Law Practice Management-- How To Identify Your Costs
Determining costs is a difficult law practice management job for many lawyers when analyzing their law office marketing strategies. In identifying charges for certain services, attorneys typically disappoint what they ought to charge. Too many attorneys hesitate of even charging the competitive price for their services when making their law office marketing strategies. Further, they make the prices decisions often without any data or conceptual framework. Furthermore, instead of focusing their efforts on how they can justify getting top dollar for what they offer, they charge a fee that is often way too low and often in fact can scare off possible clients who believe there is something missing from a service that is " inexpensive". Additionally many lawyers don't realize that many purchasers in the market by far are " worth buyers" and not searching for "cheap".
Before you sit down and begin thinking through your law practice management rates technique you need some differences around rates typically used in law company marketing planning. Do understand a law practice management law company marketing plan is not effective if you just attract people who want to pay the lowest charge for a service. Instead, you desire to focus your law practice management and law firm marketing strategies on drawing in clients who will become long term properties to the firm.
There are generally four methods of determining just how much you ought to be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Pricing
This is one excellent method of identifying rates. Get your assistant to support you in this law practice management job and spend a long time discovering what the series of rates is in the neighborhood. Have her do a "mystery consumer" research study by calling around as if he/she were a prospective customer and find out what your competitors say on the phone to her around rates. She might need to call from her home phone to prevent caller ID. As another alternative you might have him/her call other assistants or paralegals at your competitors and offer to exchange your costs for their fees or you might do that with other attorneys yourself in your market. If you actually want to enter into it and have optimal data you can write perhaps a few dozen competitors in your marketplace and say you are doing a cost survey and if they would send you their fee list you will develop a composite list that does not recognize those responding and send them a copy of the outcomes. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services provided in your practice area. Now you will see what people are charging for services comparable to those you use. You need to be able to create a series of costs. Use this range to set prices for your own services. My recommendation in law office marketing preparation is to charge at the 75% level of the list. You ought to be at or in the leading 25% of the charges.
Keep in mind that in basic it is not a great law practice management method to compete on rate. Most prospective clients will see pricing that is too low as a signal that there is something missing either from the service, the company, or the company.
The Expense Approach in Law Practice Management Pricing
This law practice management pricing technique is extremely simple really. The most typical mistake in law practice management utilizing this technique is to neglect to consist of some type of your cost.
In law practice management typically you count yourself out of the expenses and you ought to include yourself in the expenses. Frequently you are doing at least some of the management work. If you are all three of these in one, you need to consider one salary as due you for your time and expertise as the specialist and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Rates
This is the approach used by lots of vehicle mechanics (it is called "the flat rate book") and other service providers. This approach is where you determine a fixed rate for various tasks and charge that rate no matter what. Another example using this technique is how handled health care has utilized this system with physicians and healthcare facilities .
The "Rule of Three" in Law Practice Management Pricing
This " guideline of thumb" called the " guideline of 3" used in law practice management is not what your Certified Public Accountant might inform you and it does not fail you either. For the very first third we will take the total quantity of salaries/bonuses (not benefits simply salaries-- advantages go into the second 3rd coming next) for the revenue generators and/or timekeepers (this includes you if you are producing profits) and call that our very first third. What you require to do is take the overall amount (in this example $300,000) and now figure out how much you should charge per billable hour, per repaired rate or how many contingency charge cases won to be sure you struck the target we should strike given our first 3rd number times three (in this example $300,000).
This method reveals you how much per hour you need to charge. Given that you understand how many billable hours each profits generator can do per month, merely divide that into index your total of all thirds ($300,000) to see what you require to charge per my link billable hour to make your numbers come out properly. As long as you hit your targets you will be guaranteed of a 15% to 30% net revenue from your operations. After all if you are the owner of the practice you deserve a fair profit too do not you agree? This method is referred to as the Guideline of 3. i thought about this , if this method is a bit too confusing do feel complimentary 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 rates methods in identifying your law practice management rates strategy prior to setting a cost and moving ahead with a law practice marketing strategy to ensure you are thoroughly checking out all choices. Keep in mind the propensity for many legal representatives is to price too low. Don't do that! In another article I will tell you how to speak with potential customers so you never ever have a issue getting the fee you are worthy of.