Law Practice Management-- How To Determine Your Fees
Determining costs is a tough law practice management task for the majority of lawyers when thinking through their law firm marketing strategies. In determining costs for particular services, lawyers typically fall short of what they must charge. Too lots of attorneys are afraid of even charging the competitive price for their services when making their law company marketing strategies.
Prior to you sit down and begin thinking through your law practice management prices strategy you require some distinctions around prices commonly used in law company marketing planning. Do understand a law practice management law firm marketing plan is not effective if you only attract individuals who want to pay the lowest cost for a service. Rather, you desire to focus your law practice management and law company marketing plans on bring in clients who will end up being long term possessions to the company.
There are essentially four methods of identifying how much you must 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 identifying pricing. Get your assistant to support you in this law practice management job and spend a long time finding what the variety of prices is in the community. Have her do a " secret buyer" study by calling around as if he/she were a potential client and discover what your competitors say on the phone to her around rates. She might require to call from her home phone to avoid caller ID. As another alternative you might have him/her call other assistants or paralegals at your competitors and offer to exchange your charges for their fees or you might do that with other lawyers yourself in your market. If you truly want to get into it and have maximum data you can write maybe a few dozen rivals in your marketplace and state 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 simple for them include a stamped, self-addressed envelope with a list of the most common services offered 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 develop a variety of rates. Utilize this variety to set costs for your own services. My recommendation in law firm marketing planning is to charge at the 75% level of the list. So you should be at or in the top 25% of the charges.
Keep in mind that in general it is not a great law practice management technique to complete on price. The majority of possible customers will see rates that is too low as a signal that there is something missing either from the service, the company, or the firm. And individuals who are searching for a low price will follow that low rate wherever they can find it instead of becoming long-term customers. Be sure that your cost covers your costs and a sensible earnings margin.
The Expense Approach in Law Practice Management Pricing
This law practice management pricing method is very uncomplicated actually. The most common mistake in law practice management utilizing this technique is to neglect to include some type of your expense.
In law practice management frequently you count yourself out of the expenses and you ought to include yourself in the costs. Often you are doing at least some of the management work. If you are all three of these in one, you should consider one salary as due you for your time and competence as the technician and manager as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Pricing
This is the technique utilized by lots of car mechanics (it is called "the flat rate book") and other provider. This approach is where you determine a fixed rate for various jobs and charge that rate no matter what. If the mechanic spends less time than allotted for the job, he makes more. He makes less if he spends more time than allotted. But in the end, it all evens out (well, typically to the mechanics' favor if you ask me). Another example using this technique is how managed health care has utilized this system with healthcare facilities and medical professionals . If they desire, lawyers can utilize this system.
The " Guideline of Three" in Law Practice Management Rates
This "rule of thumb" called the " guideline of three" utilized 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 start we are going to be thinking in thirds. For the very first third we will take the overall quantity of salaries/bonuses (not benefits just wages-- benefits go into the 2nd third following) for the profits generators and/or timekeepers (this includes you if you are producing earnings) and call that our first 3rd. So build up the incomes of the lawyers, paralegals, and legal secretaries who create 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 once again and it is your 2nd third which we will call your "overhead" ( therefore that second third is $100,000 and don't forget you if you are doing some handling partner type duties since that part of your time goes here in overhead). Take that 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 just how much you must charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you hit go the target we should strike offered our very first 3rd number times 3 (in this example $300,000).
This method reveals you how much per hour you require to charge. If you are the owner of the practice you are worthy of a reasonable revenue as well do not you agree? If this technique is a bit too complicated do feel totally free to call me and I will help you arrange it out in a couple of minutes on the phone.
It is a good concept to analyze all of these pricing techniques in identifying your law practice management pricing technique prior to setting a price and moving ahead with a law office marketing strategy to ensure you are thoroughly checking out all options. Remember the propensity for most legal representatives is to price too low. Don't do that! In another short article I will inform you how to speak with potential clients so you never have a issue getting the cost you are worthy of.