Law Practice Management-- How To Identify Your Costs
Identifying fees is a difficult law practice management task for a lot of lawyers when believing through their law firm marketing strategies. In determining charges for specific services, attorneys often fall short of what they must charge. Too numerous attorneys are scared of even charging the competitive rate for their services when making their law company marketing plans.
Prior to you sit down and start thinking through your law practice management rates strategy you require some differences around pricing commonly utilized in law company marketing preparation. Do know a law practice management law company marketing strategy is not efficient if you only bring in individuals who want to pay the least expensive cost for a service. Instead, you want to focus your law practice management and law firm marketing plans on attracting clients who will end up being long term possessions to the firm.
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 Technique In Law Practice Management Rates
This is one excellent way of determining rates. Get your assistant to support you in this law practice management task and invest a long time discovering what the variety of rates is in the neighborhood. Have her do a "mystery consumer" research study by calling around as if he/she were a possible client and find out what your competitors say on the phone to her around prices. She may need to call from her home phone to avoid caller ID. As another option you might have him/her call other assistants or paralegals at your competitors and offer to exchange your fees for their costs or you could do that with other legal representatives yourself in your market. If you really wish to enter into it and have optimal data 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 reacting 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 offered in your practice area. Now you will see what individuals are charging for services similar to those you provide. You need to have the ability to develop a series of prices. Utilize this range to set costs for your own services. My recommendation in law practice marketing preparation is to charge at the 75% level of the list. So you ought to be at or in the top 25% of the costs.
Keep in mind that in general it is not a great law practice management method to complete on cost. A lot of potential clients will see pricing that is too low as a get more signal that there is something missing either from the service, the supplier, or the company.
The Expense Approach in Law Practice Management Rates
This law practice management prices approach is extremely straightforward truly. The most typical mistake in law practice management utilizing this approach is to disregard to include some type of your expenditure.
In law practice management frequently you count yourself out of the expenditures 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 must think about one wage as due you for your time and competence as the service technician and manager as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Rates
This is the approach utilized by lots of automobile mechanics (it is called "the flat rate book") and other company. This approach is where you determine a set rate for different jobs and charge that rate no matter what. He makes more if the mechanic spends less time than allocated for the task. If he invests more time than allocated, read he makes less. However in the end, everything evens out (well, normally to the mechanics' favor if you ask me). Another example utilizing this approach is how handled health care has utilized this system with hospitals and medical professionals . If they prefer, lawyers can utilize this system.
The "Rule of 3" in Law Practice Management Prices
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 CPA what they consider 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 advantages just salaries-- benefits enter into the second 3rd following) for the revenue generators and/or timekeepers (this includes you if you are producing revenue) and call that our first third. So accumulate the salaries of the legal representatives, paralegals, and legal secretaries who create profits or are timekeepers and call this your first 3rd (lets just say that number was $100,000 to keep it simple). 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 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 require to do is take the overall amount (in this example Learn More Here $300,000) and now figure out how much you must charge per billable hour, per fixed rate or how many contingency charge cases won to be sure you struck the target we need to hit given our first third number times three (in this example $300,000).
This approach reveals you how much per hour you require to charge. If you are the owner of the practice you are worthy of a reasonable profit as well do not you concur? If this technique is a bit too confusing do feel totally free to call 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 pricing strategy prior to setting a cost and moving ahead with a law firm marketing plan to ensure you are completely checking out all alternatives. In another post I will tell you how to speak to prospective clients so you never ever have a issue getting the charge you should have.