Law Practice Management-- How To Identify Your Costs
When thinking through their law firm marketing plans, determining charges is a hard law practice management job for many lawyers. In identifying fees for particular services, lawyers often disappoint what they must charge. When making their law firm marketing plans, too many lawyers are afraid of even charging the competitive price for their services. Even more, they make the pricing decisions typically with no data or conceptual framework. Furthermore, instead of focusing their efforts on how they can justify getting leading dollar for what they provide, they charge a charge that is frequently way too low and frequently in fact can frighten prospective customers who believe there is something missing from a service that is "cheap". Additionally many attorneys do not recognize that many buyers in the market by far are "value purchasers" and not looking for " low-cost".
Before you sit down and start believing through your law practice management rates strategy you need some distinctions around rates typically used in law company marketing preparation. Do understand a law practice management law company marketing strategy is not effective if you just attract people who want to pay the most affordable cost for a service. Instead, you want to focus your law practice management and law company marketing plans on drawing in customers who will become long term properties to the firm.
There are essentially four methods of figuring out just how much you must be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
Get your assistant to support you in this law practice management task and spend some time discovering what the range of pricing is in the community. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most common services provided in your practice location. My suggestion in law company marketing preparation is to charge at the 75% level of the list.
Remember that in basic it is not a excellent law practice management method to compete on price. A lot of possible 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 Cost Approach in Law Practice Management Prices
This law practice management pricing approach is extremely straightforward truly. The most common error in law practice management utilizing this method is to neglect to include some form of your expenditure.
OK, let me state it once again. In law practice management frequently you count yourself out of the expenses and you ought to include yourself in the expenses. Why? Typically you are doing at least some of the technical work. Yes? Often you are doing at least a few of the management work. Yes? As the owner of the company 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 service technician and supervisor along with a profit of fifteen to thirty percent due you as the owner. So be sure to include a reasonable cost for your supervisory and technical work in the expenditures part of this formula.
Fixed Rate Method in Law Practice Management Pricing
This is the approach used by numerous vehicle mechanics (it this post is called "the flat rate book") and other service companies. This approach is where you identify a set rate for various jobs and charge that rate no matter what. He makes more if the mechanic spends less time than allotted for the job. If he spends more time than allocated, he makes less. But in the end, it all evens out (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 hospitals . If they prefer, legal representatives can utilize this system.
The "Rule of Three" in Law Practice Management Prices
This " guideline of thumb" called the "rule of three" used in law practice management is not what your CPA may tell you and it does not fail you either. Ask your Certified Public Accountant what they consider it and they will like it. To begin we are going to be thinking in thirds. For the very first third we will take the overall amount of salaries/bonuses (not advantages just incomes-- benefits go into the 2nd third following) for the profits generators and/or timekeepers (this includes you if you are generating earnings) and call that our first third. So build up the salaries of the attorneys, paralegals, and legal secretaries who generate profits or are timekeepers and call this your first 3rd (lets just say 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" ( hence that second third is $100,000 and do not forget you if you are doing some handling partner type tasks because that part of your time goes here in overhead). Then take that very same number and we will call that your last third, 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 find out how much you must charge per billable hour, per browse around these guys fixed rate or how numerous contingency charge cases won to be sure you hit the target we must strike given our first 3rd number times three (in this example $300,000).
This technique shows you how much per hour you need to charge. If you are the owner of the practice you should have a reasonable revenue as well do not you agree? If this method is a bit too confusing do feel free to call me and I will assist you sort it out in a read couple of minutes on the phone.
It is a excellent idea to think through all of these prices approaches in determining your law practice management rates technique prior to setting a price and moving ahead with a law firm marketing strategy to guarantee you are completely checking out all choices. In another post I will inform you how to speak to prospective customers so you never ever have a problem getting the charge you are worthy of.