Law Practice Management-- How To Determine Your Costs
Figuring out costs is a challenging law practice management task for most lawyers when thinking through their law firm marketing plans. In determining fees for specific services, attorneys frequently fall brief of what they need to charge. Too lots of lawyers are scared of even charging the competitive cost for their services when making their law company marketing plans.
Prior to you sit down and start believing through your law practice management prices technique you need some distinctions around rates frequently utilized in law firm marketing preparation. Include your prices technique to your law firm marketing strategies. You require to be sure that you are charging a enough cost on whatever to guarantee you a excellent revenue not simply a great living. If you only draw in people who desire to pay the lowest cost for a service, do know a law practice management law company marketing plan is not efficient. These are not devoted clients. Rather, you wish to focus your law practice management and law office marketing intend on bring in clients who will end up being long term assets to the company. Low price customers are not building your base of long term customers I can assure you that.
There are basically four ways of determining how much you should 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 identifying rates. Get your assistant to support you in this law practice management task and spend some time finding what the variety of rates is in the community. Have her do a "mystery consumer" study by calling around as if he/she were a potential client and discover out what your rivals state on the phone to her around rates. She may require to call from her house phone to prevent caller ID. As another alternative you could have him/her call other assistants or paralegals at your rivals and offer to exchange your charges for their fees or you might do that with other legal representatives yourself in your market. If you truly desire to get into it and have maximum information you can write maybe a couple of dozen rivals in your market and say you are doing a fee survey and if they would send you their cost list you will create a composite list that does not identify those responding and send them a copy of the results. To keep it basic for them consist of 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 use. You should be able to come up with a series of prices. Use this range to set rates for your own services. My recommendation in law practice marketing preparation is to charge at the 75% level of the list. So you should be at or in the leading 25% of the charges.
Keep in mind that in basic it is not a excellent law practice management strategy to contend on rate. Many possible clients will see pricing that is too low as a signal that there is something missing out on either from the service, the supplier, or the company.
The Cost Technique in Law Practice Management Pricing
This law practice management rates method is extremely simple really. One merely determines what the costs are to provide services or products and includes on a affordable earnings, somewhere between fifteen percent at the least and maybe thirty three percent at the most. The most typical mistake in law practice management utilizing this method is to neglect to consist of some type of your cost. Solo and small company attorneys tend to not include their own salary!
In law practice management typically you count yourself out of the costs and you must include yourself in the costs. 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 income as due you for your time and expertise as the service technician and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Pricing
This is the method utilized by many auto mechanics (it is called "the flat rate book") and other company. This approach is where you figure out a fixed rate for different tasks and charge that rate no matter what. He makes more if the mechanic spends less time than set aside for the task. He makes less if he spends more time than allotted. However in the end, it all levels (well, generally to the mechanics' favor if you ask me). Another example utilizing this method is how handled health care has actually utilized this system with doctors and health centers . Lawyers can utilize this system if they want.
The "Rule of Three" in Law Practice Management Prices
This " general rule" called the "rule of 3" utilized in law practice management is not what your CPA might inform you and it does not fail you either. Ask your Certified Public Accountant 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 total quantity of salaries/bonuses (not advantages simply incomes-- benefits enter into the 2nd third coming next) for the revenue generators and/or timekeepers (this includes you if you are producing you could try here earnings) and call that our first 3rd. Add up the wages of the legal representatives, paralegals, and legal secretaries who produce income 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 third which we will call your "overhead" ( hence that second 3rd is $100,000 and don't forget you if you are doing some handling partner type responsibilities because that part of your time goes here in overhead). Then take that very same number and we will call that your last 3rd, which we will call gross revenues (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now determine just how much you should charge per billable hour, per fixed rate or how lots of contingency fee cases won to be sure you hit the target we should hit given our first 3rd number times three (in this example $300,000).
This approach reveals you how much per hour you require to charge. Because you know the number of billable hours each revenue generator can do per month, merely 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 correctly. As long as you strike your targets you will be ensured of a 15% to 30% net revenue from your operations. If you are the owner of the practice you are worthy of a reasonable profit as well do not you agree? This technique is referred to as the Rule of Three. , if this technique is a bit too complicated do feel free to call me and I will assist you sort it out in a few minutes on the phone.
It is a good idea to think through all of these pricing methods in determining your law practice management pricing strategy before setting a price and moving ahead with a law practice marketing plan to guarantee you are completely exploring all choices. Keep in mind the propensity for many lawyers is to price too low. Don't do that! In another article I will tell you how to speak to prospective clients so you never have a issue getting the cost you should have.