Law Practice Management-- How To Determine Your Fees
When believing through their law company marketing strategies, figuring out costs is a challenging law practice management task for a lot of attorneys. In figuring out costs for particular services, lawyers typically disappoint what they must charge. When making their law firm marketing strategies, too lots of attorneys are scared of even charging the competitive cost for their services. Further, they make the pricing choices often without any information or conceptual structure. In addition, instead of focusing their efforts on how they can justify getting leading dollar for what they provide, they charge a cost that is frequently way too low and typically really can frighten possible clients who believe there is something missing from a service that is "cheap". In addition lots of attorneys don't recognize that many buyers in the marketplace by far are "value purchasers" and not looking for " low-cost".
Before you sit down and start thinking through your law practice management rates strategy you require some distinctions around prices commonly used in law company marketing planning. Do know a law practice management law company marketing plan is not efficient if you just draw in people who desire to pay the most affordable charge for a service. Rather, you desire to focus your law practice management and law company marketing plans on drawing in customers who will end up being long term properties to the firm.
There are essentially 4 methods of determining how much you need to be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Rates
This is one great way of identifying prices. Get your assistant to support you in this law practice management job and invest some time finding what the variety of prices remains in the community. Have her do a "mystery shopper" study by calling around as if he/she were a possible customer and discover what your rivals state on the phone to her around rates. She might require to call from her home phone to avoid caller ID. As another alternative you could have him/her call other assistants or paralegals at your competitors and offer to exchange your charges for their costs or you might do that with other attorneys yourself in your market. If you actually wish to get into it and have maximum data you can compose perhaps a few lots rivals in your market and state you are doing a cost survey and if they would send you their charge list you will create a composite list that does not recognize those responding and send them a copy of the results. To keep it basic for them consist of a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. Now you will see what individuals are charging for services comparable to those you offer. You ought to be able to create a variety of rates. Use 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. You should be at or in the leading 25% of the fees.
Keep in mind that in general it is not a great law practice management strategy to contend on rate. Many potential clients will see rates that is too low as a signal that there is something missing out on either from the service, the company, or the firm.
The Cost Technique in Law Practice Management Pricing
This law practice management pricing approach is very uncomplicated really. One description just determines what the expenses are to provide services or products and includes on a sensible revenue, somewhere in between fifteen percent at the least and possibly thirty 3 percent at the most. The most typical mistake in law practice management using this technique is to disregard to consist of some form of your expense. Solo and small company lawyers tend to not include their own wage!
OK, let me say it once again. In law practice management often you count yourself out of the expenses and you need to include yourself in the costs. Why? Frequently you are doing a minimum of a few of the technical work. Yes? Frequently you are doing at least some of the management work. Yes? As the owner of the service you are due a sensible revenue. Yes? If you are all 3 of these in one, you must consider one income as due you for your time and expertise as the technician and manager in addition to a revenue of fifteen to thirty percent due you as the owner. So make sure to include a reasonable cost for your technical and supervisory work in the costs part of this formula.
Fixed Rate Approach in Law Practice Management Prices
This is the method utilized by lots of car mechanics (it is called "the flat rate book") and other service suppliers. This method is where you determine a fixed rate for various tasks and charge that rate no matter what. Another example utilizing this approach is how managed health care has used this system with health centers and doctors .
The " Guideline of 3" in Law Practice Management Rates
This " guideline of thumb" called the "rule of three" used in law practice management is not what your CPA may tell 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 believing in thirds. For the first third we will take the total quantity of salaries/bonuses (not benefits simply salaries-- benefits enter into the 2nd 3rd coming next) for the earnings generators and/or timekeepers (this includes you if you are producing earnings) and call that our very first 3rd. So include up the wages of the legal representatives, paralegals, and legal secretaries who create earnings or are timekeepers and call this your first 3rd (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 second third which we will call your "overhead" ( hence that 2nd third is $100,000 and don't forget you if you are doing some handling partner type responsibilities because that part of your time goes here in overhead). Take that exact same number and we will call that your last third, 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 determine just how much you should charge per billable hour, per fixed rate or how numerous contingency fee cases won to be sure you hit the target we must hit provided our first third number times three (in this example $300,000).
This method shows you just how much per hour you need to charge. Considering that you know the number of billable hours each income generator can do each month, simply divide that into your total of all thirds ($300,000) to see what you require to charge per billable hour to make your numbers come out correctly. As long as you hit your targets you will be ensured of a 15% to 30% net benefit from your operations. After all if you are the owner of the practice you should have a fair earnings as well don't you agree? This technique is referred to as the Guideline of Three. If this method is a bit too complicated do do not hesitate to call me and I will assist you arrange it out in a few minutes on the phone.
It is a excellent concept to think through all of these prices techniques in determining your law practice management prices strategy prior to setting a rate and continuing with a law office marketing strategy to guarantee you are completely exploring all alternatives. Remember the tendency for the majority of legal representatives is to price too low. Don't do that! In another article I will tell you how to speak to prospective clients so you never ever have a issue getting the charge you are worthy of.