Law Practice Management-- How To Identify Your Fees
When thinking through their law firm marketing plans, identifying costs is a hard law practice management task for a lot of lawyers. In determining fees for certain services, attorneys often disappoint what they need to charge. A lot of lawyers hesitate of even charging the competitive cost for their services when making their law firm marketing plans. Further, they make the prices choices often with no data or conceptual structure. Furthermore, rather of focusing their efforts on how they can validate getting top dollar for what they provide, they charge a cost that is typically way too low and typically actually can scare off potential customers who believe there is something missing from a service that is "cheap". Furthermore lots of attorneys don't recognize that a lot of buyers in the market without a doubt are " worth buyers" and not looking for "cheap".
So prior to you take a seat and begin thinking through your law practice management pricing strategy you require some differences around prices typically used in law company marketing preparation. Then add your pricing strategy to your law company marketing plans. You require to be sure that you are charging a adequate fee on everything to ensure you a great profit not simply a great living. If you just draw in individuals who want to pay the lowest charge for a service, do know a law practice management law company marketing plan is not reliable. These are not faithful customers. Instead, you wish to focus your law practice management and law office marketing intend on attracting customers who will end up being long term possessions to the company. Low cost customers are not developing your base of long term customers I can promise you that.
There are essentially 4 ways of figuring out how much you must be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
This is one great way of figuring out pricing. Get your assistant to support you in this law practice management task and invest some time discovering what the range of prices 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 say on the phone to her around prices. She might 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 competitors and offer to exchange your fees for their fees or you could do that with other lawyers yourself in your market. If you truly want to enter it and have maximum data you can compose perhaps a few dozen competitors in your marketplace and state you are doing a cost study and if they would send you their cost list you will develop a composite list that does not determine 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 comparable to those you use. You must be able to create a series of prices. Use this variety to set rates for your own services. My recommendation in law practice marketing preparation is to charge at the 75% level of the list. You should be at or in the leading 25% of the charges.
Bear in mind that in general it is not a great law practice management strategy to contend on price. Most possible customers will see prices that is too low as a signal that there is something missing out on either from the service, the company, or the company. And people who are looking for a low cost will follow that low price anywhere they can discover it instead of ending up being long-term customers. So make sure that your rate covers your costs and a sensible revenue margin.
The Expense Approach in Law Practice Management Rates
This law practice management prices approach is extremely straightforward actually. The most typical error in law practice management using this method is to neglect to include some type of your expenditure.
OK, let me state it again. In law practice management typically you count yourself out of the costs and you need to include yourself in the expenditures. Why? Often you are doing at least some of the technical work. Yes? Frequently you are doing a minimum of some of the management work. Yes? As the owner of the service you are due a sensible profit. Yes? If you are all three of these in one, you must think about one income as due you for your time and know-how as the technician and supervisor in addition to a earnings of fifteen to thirty percent due you as the owner. So be sure to include a reasonable cost for your managerial and technical operate in the expenditures part of this formula.
Fixed Rate Method in Law Practice Management Rates
This is the approach used by lots of automobile mechanics (it is called "the flat rate book") and other service providers. This approach is where you identify a set rate for different tasks and charge that rate no matter what. He makes more if the mechanic invests less time than allocated for the task. He makes less if he invests more time than allotted. However in the end, everything levels (well, generally to the mechanics' favor if you ask me). Another example utilizing this method is how handled health care has actually used this system with medical professionals and medical facilities . Lawyers can utilize this system if they want.
The "Rule of 3" in Law Practice Management Prices
This " guideline" called the "rule of 3" utilized in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your Certified Public Accountant what they think of it and they will like it. To begin we are going to be thinking in thirds. For the first third we will take the total quantity of salaries/bonuses (not advantages simply salaries-- advantages enter into the 2nd 3rd following) for the profits generators and/or timekeepers (this includes you if you are creating earnings) and call that our very first 3rd. So include up the incomes of the attorneys, paralegals, and legal secretaries who produce profits or are timekeepers and call this your first third (lets just state that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( hence that second third is $100,000 and do not forget you if you are doing some managing 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). you could try this out What you need to do is take the overall amount (in this example $300,000) and now figure out just how much you should charge per billable hour, per fixed rate or how lots of contingency charge cases won to be sure you hit the target we need to hit given our very first third number times 3 (in this example $300,000).
This approach shows you just how much per hour you need to charge. Considering that you understand the number of billable hours each earnings generator can do monthly, merely divide that into your overall 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 strike your targets you will be guaranteed of a 15% to 30% net earnings from your operations. After all if you are the owner of the practice you are worthy of a reasonable profit also do not you concur? This approach is known as the Rule of 3. If this approach is a bit too confusing do feel free to contact me and I will assist you arrange it out in a couple of minutes on the phone.
It is a excellent concept to believe through all of these rates approaches in identifying your law practice management rates method prior to setting a rate and continuing with a law company marketing strategy to ensure you are thoroughly exploring all options. Remember the tendency for most lawyers is to price too low. Do not do that! In another post I will inform you how to talk to prospective clients so you never have a issue getting the cost you are worthy of.