Law Practice Management-- How To Determine Your Fees
Identifying fees is a difficult law practice management job for most attorneys when thinking through their law firm marketing plans. In identifying charges for specific services, lawyers frequently fall brief of what they must charge. Too lots of lawyers are scared of even charging the competitive cost for their services when making their law firm marketing strategies.
Prior to you sit down and begin thinking through your law practice management pricing method you require some distinctions around rates commonly utilized in law company marketing planning. Do understand a law practice management law firm marketing strategy is not efficient if you just bring in individuals who want to pay the lowest cost for a service. Rather, you want to focus your law practice management and law company marketing strategies on attracting customers who will end up being long term assets to the company.
There are generally 4 ways of figuring out how much you need to be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Prices
This is one great way of figuring out rates. Get your assistant to support you in this law practice management task and invest a long time finding what the variety of pricing is in the neighborhood. Have her do a "mystery consumer" research study by calling around as if he/she were a prospective client 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 provide to exchange your costs for their fees or you might do that with other attorneys yourself in your market. If you truly wish to enter it and have maximum data you can compose possibly a couple of lots rivals in your marketplace and say you are doing a fee survey and if they would send you their charge list you will develop a composite list that does not identify those reacting 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 provided in your practice area. Now you will see what individuals are charging for services similar to those you provide. You should have the ability to create a variety of costs. Utilize this variety 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 ought to be at or in the top 25% of the fees.
Remember that in basic it is not a excellent law practice management method to compete on rate. The majority of possible customers will see pricing that is too low as a signal that there is something missing out on either from the service, the supplier, or the firm. And people who are trying to find a low price will follow that low rate anywhere they can find it rather than ending up being long-lasting clients. Be sure that your rate covers your costs and a affordable profit margin.
The Expense Approach in Law Practice Management Rates
This law practice management pricing technique is extremely straightforward really. The most typical mistake in law practice management utilizing this method is to overlook to include some kind of your cost.
In law practice management often you count yourself out of the costs and you should include yourself in the costs. Often you are doing at least some of the management work. If you are all three of these in one, you should think about one salary as due you for your time and proficiency as the professional and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Prices
This is the method utilized by many car mechanics (it is called "the flat rate book") and other service providers. This method is where you determine a set rate for numerous tasks and charge that rate no matter what. Another example utilizing this method is how handled health care has utilized this system with doctors and hospitals .
The " Guideline of 3" in Law Practice Management Rates
This " general rule" called the "rule of 3" used in law practice management is not what your Certified Public Accountant may tell you and it does not fail you either. Ask your Certified Public Accountant what they think of it and they will like it. To begin we are going to be thinking in thirds. For the very first third we will take the total quantity of salaries/bonuses (not benefits simply wages-- advantages enter into the second 3rd coming next) for the earnings generators and/or timekeepers (this includes you if you are producing earnings) and call that our first third. Add Continue up the incomes of the attorneys, paralegals, and legal secretaries who create revenue or are timekeepers and call this your first third (lets simply state that number was $100,000 to keep it basic). Whatever that number is take that number once again and it is your 2nd 3rd 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 duties because that part of your time goes here in overhead). Then take that exact 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 total quantity (in this example $300,000) and now figure out how much you must charge per billable hour, per repaired rate or how lots of contingency cost cases won to be sure you hit the target we must strike offered our first 3rd number times 3 (in this example $300,000).
This method reveals you just how much per hour you require to charge. Given that you know how lots of billable hours each revenue generator can do per 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 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 profit as well do not you agree? This method is known as the Rule of Three. If this technique is a bit too confusing do do not hesitate to contact me and I will assist you sort it out in a few minutes on the phone.
It is a good idea to think through all of these prices approaches in determining your law practice management prices method before setting a price and moving ahead with a law firm marketing plan to guarantee you are completely checking out all options. In another article I will tell you how to speak to potential customers so you never have a problem getting the charge you are worthy of.