Law Practice Management-- How To Determine Your Charges
Determining costs is a difficult law practice management task for the majority of attorneys when thinking through their law practice marketing plans. In determining charges for certain services, lawyers often fall brief of what they need to charge. A lot of lawyers hesitate of even charging the competitive price for their services when making their law firm marketing strategies. Further, they make the pricing choices often without any information or conceptual framework. In addition, rather of focusing their efforts on how they can justify getting leading dollar for what they offer, they charge a fee that is often way too low and often in fact can frighten possible customers who think there is something missing from a service that is "cheap". Furthermore many attorneys don't recognize that the majority of purchasers in the market by far are "value buyers" and not trying to find "cheap".
So prior to you sit down and begin believing through your law practice management rates technique you need some distinctions around pricing frequently used in law office marketing planning. Include your pricing method to your law firm marketing plans. You require to be sure that you are charging a adequate fee on everything to ensure you a great earnings not just a excellent living. Do understand a law practice management law company marketing plan is ineffective if you just attract people who wish to pay the most affordable cost for a service. These are not faithful clients. Rather, you wish to focus your law practice management and law office marketing plans on drawing in clients who will end up being long term assets to the firm. Low cost customers are not building your base of long term clients I can guarantee you that.
There are essentially 4 ways of figuring out how much you need to be charging for your services. Lets move right into those now.
The Market Method In Law Practice Management Prices
This is one excellent way of identifying prices. Get your assistant to support you in this law practice management job and spend a long time finding what the series of rates is in the neighborhood. Have her do a " secret buyer" study by calling around as if he/she were a potential customer and find out what your competitors state on the phone to her around rates. She may need to call from her house phone to prevent caller ID. As another choice you might have him/her call other assistants or paralegals at your rivals and offer to exchange your costs for their charges or you might do that with other attorneys yourself in your market. If you really want to enter into it and have maximum data you can write possibly a few dozen rivals in your marketplace and say you are doing a cost study and if they would send you their cost list you will produce a composite list that does not recognize 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 common services used in your practice location. Now you will see what individuals are charging for services comparable to those you use. You need to have the ability to develop a range of prices. Use this range to set prices for your own services. My recommendation in law office marketing planning is to charge at the 75% level of the list. You need to be at or in the top 25% of the fees.
Keep in mind that in basic it is not a great law practice management strategy to complete on price. Many possible clients will see pricing that is too low as a signal that there is something missing out on either from the service, the provider, or the company. And people who are trying to find a low cost will follow that low cost wherever they can discover it rather than ending up being long-term customers. So make sure that your rate covers your expenses and a reasonable revenue margin.
The Expense Approach in Law Practice Management Prices
This law practice management pricing method is really simple truly. The most common mistake in law practice management utilizing this approach is to overlook to include some kind of your cost.
OK, let me say it once again. In law practice management typically you count yourself out of the expenditures and you need to include yourself in the costs. Why? Often you are doing a minimum of a few of the technical work. Yes? Often you are doing a minimum of some of the management work. Yes? As the owner of the company you are due a reasonable revenue. Yes? If you are all three of these in one, you need to consider one wage as due you for your time and expertise as the professional and manager as well as a revenue of fifteen to thirty percent due you as the owner. Be sure to include a sensible cost for your supervisory and technical work in the costs part of this formula.
Fixed Rate Method in Law Practice Management Prices
This is the method used by many car mechanics (it is called "the flat rate book") and other service providers. This method is where you figure published here out a set rate for different jobs and charge that rate no matter what. Another example using this technique is how managed health care has utilized this system with healthcare facilities and physicians .
The "Rule of Three" in Law Practice Management Rates
This " guideline" called the "rule of three" utilized in law practice management is not what your Certified Public Accountant may tell you and it does not fail you either. Ask your CPA what they believe about it and they will like it. To start we are going to be thinking in thirds. For the first third we will take the total quantity of salaries/bonuses (not advantages simply wages-- benefits go into the second 3rd following) for the earnings generators and/or timekeepers (this includes you if you are generating profits) and call that our very first 3rd. Include up the salaries of the attorneys, paralegals, and legal secretaries who produce revenue 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 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 since that part of your time goes here in overhead). Then take that same number and we will call that your last 3rd, which we will call gross earnings (another $100,000). What you need to do is take the overall quantity (in this example $300,000) and now figure out how much you should charge per billable hour, per repaired rate or how many contingency charge cases won to be sure you struck the target we need to strike given our first third 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 are worthy of a reasonable profit as well don't you agree? If this technique is a bit too confusing do feel totally free to contact me and I will help you sort it out in a few minutes on the phone.
It is a good idea to believe through all of these rates techniques in determining your law practice management rates technique prior to setting a rate and continuing with a law practice marketing plan to ensure you are completely checking out all choices. Keep in mind the tendency for the majority of attorneys is to price too low. Do not do that! In another short article I will tell you how to speak with possible customers so you never have a issue getting the cost you deserve.