice management rates method prior to setting a rate and moving ahead with a law firm marketing plan to ensure you are thoroughly checking out all choices. In another short article I will tell you how to speak to potential customers so you never have a issue getting the fee you deserve.