Law Practice Management-- How To Determine Your Costs
Identifying fees is a tough law practice management task for most lawyers when believing through their law firm marketing plans. In determining costs for particular services, lawyers frequently fall brief of what they must charge. Too lots of lawyers are afraid of even charging the competitive cost for their services when making their law company marketing strategies.
So prior to you take a seat and start believing through your law practice management rates technique you require some differences around prices commonly utilized in law practice marketing planning. Then add your prices technique to your law office marketing strategies. You need to be sure that you are charging a adequate fee on whatever to ensure you a good profit not simply a good living. Do understand a law practice management law office marketing strategy is ineffective if you just bring in people who desire to pay the lowest fee for a service. These are not loyal customers. Rather, you wish to focus your law practice management and law office marketing intend on drawing in clients who will become long term assets to the firm. Low price clients are not constructing your base of long term customers I can assure you that.
There are essentially 4 methods of identifying just how much you ought to be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Rates
This is one good method of identifying prices. Get your assistant to support you in this law practice management job and invest some time finding what the variety of pricing remains in the community. Have her do a " secret shopper" study by calling around as if he/she were a possible client and learn what your rivals state on the phone to her around prices. She might need to call from her house phone to avoid caller ID. As another alternative you might have him/her call other assistants or paralegals at your competitors and provide to exchange your charges for their charges or you might do that with other legal representatives yourself in your market. If you actually want to get into it and have maximum data you can compose possibly a couple of dozen rivals in your market and state you are doing a fee survey and if they would send you their cost list you will create a composite list that does not recognize those reacting and send them a copy of the results. To keep it simple for them consist of a stamped, self-addressed envelope with a list of the most typical services used in your practice location. Now you will see what people are charging for services comparable to those you use. You ought to be able to develop a series 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 must be at or in the leading 25% of the costs.
Keep in mind that in general it is not a good law practice management strategy to contend on price. Many prospective customers will see prices that is too low as a signal that there is something you could check here missing either from the service, the provider, or the firm.
The Cost Method in Law Practice Management Rates
This law practice management prices method is extremely uncomplicated really. The most common mistake in law practice management using this approach is to disregard to include some form of your expense.
In law practice management often you count yourself out of the expenditures and you must include yourself in the expenditures. Often you are doing at least some of the management work. If you are all 3 of these in one, you need to think about one salary as due you for your time and competence as the professional and supervisor as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Prices
This is the method used by numerous vehicle mechanics (it is called "the flat rate book") and other service companies. This method is where you figure out a fixed rate for numerous jobs and charge that check these guys out rate no matter what. He makes more if the mechanic invests less time than allocated for the task. If he invests more time than designated, he makes less. But in the end, it all evens out (well, typically to the mechanics' favor if you ask me). Another example using this approach is how managed healthcare has utilized this system with doctors and healthcare facilities . Legal representatives can utilize this system if they prefer.
The "Rule of 3" in Law Practice Management Prices
This " general rule" called the " guideline of 3" used in law practice management is not what your CPA might inform you and it does not fail you either. Ask your CPA what they believe about it and they will like it. To start we are going to be thinking in thirds. For the first third we will take the overall amount of salaries/bonuses (not benefits simply wages-- advantages enter into the second third coming next) for the earnings generators and/or timekeepers (this includes you if you are generating income) and call that our very first 3rd. So accumulate the wages of the legal representatives, paralegals, and legal secretaries who produce revenue or are timekeepers and call this your first third (lets just say that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your 2nd third which we will call your "overhead" ( hence that second third is $100,000 and do not forget you if you are doing some handling partner type duties since that part of your time goes here in overhead). Then take that exact 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 quantity (in this example $300,000) and now determine how much you should charge per billable hour, per fixed rate or how many contingency charge cases won to be sure you hit the target we need to strike offered our very first 3rd number times three (in this example $300,000).
This technique reveals you how much per hour you require to charge. If you are the owner of the practice you are worthy of a reasonable revenue as well don't you concur? If this technique is a bit too complicated do feel complimentary to call me and I will help you sort it out in a few minutes on the phone.
It is a excellent idea to believe through all of these pricing methods in identifying your law practice management rates technique before setting a price and continuing with a law practice marketing strategy to ensure you are thoroughly exploring all choices. Keep in mind the tendency for most lawyers is to price too low. Do not do that! In another post I will tell you how to talk to prospective clients so you never ever have a problem getting the cost you are worthy of.