Law Practice Management-- How To Determine Your Costs
Determining fees is a tough law practice management job for a lot of attorneys when believing through their law company marketing plans. In figuring out costs for specific services, lawyers often fall brief of what they need to charge. Too lots of lawyers are afraid of even charging the competitive price for their services when making their law firm marketing plans.
Before you sit down and start thinking through your law practice management pricing strategy you require some distinctions around rates typically utilized in law company marketing planning. Do understand a law practice management law firm marketing plan is not efficient if you just bring in people who want to pay the lowest charge for a service. Instead, you want to focus your law practice management and law firm marketing plans on drawing in customers who will end up being long term properties to the firm.
There are essentially four methods of determining just how much you need to be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Prices
This is one excellent way of identifying pricing. Get your assistant to support you in this law practice management task and invest some time discovering what the variety of rates remains in the neighborhood. Have her do a " secret shopper" study by calling around as if he/she were a potential client and discover what your competitors state on the phone to her around pricing. She might require to call from her home phone to prevent caller ID. As another choice you might 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 legal representatives yourself in your market. If you actually want to enter into it and have optimal data you can compose possibly a few dozen rivals in your market and say you are doing a charge survey and if they would send you their cost 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 consist of a stamped, self-addressed envelope with a list of the most common services used in your practice area. Now you will see what people are charging for services similar to those you use. You need to have the ability to create a series of costs. Use this range to set costs for your own services. My suggestion in law office marketing planning 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 general it is not a good law practice management technique to compete on cost. A lot of potential customers will see rates that is too low as a signal that there is something missing out on either from the service, the supplier, or the firm.
The Cost Method in Law Practice Management Rates
This law practice management pricing approach is very straightforward really. The most typical mistake in law practice management using this method is to disregard to consist of some kind of your cost.
OK, let me say it again. In law practice management often you count yourself out of the expenses and you ought to include yourself in the expenses. Why? Often you are doing a minimum of a few of the technical work. Yes? Often you are doing a minimum of a few of the management work. Yes? As the owner of the company you are due a affordable earnings. Yes? If you are all 3 of these in one, you need to think about one wage as due you for your time and knowledge as the service technician and supervisor in addition to a revenue of fifteen to thirty percent due you as the owner. So make sure to include a reasonable cost for your technical and managerial work in the costs part of this formula.
Fixed Rate Method in Law Practice Management Rates
This is the approach utilized by numerous automobile mechanics (it is called "the flat rate book") and other company. This approach is where you identify a set rate for numerous jobs and charge that rate no matter what. He makes more if the mechanic invests less time than set aside for the job. He makes less if he invests more time than allotted. However in the end, it all evens out (well, generally to the mechanics' favor if you ask me). Another example using this technique is how managed healthcare has utilized this system with physicians and hospitals . If they want, attorneys can utilize this system.
The " Guideline of 3" in Law Practice Management Rates
This "rule of thumb" called the "rule of three" used in law practice management is not what your CPA might tell you and it does not fail you either. Ask your Certified Public Accountant what they believe about it and they will like it. To start we are going to be believing in thirds. For the very first 3rd we will take the overall amount of salaries/bonuses (not benefits simply salaries-- benefits enter into the second 3rd following) for the revenue generators and/or timekeepers (this includes you if you are producing revenue) and call that our first third. Include up the incomes of the attorneys, paralegals, and legal secretaries who produce revenue or are timekeepers and call this your very first 3rd (lets simply say that number was $100,000 to keep it simple). 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 handling partner type duties because that part of your time goes here in overhead). Take that 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 total quantity (in this example $300,000) and now figure out how much you should charge per billable hour, per fixed rate or how many contingency fee cases won to be sure you struck the target we must strike offered our first 3rd number times three (in this example $300,000).
This approach reveals you how much per hour you need to charge. Because you understand the number of billable hours each revenue generator can do each month, just divide that into your total of all thirds ($300,000) to see what you need to charge per billable hour to make your numbers come out correctly. As long as you hit your targets you will be guaranteed of a 15% to 30% net profit from your operations. After all if you are the owner of the practice you should have a reasonable earnings also don't you agree? This technique is referred to as the Guideline of Three. If this method is a bit too confusing do feel free to call me and I will assist you arrange it out in a couple of minutes on the phone.
It is a great idea to think through all of these pricing methods in determining your law practice management pricing method prior to setting a rate and continuing with a law firm marketing strategy to ensure you are completely checking out all alternatives. Keep in mind the tendency for many recommended you read attorneys is to price too low. Do not do that! In another short article I will tell you how to talk to potential clients so you never have a problem getting the charge you should have.