Law Practice Management-- How To Identify Your Charges
Figuring out costs is a hard law practice management job for the majority of lawyers when thinking through their law practice marketing strategies. In identifying costs for certain services, lawyers typically disappoint what they should charge. Too numerous lawyers hesitate of even charging the competitive price for their services when making their law company marketing strategies. Further, they make the prices decisions often without any information or conceptual framework. Additionally, instead of focusing their efforts on how they can validate getting top dollar for what they use, they charge a charge that is typically way too low and typically actually can frighten off possible clients who think there is something missing from a service that is " low-cost". In addition many attorneys don't recognize that the majority of buyers in the marketplace by far are "value purchasers" and not looking for " inexpensive".
Before you sit down and start believing through your law practice management prices technique you require some distinctions around prices typically used in law company marketing planning. Do understand a law practice management law firm marketing plan is not effective if you just bring in individuals who desire to pay the least expensive cost for a service. Rather, you want to focus your law practice management and law company marketing plans on drawing in customers who will become long term assets to the company.
There are basically four methods of determining how much you must be charging for your services. Lets move right into those now.
The Marketplace Technique In Law Practice Management Prices
This is one excellent way of determining prices. Get your assistant to support you in this law practice management task and spend a long time finding what the series of rates remains in the community. Have her do a " secret shopper" research study by calling around as if he/she were a possible client and learn what your rivals state on the phone to her around rates. She may need to call from her home phone to avoid caller ID. As another alternative you might have him/her call other assistants or paralegals at your rivals and use to exchange your charges for their charges or you might do that with other attorneys yourself in your market. If you really wish to enter into it and have maximum data you can compose perhaps a few lots competitors in your market and state you are doing a fee study and if they would send you their fee list you will develop a composite list that does not determine those responding and send them a copy of the outcomes. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. Now you will see what people are charging for services comparable to those you offer. You need to be able to create a variety of rates. Use this variety to set rates for your own services. My recommendation in law practice marketing planning is to charge at the 75% level of the list. So you should be at or in the top 25% of the costs.
Remember that in general it is not a great law practice management method to complete on price. Many potential clients will see prices that is too low as a signal that there is something missing either from the service, the provider, or the firm.
The Expense Approach in Law Practice Management Pricing
This law practice management pricing method is extremely uncomplicated actually. One simply determines what the costs are to provide services or products and adds on a sensible revenue, somewhere between fifteen percent at the least and perhaps thirty three percent at the most. The most typical error in law practice management utilizing this technique is to overlook to include some form of your expenditure. Solo and little company attorneys tend to not include their own salary!
OK, let me say it again. In law practice management typically you count yourself out of the expenditures and you must include yourself in the expenses. Why? Typically you are doing at least a few of the technical work. Yes? Frequently you are doing at least a few of the management work. Yes? As the owner of business you are due a reasonable earnings. Yes? If you are all three of these in one, you should consider one salary as due you straight from the source for your time and know-how as the service technician and supervisor as well as a earnings of fifteen to thirty percent due you as the owner. So make sure to consist of a sensible cost for your supervisory and technical operate in the costs part of this formula.
Fixed Rate Method in Law Practice Management Pricing
This is the method used by many auto mechanics (it is called "the flat rate book") and other service companies. This approach is where you identify a set rate for numerous jobs and charge that rate no matter what. Another example using this approach is how managed health care has actually utilized this system with physicians and hospitals .
The "Rule of 3" in Law Practice Management Pricing
This " general rule" called the "rule of 3" used in law practice management is not what your CPA might tell you and it does not fail you either. Ask your CPA what they consider it and they will like it. To start we are going to be thinking in thirds. For the first 3rd we will take the overall amount of salaries/bonuses (not advantages simply wages-- advantages enter into the second third following) for the profits generators and/or timekeepers (this includes you if you are creating earnings) and call that our very first 3rd. So build up the salaries of the attorneys, paralegals, and legal secretaries who create earnings or are timekeepers and call this your very first 3rd (lets simply say that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your second 3rd which we will call your "overhead" ( therefore that second 3rd 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). Take that very 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 quantity (in this example $300,000) and now determine how much you must charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you struck the target we need to strike given our first third number times three (in this example $300,000).
This technique shows you how much per hour you require to charge. Considering that you understand how many billable hours each profits generator can do per month, just 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 properly. As long as you strike your targets you will be guaranteed of a 15% to 30% net benefit from your operations. If you are the owner of the practice you deserve a fair revenue as well don't you concur? This method is referred to as the Rule of 3. If this technique is a bit too complicated do do not hesitate to contact me and I will help you sort it out in a couple of minutes on the phone.
It is a excellent concept to think through all of these rates approaches in determining your law practice management prices strategy prior to setting a rate and moving ahead with a law firm marketing plan to guarantee you are thoroughly checking out all alternatives. In another post I will inform you how to speak to prospective clients so you never ever have a issue getting the charge you are worthy of.