Law Practice Management-- How To Identify Your Fees
Determining costs is a hard law practice management task for most lawyers when believing through their law firm marketing plans. In figuring out fees for certain services, attorneys often fall short of what they should charge. Too numerous attorneys are scared of even charging the competitive cost for their services when making their law company marketing strategies.
Prior to you sit down and begin thinking through your law practice management rates technique you require some distinctions around rates frequently utilized in law firm marketing preparation. Include your pricing strategy to your law company marketing strategies. You need to be sure that you are charging a enough fee on whatever to guarantee you a great earnings not just a excellent living. If you just draw in individuals who desire to pay the least expensive charge for a service, do know a law practice management law company marketing strategy is not reliable. These are not loyal customers. Rather, you wish to focus your law practice management and law office marketing plans on drawing in clients who will become long term assets to the company. Low price clients are not constructing your base of long term customers I can assure you that.
There are essentially 4 methods of figuring out how much you should be charging for your services. Lets move right into those now.
The Market Method In Law Practice Management Prices
This is one good method of determining rates. Get your assistant to support you in this law practice management job and invest a long time finding what the series of rates is in the neighborhood. Have her do a " secret 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 prices. She might need to call from her home phone to prevent caller ID. As another option you might have him/her call other assistants or paralegals at your competitors and use to exchange your fees for their costs or you might do that with other lawyers yourself in your market. If you really want to enter into it and have optimal information you can compose maybe a couple of lots competitors in your market and state you are doing a charge survey and if they would send you their fee list you will develop a composite list that does not identify those responding and send them a copy of the results. To keep it simple for them include a stamped, self-addressed envelope with a list of the most typical services provided in your practice area. Now you will see what people are charging for services similar to those you use. You ought to be able to come up with a range of rates. Use this range to set prices for your own services. My recommendation in law office marketing planning is to charge at the 75% level of the list. You need to be at or in the top 25% of the charges.
Bear in mind that in basic it is not a excellent law practice management strategy to contend on cost. The majority of possible customers will see rates that is too low as a signal that there is something missing out on either from the service, the service provider, or the company. And people who are looking for a low price will follow that low rate wherever they can find it instead of becoming long-term clients. So make sure that your price covers your expenses and a affordable profit margin.
The Cost Approach in Law Practice Management Prices
This law practice management prices method is extremely uncomplicated truly. One simply determines what the costs are to deliver products or services and includes on a affordable profit, someplace in between fifteen percent at the least and perhaps thirty three percent at the most. The most common error in law practice management utilizing this technique is to disregard to include some kind of your cost. Solo and small company lawyers tend to not include their own income!
OK, let me say it again. In law practice management typically you count yourself out of the expenditures and you need to include yourself in the costs. Why? Typically you are doing at least a few of the technical work. Yes? Frequently you are doing a minimum of some of the management work. Yes? As the owner of business you are due a sensible profit. Yes? If you are all three of these in one, you ought to think about one salary as due you for your time and proficiency as the specialist and manager in addition find to a profit of fifteen to thirty percent due you as the owner. So be sure to include a reasonable cost for your supervisory and technical operate in the costs part of this formula.
Fixed Rate Approach in Law Practice Management Rates
This is the method used by numerous auto mechanics (it is called "the flat rate book") and other provider. This method is where you figure out a set rate for different tasks and charge that rate no matter what. He makes more if the mechanic invests less time than set aside for the job. He makes less if he invests more time than allotted. In the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example utilizing this approach is how handled health care has actually utilized this system with healthcare facilities and physicians . Lawyers can utilize this system if they prefer.
The " Guideline of 3" in Law Practice Management Prices
This "rule of thumb" called the " guideline of three" utilized in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your CPA what they believe about it and they will like it. To begin we are going to be thinking in thirds. For the first third we will take the total quantity of salaries/bonuses (not benefits simply incomes-- benefits enter into the 2nd third coming next) for the revenue generators and/or timekeepers (this includes you if you are producing revenue) and call that our first 3rd. So include up the wages of the legal representatives, paralegals, and legal secretaries who create profits or are timekeepers and call this your first third (lets just state that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your second third which we will call your "overhead" ( therefore that 2nd third is $100,000 and don't forget you if you are doing some managing partner type responsibilities since that part of your time goes here in overhead). Then my sources take that 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 amount (in this example $300,000) and now find out just how much you should charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you hit the target we need to hit given our first 3rd number times 3 (in this example $300,000).
This approach shows you just how much per hour you require to charge. Considering that you understand the number 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 require to charge per billable hour to make your numbers come out properly. As long as you hit your targets you will be assured of a 15% to 30% net earnings from your operations. If you are the owner of the practice you deserve a fair earnings as well don't you concur? This technique is referred to as the Rule of 3. If this approach is a bit too confusing do do not hesitate to call me and I will assist you sort it out in a couple of minutes on the phone.
It is a great idea to think through all of these prices approaches in determining your law practice management prices technique before setting a rate and moving ahead with a law company marketing plan to guarantee you are thoroughly exploring all options. In another article I will tell you how to speak to prospective customers so you never ever have a problem getting the charge you are worthy of.