Law Practice Management-- How To Identify Your Costs
Figuring out costs is a tough law practice management task for many lawyers when believing through their law firm marketing plans. In identifying costs for particular services, attorneys often fall short of what they should charge. Too lots of attorneys are afraid of even charging the competitive rate for their services when making their law company marketing strategies.
Before you sit down and begin believing through your law practice management prices strategy you require some distinctions around pricing typically utilized in law firm marketing planning. Do understand a law practice management law firm marketing plan is not reliable if you just attract people who want to pay the most affordable fee for a service. Rather, 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 ways of figuring out how much you must be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Rates
This is one great way of figuring out rates. Get your assistant to support you in this law practice management task and invest a long time discovering what the variety of rates remains in the neighborhood. Have her do a " secret shopper" study by calling around as if he/she were a possible client and discover out what your rivals state on the phone to her around prices. She might need to call from her house phone to avoid caller ID. As another choice you could have him/her call other assistants or paralegals at your rivals and provide to exchange your costs for their fees or you could do that with other lawyers yourself in your market. If you really wish to get into it and have maximum information you can write possibly a few lots rivals in your marketplace and say you are doing a fee survey and if they would send you their charge list you will develop a composite list that does not recognize 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 use. You must have the ability to come up with a series of prices. Use this variety to set rates for your own services. My recommendation in law practice marketing preparation is to charge at the 75% level of the list. You should be at or in the top 25% of the charges.
Remember that in general it is not a great law practice management strategy to contend on cost. The majority of potential customers will see pricing that is too low as a signal that there is something missing either from the service, the company, or the firm.
The Cost Method in Law Practice Management Rates
This law practice management prices approach is very simple really. The most typical error in law practice management using this method is to disregard to include some kind of your expense.
OK, let me state it again. In law practice management often you count yourself out of the costs and you must include yourself in the costs. Why? Typically you are doing at least some 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 earnings. Yes? If you are all 3 of these in one, you should go to these guys think about one income as due you for your time and expertise as the professional and manager along with a revenue of fifteen to thirty percent due you as the owner. Be sure to include a affordable expense for your technical and managerial work in the costs part of this formula.
Fixed Rate Approach in Law Practice Management Prices
This is the technique utilized by many car mechanics (it is called "the flat rate book") and other company. This approach is where you identify a fixed rate for various tasks and charge that rate no matter what. If the mechanic spends less time than allocated for the task, he makes more. He makes less if he spends more time than allocated. In the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example using this approach is how managed health care has actually used this system with doctors and hospitals . Lawyers can use this system if they want.
The "Rule of Three" in Law Practice Management Prices
This "rule of thumb" called the " guideline of 3" utilized in law practice management is not what your Certified Public Accountant may inform you and it does not fail you either. For the very first third we will take the overall quantity of salaries/bonuses (not benefits just incomes-- advantages go into the second third coming next) for the revenue generators and/or timekeepers (this includes you if you are creating revenue) and call that our first third. What you need to do is take the total quantity (in this example $300,000) and now figure out how much you need to charge per billable hour, per fixed rate or how lots of contingency fee cases won to be sure you struck the target we must hit given our very first third number times three (in this example $300,000).
This method reveals you just how much per hour you require to charge. Because you understand how many billable hours each earnings generator can do each month, just divide that into your total 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 hit your targets you will be guaranteed of a 15% to 30% net make money from your operations. If you are the owner of the practice you should have a fair revenue as well don't you concur? This technique is known as the Rule of 3. If this method is a bit too complicated do do not hesitate to call me and I will help you arrange it out in a couple of minutes on the phone.
It is a great concept to believe through all of these pricing methods in determining your law practice management rates technique prior to setting a rate and moving ahead with a law company marketing plan to ensure you are thoroughly exploring all choices. In another article I will tell you how to speak to prospective customers so you never ever have a issue getting the fee you are worthy of.