Law Practice Management-- How To Identify Your Costs
Identifying costs is a challenging law practice management task for most attorneys when thinking through their law company marketing strategies. In determining fees for certain services, attorneys often fall brief of what they should charge. Too many attorneys are afraid of even charging the competitive price for their services when making their law firm marketing strategies.
Prior to you sit down and begin believing through your law practice management prices technique you need some distinctions around prices frequently used in law company marketing preparation. Do understand a law practice management law firm marketing plan is not reliable if you just attract people who desire to pay the lowest fee for a service. Instead, you want to focus your law practice management and law firm marketing strategies on bring in clients who will end up being long term assets to the company.
There are essentially 4 ways of identifying just how much you must be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Rates
Get your assistant to support you in this law practice management task and spend some time discovering what the range of prices is in the community. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services provided in your practice area. My recommendation in law firm marketing preparation is to charge at the 75% level of the list.
Keep in mind that in basic it is not a good law practice management strategy to compete on rate. The majority of potential clients will see prices that is too low as a signal that there is something missing out on either from the service, the provider, or the firm.
The Cost Technique in Law Practice Management Pricing
This law practice management prices approach is really straightforward really. One merely identifies what the expenses are to deliver product and services and adds on a reasonable profit, someplace in between fifteen percent at the least and maybe thirty three percent at the most. The most typical error in law practice management using this technique is to neglect to include some type of your expenditure. Solo and little firm lawyers tend to not include their own salary!
OK, let me say it again. In law practice management frequently you count yourself out of the costs and you should include yourself in the expenditures. Why? Frequently you are doing a minimum of some of the technical work. Yes? Often you are doing a minimum of a few of the management work. Yes? As the owner of the company you are due a reasonable profit. Yes? If you are all three of these in one, you should consider one salary as due you for your time and competence as the professional and manager in addition to a revenue of fifteen to thirty percent due you as the owner. So make sure to consist of a sensible expense for your technical and managerial work in the expenditures part of this formula.
Fixed Rate Technique in Law Practice Management Prices
This is the method utilized by many automobile mechanics (it is called "the flat rate book") and other service providers. This method is where you figure out a fixed rate for various tasks and charge that rate no matter what. Another example utilizing this method is how managed health care has actually utilized this system with medical professionals and medical facilities .
The "Rule of 3" in Law Practice Management Rates
This " general rule" called the " guideline of 3" utilized 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 consider 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 total amount of salaries/bonuses (not benefits simply wages-- benefits go into the 2nd third following) for the profits generators and/or timekeepers (this includes you if you are creating income) and call that our first third. Add up the incomes of the legal representatives, paralegals, and legal secretaries who generate profits or are timekeepers and call this your very first 3rd (lets just say that number was $100,000 to keep it easy). Whatever that number is take that number once again and it is your 2nd third which we will call your "overhead" (thus that second 3rd 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 third, which we will call gross profits (another $100,000). What you need to do is take the overall quantity (in this example $300,000) and now find out how much you should charge per billable hour, per repaired rate or the number of contingency cost cases won to be sure you struck the target we must strike provided our very first 3rd number times 3 (in this example $300,000).
This method reveals you just how much per hour you require to charge. Considering that you know the number of billable hours each income generator can do each month, simply from this source 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 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 deserve a fair profit as well do not you concur? This technique is called the Rule of 3. If this method is a bit too confusing do do not hesitate to contact me and I will help you arrange it out in a few minutes on the phone.
It is a good concept to believe through all of these rates approaches in determining your law practice management pricing strategy prior to setting a cost and moving ahead with a law firm marketing plan to ensure you are completely checking out all options. In another article I will inform you how to speak to prospective clients so you never ever have a issue getting the charge you deserve.