Law Practice Management-- How To Determine Your Costs
Identifying charges is a hard law practice management job for many attorneys when analyzing their law office marketing strategies. In determining costs for certain services, lawyers often disappoint what they ought to charge. Too many lawyers hesitate of even charging the competitive cost for their services when making their law practice marketing plans. Even more, they make the rates decisions often without any data or conceptual framework. Additionally, rather of focusing their efforts on how they can justify getting leading dollar for what they provide, they charge a cost that is frequently way too low and frequently really can frighten off prospective clients who believe there is something missing from a service that is " inexpensive". Additionally many lawyers do not understand that most purchasers in the market by far are "value purchasers" and not looking for "cheap".
So prior to you take a seat and begin thinking through your law practice management pricing method you need some distinctions around rates typically used in law practice marketing planning. Add your prices strategy to your law firm marketing strategies. You need to be sure that you are charging a enough charge on everything to ensure you a good revenue not simply a great living. Do understand a law practice management law firm marketing strategy is ineffective if you just draw in individuals who wish to pay the least expensive charge for a service. These are not loyal customers. Rather, you wish to focus your law practice management and law firm marketing intend on drawing in customers who will become long term possessions to the company. Low rate clients are not developing your base of long term customers I can promise you that.
There are essentially four ways of determining how much you need 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 job and spend a long 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 prospective customer and learn what your rivals state on the phone to her around pricing. She might need to call from her house phone to avoid caller ID. As another option you could have him/her call other assistants or paralegals at your rivals and provide to exchange your fees for their costs or you might do that with other lawyers yourself in your market. If you truly desire to enter into it and have maximum data you can write maybe a couple of lots competitors in your marketplace and state you are doing a charge study and if they would send you their charge list you will produce 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 common services used in your practice location. Now you will see what individuals are charging for services similar to those you provide. You need to be able to come up with a variety of prices. Utilize this range to set prices for your own services. My recommendation in law practice marketing planning is to charge at the 75% level of the list. You must be at or in the top 25% of the fees.
Keep in mind that in general it is not a good law practice management method to complete on price. Most possible customers will see rates that is too low as a signal that there is something missing out on either from the service, the supplier, or the firm. And individuals who are looking for a low cost will follow that low cost anywhere they can discover it rather than becoming long-lasting customers. Be sure that your cost covers your expenses and a affordable profit margin.
The Cost Approach in Law Practice Management Pricing
This law practice management rates technique is very simple truly. The most typical mistake in law practice management using this approach is to overlook to include some form of your expenditure.
OK, let me state it again. In law practice management often you count yourself out of the expenditures and you must include yourself in the expenses. Why? Frequently you are doing at least a few of the technical work. Yes? Often 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 must think about one income as due you for your time and knowledge as the technician and supervisor as well as a earnings 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 Web Site Rate Technique in Law Practice Management Prices
This is the technique used by lots of vehicle mechanics (it is called "the flat rate book") and other company. This approach is where you figure out a set rate for various jobs and charge that rate no matter what. He makes more if the mechanic spends less time than allotted for the job. He makes less if he spends more time than allotted. However in the end, all of it levels (well, typically to the mechanics' favor if you ask me). Another example using this technique is how managed health care has used this system with health centers and physicians . Attorneys can utilize this system if they want.
The "Rule of Three" in Law Practice Management Rates
This "rule of thumb" called the "rule of three" used in law practice management is not what your CPA might inform you and it does not fail you either. For the very first 3rd we will take the total amount of salaries/bonuses (not benefits simply wages-- benefits go into the second third coming next) for the earnings generators and/or timekeepers (this includes you if you are producing revenue) and call that our very first third. What you need to do is take the total quantity (in this example $300,000) and now figure out how much you should charge per billable hour, per repaired rate or how many contingency cost cases won to be sure you hit the target we should strike given our very first 3rd number times 3 (in this example $300,000).
This method shows you how much per hour you need to charge. Since you know how many billable hours each income generator can do per month, simply 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 strike your targets you will be assured of a 15% to 30% net benefit from your operations. If you are the owner of the practice you are worthy of a reasonable earnings as well don't you agree? This technique is known as the Guideline of Three. If this method is a bit too complicated do do not hesitate to contact me and I will assist you arrange it out in a few minutes on the phone.
It is a great concept to analyze all of these pricing approaches in identifying your law practice management pricing strategy before setting a rate and moving ahead with a law practice marketing plan to guarantee you are completely exploring all choices. Remember the propensity for the majority of attorneys is to price too low. Do not do that! In another short article I will inform you how to speak to possible customers so you never have a issue getting the fee you deserve.