Law Practice Management-- How To Determine Your Charges
Determining charges is a tough law practice management job for the majority of attorneys when thinking through their law office marketing plans. In identifying charges for certain services, lawyers typically disappoint what they must charge. When making their law firm marketing strategies, too many lawyers are scared of even charging the competitive price for their services. Even more, they make the prices choices frequently without any information or conceptual framework. In addition, rather of focusing their efforts on how they can validate getting top dollar for what they use, they charge a cost that is frequently way too low and frequently actually can frighten potential clients who believe there is something missing from a service that is "cheap". In addition lots of lawyers do not understand that the majority of buyers in the marketplace without a doubt are " worth purchasers" and not searching for "cheap".
Before you sit down and start thinking through your law practice management rates technique you require some differences around prices commonly utilized in law firm marketing planning. Do know a law practice management law firm marketing plan is not efficient if you only bring in individuals who desire to pay the least expensive charge for a service. Instead, you desire to focus your law practice management and law firm marketing plans on bring in customers who will become long term possessions to the firm.
There are essentially four ways of figuring out just how much you ought to be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Prices
This is one good way of identifying rates. Get your assistant to support you in this law practice management task and spend a long time finding what the series of pricing is in the neighborhood. Have her do a " secret shopper" research study by calling around as if he/she were a possible customer and discover what your rivals say on the phone to her around prices. She may require to call from her house phone to prevent caller ID. As another option you might have him/her call other assistants or paralegals at your rivals and provide to exchange your costs for their charges or you could do that with other attorneys yourself in your market. If you really desire to enter into it and have maximum data you can compose possibly a few dozen competitors in your market and say you are doing a cost study and if they would send you their charge list you will develop a composite list that does not identify those responding 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 typical services offered in your practice area. Now you will see what people are charging for services similar to those you offer. You need to have the ability to develop a series of rates. Use this variety to set costs for your own services. My recommendation in law office marketing preparation is to charge at the 75% level of the list. You need to be at or in the leading 25% of the fees.
Keep in mind that in general it is not a great law practice management technique to complete on price. The majority of prospective clients will see prices that is too low as a signal that there is something missing either from the service, the supplier, or the firm.
The Cost Method in Law Practice Management Pricing
This law practice management prices technique is extremely uncomplicated really. The most typical mistake in law practice management utilizing this approach is to neglect to include some kind of your expenditure.
In law practice management typically you count yourself out of the expenses and you must include yourself in the expenditures. Typically you are doing at least some of the management work. If you are all 3 of these in one, you should think about one wage as due you for your time and knowledge as the professional and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Rates
This is the approach utilized by numerous car mechanics (it is called "the flat rate book") and other service providers. This approach is where you identify 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 medical facilities and physicians .
The "Rule of 3" in Law Practice Management Recommended Reading Prices
This " general rule" called the " guideline of three" utilized in law practice management is not what your CPA may tell you and it does not fail you either. Ask your Certified Public Accountant what they consider it and they will like it. To begin we are going to be believing in thirds. For the first 3rd we will take the overall amount of salaries/bonuses (not advantages just incomes-- benefits go into the 2nd 3rd coming next) for the earnings generators and/or timekeepers (this includes you if you are generating earnings) and call that our first 3rd. So include up the salaries of the legal representatives, paralegals, and legal secretaries who generate profits or are timekeepers and call this your very first third (lets just state that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( hence that 2nd 3rd is $100,000 and don't forget you if you are doing some managing partner type responsibilities because that part of your time goes here in overhead). Take that exact same number and we will call that your last 3rd, which we will call gross earnings (another $100,000). What you require to do is take the overall quantity (in this example $300,000) and now figure out how much you must charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you hit the target we should hit given our very first third number times 3 (in this example $300,000).
This method reveals you how much per hour you need to charge. Because you understand how lots of billable hours each profits 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 strike 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 deserve a reasonable revenue as well don't you agree? This method is called the Rule of 3. If this technique is a bit too complicated do feel totally free to contact me and I will help you sort it out in a couple of minutes on the phone.
It is a excellent idea to think through all of these pricing techniques in determining your law practice management prices strategy before setting a rate and continuing with a law company marketing strategy to guarantee you are thoroughly checking out all alternatives. Remember the propensity for most attorneys is to price too low. Don't do that! In another post I will inform you how to speak to potential customers so you never ever have a problem getting the cost you deserve.