Law Practice Management-- How To Identify Your Costs
Determining costs is a hard law practice management task for a lot of attorneys when thinking through their law company marketing plans. In determining charges for certain services, lawyers typically fall short of what they should charge. Too numerous lawyers are afraid of even charging the competitive price for their services when making their law company marketing plans.
So prior to you take a seat and begin thinking through your law practice management pricing strategy you need some differences around rates commonly utilized in law practice marketing planning. Then add your rates strategy to your law practice marketing plans. You need to be sure that you are charging a sufficient cost on whatever to ensure you a good revenue not simply a great living. If you only attract people who want to pay the lowest cost for a service, do know a law practice management law company marketing plan is not effective. These are not devoted clients. Rather, you want to focus your law practice management and law company marketing intend on attracting clients who will become long term properties to the company. Low cost clients are not building your base of long term clients I can assure you that.
There are basically 4 methods of determining how much you ought to be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Rates
This is one great way of determining prices. Get your assistant to support you in this law practice management task and invest a long time finding what the variety of pricing remains in the community. Have her do a "mystery shopper" study by calling around as if he/she were a potential client and find out what your rivals state on the phone to her around rates. She might require to call from her home phone to prevent caller ID. As another alternative you could have him/her call other assistants or paralegals at your rivals and use to exchange your charges for their fees or you might do that with other legal representatives yourself in your market. If you really wish to enter it and have optimal data you can write possibly a few dozen rivals in your marketplace and say you are doing a cost survey and if they would send you their cost list you will create a composite list that does not recognize those responding and send them a copy of the outcomes. To keep it basic for them include a stamped, self-addressed envelope with a list of the most common services used in your practice location. Now you will see what individuals are charging for services comparable to those you provide. You should be able to develop a range of rates. Use this range to set rates 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 top 25% of the costs.
Keep in mind that in general it is not a good law practice management technique to complete on rate. Many potential clients will see pricing that is too low as a signal that there is something missing out on either from the service, the provider, or the company.
The Expense Approach in Law Practice Management Rates
This law practice management prices technique is extremely straightforward really. One simply identifies what the costs are to deliver product and services and includes on a reasonable earnings, somewhere between fifteen percent at the least and possibly thirty three percent at the most. The most typical error in law practice management utilizing this technique is to neglect to include some type of your expenditure. Solo and little company lawyers tend to not include their own wage!
In law practice management often you count yourself out of the expenditures and you need to 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 need to consider one wage as due you for your time and knowledge as the technician and supervisor as well as a profit of find out fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Pricing
This is the technique used by numerous car mechanics (it is called "the flat rate book") and other company. This method is where you figure out a set rate for numerous tasks and charge that rate no matter what. If the mechanic invests less time than allocated for the task, he makes more. If he invests more time than allotted, he makes less. In the end, it all evens out (well, normally to the mechanics' favor if you ask me). Another example using this method is how handled health care has actually utilized this system with physicians and health centers . Attorneys can utilize this system if they want.
The "Rule of 3" in Law Practice Management Prices
This "rule of thumb" called the "rule of three" 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 consider it and they will like it. To start we are going to be thinking in thirds. For the very first third we will take the total amount of salaries/bonuses (not advantages just incomes-- benefits enter into the second third coming next) for the revenue generators and/or timekeepers (this includes you if you are generating earnings) and call that our very first 3rd. So accumulate the incomes of the legal representatives, paralegals, and legal secretaries who produce income or are timekeepers and call this your first third (lets simply state that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your second third which we will call your "overhead" (thus that second third is $100,000 and don't forget you if you are doing some managing partner type responsibilities since that part of your time goes here in overhead). Then take that same number and we will call that your last 3rd, which we will call gross revenues (another $100,000). What you require to do is take the overall amount (in this example $300,000) and now determine how much you should charge per billable hour, per fixed rate or how many contingency charge cases won to be sure you struck the target we need to hit offered our very first third number times three (in this example $300,000).
This technique reveals you how much per hour you require to charge. Considering that you know the number of billable hours each profits generator can do monthly, 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 try these out correctly. As long as you hit your targets you will be guaranteed of a 15% to 30% net earnings 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 approach is referred to as the Rule of 3. If this approach is a bit too complicated do feel free to contact me and I will help you arrange it out in a few minutes on the phone.
It is a great idea to analyze all of these prices techniques in determining your law practice management pricing strategy prior to setting a cost and moving ahead with a law company marketing plan to guarantee you are completely exploring all alternatives. Remember the tendency for the majority of legal representatives is to price too low. Don't do that! In another article I will tell you how to talk to possible customers so you never ever have a problem getting the fee you should have.