Law Practice Management-- How To Identify Your Costs
Figuring out costs is a hard law practice management task for many lawyers when thinking through their law company marketing strategies. In determining costs for particular services, attorneys typically fall brief of what they must charge. Too many attorneys are scared of even charging the competitive price for their services when making their law company marketing plans.
So prior to you sit down and begin believing through your law practice management rates method you require some distinctions around pricing commonly used in law office marketing planning. Add your pricing strategy to your law company marketing plans. You require to be sure that you are charging a adequate fee on everything to guarantee you a excellent revenue not just a excellent living. If you just bring in people who want to pay the lowest charge for a service, do understand a law practice management law firm marketing strategy is not effective. These are not devoted customers. Instead, you desire to focus your law practice management and law company marketing intend on attracting customers who will become long term properties to the firm. Low rate clients are not developing your base of long term customers I can promise you that.
There are essentially 4 ways of determining just how much you must be charging for your services. Lets move right into those now.
The Marketplace Technique In Law Practice Management Pricing
This is one great way of identifying prices. Get your assistant to support you in this law practice management task and invest a long time discovering what the series of pricing remains in the neighborhood. Have her do a "mystery consumer" research study by calling around as if he/she were a possible customer and discover what your rivals state on the phone to her around rates. She might require to call from her home phone to prevent caller ID. As another option you could have him/her call other assistants or paralegals at your rivals and use to exchange your costs for their charges or you could do that with other lawyers yourself in your market. If you really wish to enter into it and have optimal information you can compose possibly a couple of lots rivals in your marketplace and state you are doing a cost study and if they would send you their cost list you will produce a composite list that does not recognize those reacting and send them a copy of the results. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services offered in your practice area. Now you will see what individuals are charging for services comparable to those you provide. You ought to have the ability to come up with a variety of rates. Use this variety to set prices for your own services. My recommendation in law firm marketing preparation is to charge at the 75% level of the list. So you must be at or in the top 25% of the charges.
Bear in mind that in basic it is not a great law practice management strategy to compete on rate. Most possible customers will see pricing 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 individuals who his response are searching for a low cost will follow that low rate wherever they can find it rather than becoming long-term customers. Be sure that your rate covers your expenses and a sensible earnings margin.
The Expense Technique in Law Practice Management Pricing
This law practice management pricing approach is extremely straightforward truly. The most common error in law practice management using this method is to neglect to consist of some type of your expense.
OK, let me state it once again. In law practice management frequently you count yourself out of the expenditures and you must include yourself in the expenses. Why? Typically you are doing a minimum of a few of the technical work. Yes? Frequently you are doing a minimum of a few of the management work. Yes? As the owner of business you are due a affordable revenue. Yes? If you are all 3 of these in one, you should think about one salary as due you for your time and proficiency as the professional and manager in addition to a revenue of fifteen to thirty percent due you as the owner. Be sure to consist of a affordable cost for your supervisory and technical work in the expenditures part of this formula.
Fixed Rate Technique in Law Practice Management Prices
This is the method used by many vehicle mechanics (it is called "the flat rate book") and other service providers. This approach is where you determine a set rate for different tasks and charge that rate no matter what. Another example utilizing this approach is how managed health care has used this system with physicians and medical facilities .
The " Guideline of Three" in Law Practice Management Rates
This "rule of thumb" called the "rule of three" utilized in law practice management is not what your you could try this out CPA might inform 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 believing in thirds. For the very first third we will take the overall amount of salaries/bonuses (not advantages just salaries-- advantages go into the second 3rd coming next) for the profits generators and/or timekeepers (this includes you if you are producing revenue) and call that our first third. So include up the wages of the attorneys, paralegals, and legal secretaries who produce revenue or are timekeepers and call this your first 3rd (lets just state that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your second 3rd which we will call your "overhead" ( hence that second 3rd is $100,000 and do not forget you if you are doing some managing partner type responsibilities since that part of your time goes here in overhead). Take that very same number and we will call that your last 3rd, which we will call gross profits (another $100,000). What you need to do is take the total amount (in this example $300,000) and now determine just how much you need to charge per billable hour, per fixed rate or the number of contingency cost cases won to be sure you hit the target we must hit given our first third number times 3 (in this example $300,000).
This technique shows you how much per hour you need to charge. If you are the owner of the practice you are worthy of a fair earnings a fantastic read as well do not you agree? If this method is a bit too complicated do feel complimentary to call me and I will help you arrange it out in a few minutes on the phone.
It is a good concept to think through all of these rates techniques in determining your law practice management prices strategy before setting a cost and moving ahead with a law company marketing strategy to ensure you are completely checking out all alternatives. In another article I will tell you how to speak to possible clients so you never have a issue getting the fee you deserve.