Law Practice Management-- How To Identify Your Costs
Figuring out costs is a tough law practice management task for a lot of attorneys when analyzing their law company marketing plans. In figuring out charges for specific services, lawyers often disappoint what they ought to charge. When making their law company marketing plans, too lots of attorneys are afraid of even charging the competitive rate for their services. Further, they make the pricing decisions typically with no data or conceptual framework. Additionally, rather of focusing their efforts on how they can justify getting top dollar for what they use, they charge a charge that is typically way too low and frequently actually can frighten off possible clients who think there is something missing from a service that is " inexpensive". In addition many attorneys do not realize that most purchasers in the marketplace by far are " worth buyers" and not trying to find " inexpensive".
Before you sit down and begin thinking through your law practice management prices strategy you need some differences around pricing frequently used in law firm marketing preparation. Do know a law practice management law firm marketing strategy is not effective if you only bring in people who want to pay the most affordable cost for a service. Instead, you desire to focus your law practice management and law company marketing plans on drawing in customers who will end up being long term possessions to the company.
There are generally four ways of identifying just how much you must be charging for your services. Lets move right into those now.
The Marketplace Technique In Law Practice Management Prices
This is one great way of determining pricing. Get your assistant to support you in this law practice management job and spend a long time finding what the variety of pricing is in the community. Have her do a "mystery consumer" research study by calling around as if he/she were a possible customer and discover what your competitors say on the phone to her around pricing. She may need 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 provide to exchange your charges for their costs or you could do that with other attorneys yourself in your market. If you actually wish to enter it and have optimal information you can compose perhaps a few dozen competitors in your marketplace and say you are doing a fee survey and if they would send you their cost list you will develop a composite list that does not identify those reacting and send them a copy of the results. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services provided in your practice area. Now you will see what individuals are charging for services similar to those you provide. You ought to be able to come up with a variety of prices. Use this variety to set prices for your own services. My suggestion in law firm marketing preparation is to charge at the 75% level of the list. So you ought to be at or in the top 25% of the costs.
Keep in mind that in general it is not a great law practice management strategy to contend on rate. Many possible clients will see prices that is too low as a signal that there is something missing out on either from the service, the supplier, or the firm.
The Expense Approach in Law Practice Management Pricing
This law practice management pricing method is very straightforward truly. The most common mistake in law practice management using this method is to neglect to include some form of your expenditure.
In law practice management often you count yourself out of the expenses and you should include yourself in the expenditures. Frequently you are doing at least some of the management work. If you are all three of these in one, you need to consider one income as due you check this for your time and expertise as the technician and manager as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Pricing
This is the approach utilized by many automobile mechanics (it is called "the flat rate book") and other service suppliers. This method is where you identify a fixed rate for numerous tasks and charge that rate no matter what. Another example using this method is how managed health care has actually utilized this system with medical professionals and hospitals .
The "Rule 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 might tell you and it does not fail you either. For the very first 3rd we will take the overall amount of salaries/bonuses (not benefits just incomes-- benefits go into the 2nd third coming next) for the earnings generators and/or timekeepers (this includes you if you are producing profits) and call that our first 3rd. What you need to do is take the overall amount (in this example $300,000) and now figure out how much you need to charge per billable hour, per fixed rate or how numerous contingency fee cases won to be sure you struck the target we must strike given our first third number times 3 (in this example $300,000).
This method reveals you just how much per hour you need to charge. Given that you know how lots of billable hours each revenue generator can do monthly, merely divide that into your total of all thirds ($300,000) to see what you require to charge per billable hour to make your numbers come out properly. As long as you strike your targets you will be guaranteed of a 15% to 30% net profit from your operations. If you are the owner of the practice you are worthy of a fair profit as well do not you agree? This method is referred to as the Guideline of Three. If this approach is a bit too complicated do do not hesitate to contact me and I will help you sort 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 prices technique before setting a rate and continuing with a law practice marketing strategy to guarantee you are completely checking out all alternatives. Remember the propensity for many lawyers is to price too low. Do not do that! In another post I will tell you how to speak to potential customers so you never ever have a problem getting the fee you should have.