Law Practice Management-- How To Identify Your Costs
Determining costs is a difficult law practice management task for many lawyers when thinking through their law company marketing strategies. In figuring out fees for certain services, attorneys typically fall short of what they need to charge. Too lots of attorneys are afraid of even charging the competitive cost for their services when making their law company marketing strategies.
Before you sit down and start thinking through your law practice management prices technique you require some differences around rates typically utilized in law company marketing preparation. Do understand a law practice management law company marketing plan is not effective if you only draw in people who desire to pay the lowest cost for a service. Instead, you want to focus your law practice management and law firm marketing strategies on bring in clients who will become long term properties to the company.
There are essentially four ways of figuring out how much you need to be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Pricing
This is one great method of identifying rates. Get your assistant to support you in this law practice management task and invest a long time finding what the variety of pricing is in the neighborhood. Have her do a "mystery shopper" study by calling around as if he/she were a potential customer and discover what your competitors say on the phone to her around prices. She might need to call from her home phone to prevent caller ID. As another choice you could have him/her call other assistants or paralegals at your competitors and offer to exchange your fees for their fees or you could do that with other attorneys yourself in your market. If you truly wish to get into it and have optimal data you can compose maybe a couple of lots rivals in your marketplace and say you are doing a fee study and if they would send you their charge list you will create 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 provided in your practice area. Now you will see what people are charging for services similar to those you provide. You need to 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 company marketing planning is to charge at the 75% level of the list. You should be at or in the top 25% of the costs.
Keep in mind that in basic it is not a good law practice management strategy to complete on cost. A lot of prospective clients will see rates that is too low as a signal that there is something missing out on either from the service, the company, or the company.
The Expense Approach in Law Practice Management Rates
This law practice management prices approach is extremely straightforward actually. One simply determines what the expenses are to deliver service or useful reference products and includes on a sensible profit, somewhere in between fifteen percent at the least and maybe thirty 3 percent at the most. The most typical mistake in law practice management utilizing this approach is to neglect to include some type of your cost. Solo and small company lawyers tend to not include their own salary!
OK, let me state it again. In law practice management frequently you count yourself out of the expenditures and you must include yourself in the costs. Why? Frequently you are doing at least some of the technical work. Yes? Typically you are doing a minimum of a few of the management work. Yes? As the helpful hints owner of business you are due a reasonable earnings. Yes? If you are all three of these in one, you should consider one wage as due you for your time and know-how as the technician and supervisor as well as a revenue of fifteen to thirty percent due you as the owner. Be sure to consist of a reasonable cost for your technical and managerial work in the expenses part of this formula.
Fixed Rate Method 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 suppliers. This method is where you figure out a set rate for various tasks and charge that rate no matter what. Another example utilizing this technique is how handled health care has utilized this system with medical professionals and medical facilities .
The "Rule of 3" in Law Practice Management Pricing
This " general rule" called the "rule of 3" used in law practice management is not what your CPA may inform you and it does not fail you either. Ask your CPA what they think of it and they will like it. To begin we are going to be thinking in thirds. For the very first 3rd we will take the overall quantity of salaries/bonuses (not benefits just salaries-- advantages enter into the 2nd third coming next) for the revenue generators and/or timekeepers (this includes you if you are producing revenue) over at this website and call that our first 3rd. Add up the salaries of the legal representatives, paralegals, and legal secretaries who create revenue or are timekeepers and call this your first 3rd (lets just state that number was $100,000 to keep it basic). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" ( hence that 2nd 3rd is $100,000 and do not forget you if you are doing some managing partner type responsibilities since that part of your time goes here in overhead). Then take that exact same number and we will call that your last 3rd, which we will call gross profits (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now figure out how much you must charge per billable hour, per repaired rate or the number of contingency fee cases won to be sure you hit the target we must hit given our very first 3rd number times three (in this example $300,000).
This technique shows you how much per hour you need to charge. Since you understand the number of billable hours each income generator can do each month, just 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 hit your targets you will be ensured of a 15% to 30% net make money from your operations. After all if you are the owner of the practice you are worthy of a reasonable earnings too do not you agree? This method is called the Rule of 3. , if this technique is a bit too complicated do feel complimentary to call me and I will help you arrange it out in a few minutes on the phone.
It is a great concept to believe through all of these pricing approaches in determining your law practice management rates technique before setting a rate and moving ahead with a law firm marketing plan to guarantee you are completely checking out all options. In another post I will inform you how to speak to prospective customers so you never ever have a issue getting the fee you should have.