Law Practice Management-- How To Determine Your Charges
When thinking through their law firm marketing plans, identifying costs is a hard law practice management job for most attorneys. In identifying charges for specific services, attorneys often disappoint what they need to charge. A lot of lawyers are scared of even charging the competitive price for their services when making their law firm marketing plans. Even more, they make the pricing decisions often without any data or conceptual framework. Furthermore, instead of focusing their efforts on how they can justify getting top dollar for what they offer, they charge a fee that is frequently way too low and often in fact can scare off possible customers who believe there is something missing from a service that is " inexpensive". Furthermore numerous lawyers don't understand that many purchasers in the market by far are " worth buyers" and not searching for " low-cost".
Prior to you sit down and start thinking through your law practice management pricing method you require some distinctions around rates typically utilized in law company marketing planning. Do understand a law practice management law company marketing strategy is not reliable if you just bring in people who want to pay the lowest cost for a service. Rather, you want to focus your law practice management and law firm marketing plans on attracting customers who will become long term possessions to the company.
There are generally four ways of determining just how much you ought to be charging for your services. Lets move right into those now.
The Marketplace Technique In Law Practice Management Rates
This is one excellent method of identifying prices. 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 neighborhood. Have her do a "mystery shopper" research study by calling around as if he/she were a possible customer and learn what your competitors state on the phone to her around prices. She may require to call from her home phone to avoid caller ID. As another option you might have him/her call other assistants or paralegals at your competitors and provide to exchange your costs for their fees or you might do that with other lawyers yourself in your market. If you really want to get into it and have optimal information you can compose possibly a few lots competitors in your market and say you are doing a fee 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 results. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most typical services offered in your practice area. Now you will see what people are charging for services comparable to those you provide. You ought to be able to come up with a range of prices. Use this range to set costs for your own services. My recommendation in law practice marketing planning is to charge at the 75% level of the list. So you must 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 price. Many prospective clients will see prices that is too low as a signal that there is something missing either from the service, the supplier, or the company. And people who are looking for a low price will follow that low price anywhere they can find it instead of becoming long-lasting customers. So go be sure that your cost covers your expenses and a reasonable earnings margin.
The Expense Technique in Law Practice Management Prices
This law practice management prices technique is extremely simple actually. The most common mistake in law practice management utilizing this approach is to overlook to consist of some kind of your expense.
In law practice management frequently you count yourself out of the expenditures and you must include yourself in the expenses. Frequently you are doing at least some of the management work. If you are all 3 of these in one, you should consider one income as due you for your time and proficiency as the service technician and supervisor 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 approach utilized by lots of vehicle 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 approach is how managed health care has actually utilized this system with health centers and doctors .
The "Rule of Three" in Law Practice Management Rates
This " guideline of thumb" called the " guideline of 3" used in law practice management is not what your CPA may inform you and it does not fail you either. Ask your CPA what they think of it and they will like it. To start we are going to be thinking in thirds. For the very first third we will take the overall quantity of salaries/bonuses (not benefits simply incomes-- benefits go into the second 3rd coming next) for the revenue generators and/or timekeepers (this includes you if you are creating profits) and call that our first third. So include up the incomes of the legal representatives, paralegals, and legal secretaries who generate profits or are timekeepers and call this your first third (lets simply say 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 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 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 repaired rate or how lots of contingency fee cases won to be sure you struck the target we must strike provided our very first third number times three (in this example $300,000).
This technique shows you just how much per hour see this website you need to charge. Considering that you know the number of billable hours each income generator can do per month, simply divide that into your overall 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 hit your targets you will be ensured of a 15% to 30% net make money from your operations. After all if you are the owner of the practice you should have a fair revenue as well don't you agree? This approach is called the Guideline of Three. , if this approach is a bit too complicated do feel free to contact me and I will assist you sort it out in a couple of minutes on the phone.
It is a good idea to believe through all of these pricing approaches in determining your law practice management prices strategy before setting a rate and moving ahead with a law office marketing plan to ensure you are thoroughly exploring all options. Keep in mind the propensity for a lot of lawyers is to price too low. Don't do that! In another article I will inform you how to talk to potential customers so you never have a problem getting the charge you deserve.