Law Practice Management-- How To Determine Your Fees
Identifying fees is a tough law practice management job for most lawyers when thinking through their law firm marketing strategies. In determining fees for certain services, lawyers often fall short of what they should charge. Too numerous lawyers are afraid of even charging the competitive cost for their services when making their law company marketing strategies.
So before you sit down and begin thinking through your law practice management pricing method you require some distinctions around rates typically used in law practice marketing planning. Then include your pricing strategy to your law company marketing plans. You need to be sure that you are charging a sufficient charge on whatever to ensure you a good profit not just a great living. Do understand a law practice management law firm marketing plan is ineffective if you only attract people who wish to pay the lowest cost for a service. These are not devoted clients. Instead, you wish to focus your law practice management and law practice marketing intend on attracting clients who will end up being long term assets to the firm. Low cost clients are not building your base of long term customers I can promise you that.
There are essentially four methods of figuring out just how much you should be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Rates
This is one good method of figuring out rates. Get your assistant to support you in this law practice management job and spend some time finding what the variety of prices remains in the neighborhood. Have her do a " secret shopper" research study by calling around as if he/she were a potential client and discover what your rivals state on the phone to her around rates. She might require to call from her home phone to avoid caller ID. As another option you might have him/her call other assistants or paralegals at your competitors and use to exchange your costs for their fees or you could do that with other lawyers yourself in your market. If you really wish to enter it and have maximum information you can write perhaps a few lots rivals in your market and state you are doing a cost study and if they would send you their charge list you will create a composite list that does not identify those responding 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 similar to those you use. You must be able to come up with a variety of costs. 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. So you must be at or in the top 25% of the charges.
Bear in mind that in general it is not a excellent law practice management method to complete on price. The majority of potential customers will see rates that is too low as a signal that there is something missing out on either from the service, the supplier, or the firm. And people who are trying to find a low cost will follow that low price wherever they can discover it rather than becoming long-lasting customers. Be sure that your rate covers your costs and a sensible profit margin.
The Expense Method in Law Practice Management Prices
This law practice management prices approach is very uncomplicated really. One just determines what the costs check it out are to provide services or products and adds on a affordable profit, somewhere in between fifteen percent at the least and perhaps thirty 3 percent at the most. The most typical error in law practice management using this approach is to overlook to consist of some type of your cost. Solo and small firm lawyers tend to not include their own income!
In law practice management frequently you count yourself out of the expenditures 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 think about one wage as due you for your time and proficiency as the professional and supervisor 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 auto mechanics (it is called "the flat rate book") and other service suppliers. This method is where you determine a fixed rate for numerous jobs and charge that rate no matter what. Another example using this technique is how handled health care has actually utilized this system with healthcare facilities and doctors .
The " Guideline of 3" in Law Practice Management Prices
This " guideline of thumb" called the "rule of three" used in law practice management is not what your CPA might inform 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 believing in thirds. For the first third we will take the overall quantity of salaries/bonuses (not advantages simply incomes-- advantages go into the second third coming next) for the income generators and/or timekeepers (this includes you if you are producing profits) and call that our first third. So accumulate the wages of the legal representatives, paralegals, and legal secretaries who generate revenue or are timekeepers and call this your very 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 3rd which we will call your "overhead" (thus that useful reference second 3rd is $100,000 and don't forget you if you are doing some handling partner type responsibilities because 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 need to do is take the total quantity (in this example $300,000) and now figure out just how much you must charge per billable hour, per fixed rate or the number of contingency fee cases won to be sure you hit the target we must hit offered our very first third number times three (in this example $300,000).
This method reveals you how much per hour you require to charge. Given that you understand how numerous billable hours each income generator can do per month, simply 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 hit your targets you will be assured of a 15% to 30% net profit from your operations. After all if you are the owner of the practice you deserve a fair earnings also don't you agree? This technique is understood as the Rule of Three. If this technique is a bit too complicated do do not hesitate to contact me and I will help you arrange it out in a few minutes on the phone.
It is a excellent idea to believe through all of these pricing approaches in identifying your law practice management pricing method prior to setting a price and moving ahead with a law firm marketing strategy to guarantee you are completely checking out all options. Keep in mind the tendency for a lot of legal representatives is to price too low. Don't do that! In another post I will tell you how to speak to prospective clients so you never ever have a issue getting the cost you are worthy of.