Law Practice Management-- How To Identify Your Costs
Figuring out costs is a tough law practice management job for the majority of attorneys when thinking through their law company marketing strategies. In determining charges for particular services, attorneys frequently fall short of what they should charge. Too numerous attorneys are scared of even charging the competitive rate for their services when making their law firm marketing strategies.
Prior to you sit down and begin believing through your law practice management pricing technique you require some differences around rates commonly used in law company marketing planning. Then include your pricing technique to your law firm marketing plans. You need to be sure that you are charging a sufficient charge on everything to guarantee you a great revenue not simply a great living. Do understand a law practice management law practice marketing plan is not efficient if you only attract people who wish to pay the least expensive fee for a service. These are not devoted clients. Instead, you desire to focus your law practice management and law practice marketing strategies on drawing in customers who will become long term assets to the firm. Low cost clients are not building your base of long term customers I can guarantee you that.
There are basically 4 methods of identifying just how much you should be charging for your services. Lets move right into those now.
The Marketplace Technique In Law Practice Management Rates
This is one excellent way of identifying rates. Get your assistant to support you in this law practice management task and invest some time discovering what the variety of prices remains in the neighborhood. Have her do a " secret shopper" research study by calling around as if he/she were a prospective client and learn what your competitors state on the phone to her around pricing. She may need to call from her house phone to prevent caller ID. As another choice you might have him/her call other assistants or paralegals at your rivals and use to exchange your costs for their fees or you could do that with other attorneys yourself in your market. If you really wish to get into it and have optimal data you can write perhaps a few dozen rivals in your marketplace and state you are doing a charge survey and if they would send you their cost list you will develop a composite list that does not recognize those responding and send them a copy of the results. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services used in your practice area. Now you will see what individuals are charging for services comparable to those you provide. You ought to have the ability to develop a series of rates. Utilize this range to set costs for your own services. My recommendation 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.
Keep in mind that in basic it is not a great law practice management strategy to complete on price. A lot of possible clients will see rates that is too low as a signal that there go to this site is something missing either from the service, the company, or the company.
The Expense Method in Law Practice Management Prices
This law practice management rates technique is really simple truly. One simply determines what the expenses are to deliver services or items and adds on a sensible earnings, someplace in between fifteen percent at the least and possibly thirty three percent at the most. The most common mistake in law practice management utilizing this method is to neglect to include some kind of your expenditure. Solo and small company lawyers tend to not include their own income!
OK, let me say it once again. In law practice management typically you count yourself out of the costs and you ought to include yourself in the expenditures. Why? Typically you are doing at least a few of the technical work. Yes? Typically you are doing at least some of the management work. Yes? As the owner of business you are due a sensible earnings. Yes? If you are all three of these in one, you ought to think about one wage as due you for your time and competence as the specialist and manager in addition to a revenue of fifteen to thirty percent due you as the owner. So be sure to include a affordable cost for your managerial and technical operate in the costs part of this formula.
Fixed Rate Method in Law Practice Management Pricing
This is the technique utilized by numerous automobile mechanics (it is called "the flat rate book") and other service providers. This technique is where you figure out a fixed rate for various jobs and charge that rate no matter what. Another example using this technique is how handled health care has actually utilized this system with physicians and medical facilities .
The "Rule of 3" in Law Practice Management Prices
This "rule of thumb" called the "rule of 3" utilized in law practice management is not what your CPA might tell you and it does not fail you either. Ask your Certified Public Accountant what they think about it and they will like it. To start we are going to be thinking in thirds. For the very first 3rd we will take the total quantity of salaries/bonuses (not benefits just wages-- advantages enter into the 2nd third coming next) for the revenue generators and/or timekeepers (this includes you if you are generating profits) and call that our first third. So add up the incomes of the legal representatives, paralegals, and legal secretaries who create check revenue or are timekeepers and call this your very first third (lets simply say that number was $100,000 to keep it easy). Whatever that number is take that number once again and it is your 2nd third which we will call your "overhead" ( therefore that 2nd 3rd is $100,000 and do not forget you if you are doing some managing partner type responsibilities since 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 revenues (another $100,000). What you need to do is take the overall quantity (in this example $300,000) and now find out just how much you should charge per billable hour, per fixed rate or the number of contingency fee cases won to be sure you struck the target we should hit provided our first third number my explanation times 3 (in this example $300,000).
This technique reveals you how much per hour you need to charge. If you are the owner of the practice you should have a reasonable profit as well do not you agree? If this approach is a bit too confusing do feel complimentary to contact me and I will help you arrange it out in a couple of minutes on the phone.
It is a good concept to believe through all of these rates methods in determining your law practice management pricing strategy prior to setting a price and continuing with a law office marketing strategy to ensure you are thoroughly exploring all alternatives. Remember the tendency for the majority of lawyers is to price too low. Don't do that! In another post I will tell you how to talk to prospective customers so you never have a issue getting the cost you are worthy of.