Law Practice Management-- How To Determine Your Charges
Figuring out fees is a challenging law practice management job for most attorneys when thinking through their law company marketing strategies. In figuring out costs for certain services, attorneys frequently fall brief of what they must charge. Too many lawyers are scared of even charging the competitive rate for their services when making their law company marketing strategies.
Prior to you sit down and begin thinking through your law practice management pricing strategy you require some differences around pricing typically used in law firm marketing planning. Do understand a law practice management law firm marketing strategy is not effective if you only bring in individuals who want to pay the most affordable cost for a service. Rather, you desire to focus your law practice management and law firm marketing plans on attracting customers who will become long term assets to the firm.
There are basically 4 methods of figuring out just how much you should be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Prices
This is one great way of figuring out prices. Get your assistant to support you in this law practice management task and invest some time finding what the series of rates is in the neighborhood. Have her do a "mystery shopper" study by calling around as if he/she were a prospective customer and discover what your competitors say on the phone to her around rates. She may require to call from her home phone to avoid caller ID. As another alternative you could have him/her call other assistants or paralegals at your rivals and offer to exchange your fees for their fees or you could do that with other lawyers yourself in your market. If you truly desire to get into it and have maximum information you can write maybe a couple of lots competitors in your market and say you are doing a fee study and if they would send you their charge 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 used in your practice area. Now you will see what individuals are charging for services comparable to those you offer. You ought to have the ability to develop a range of rates. Use this range to set costs for your own services. My suggestion in law firm marketing planning is to charge at the 75% level of the list. You need to be at or in the leading 25% of the fees.
Remember that in general it is not a excellent law practice management strategy to compete on rate. Most prospective 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 company. And individuals who are looking for a low cost will follow that low rate any place they can discover it rather than becoming long-term clients. Be sure that your cost covers your costs and a affordable revenue margin.
The Cost Method in Law Practice Management Rates
This law practice management pricing method is very uncomplicated actually. The most common error in law practice management using this approach is to overlook to consist of some kind of your expense.
In law practice management often you count yourself out of the expenses and you need to include yourself in the expenses. Frequently you are doing at least some of the management work. If you are all 3 of these in one, you ought to think about one income as due you for your time and proficiency as the professional and manager as well as a profit of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Prices
This is the technique used by numerous automobile mechanics (it is called "the flat rate book") and other service companies. This approach is where you determine a fixed rate for different tasks and charge that rate no matter what. He makes more if the mechanic spends less time than allocated for the job. He makes less if he invests more time than allocated. In the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example using this technique is how handled healthcare has actually utilized this system with doctors and medical facilities . If they prefer, lawyers can use this system.
The "Rule of Three" in Law Practice Management Rates
This " general rule" called the "rule of 3" utilized in law practice management is not what your CPA may tell you and it does not fail you either. Ask your CPA what they consider it and they navigate to these guys will like it. To begin we are going to be thinking in thirds. For the very first third we will take the total quantity of salaries/bonuses (not advantages just incomes-- benefits go into the 2nd 3rd following) for the revenue generators and/or timekeepers (this includes you if you are producing income) and call that our very first third. So accumulate the incomes of the lawyers, paralegals, and legal secretaries who create income or are timekeepers and call this your very first third (lets simply say that number was $100,000 to keep it easy). 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 managing partner type duties because that part of your time goes here in overhead). Then take that very same number and we will call that your last 3rd, which we will call gross profits (another $100,000). What you require to do is take the overall quantity (in this example $300,000) and now find out how much you need to charge per billable hour, per repaired rate or the number of contingency cost cases won to be sure you struck the target we need to strike provided our very first third number times three (in this example $300,000).
This technique shows you just how much per hour you require to charge. Since you understand the number of billable hours each navigate to this site revenue generator can do per month, merely 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 properly. As long as you strike your targets you will be guaranteed of a 15% to 30% net revenue from your operations. If you are the owner of the practice you should have a reasonable profit as well do not you agree? This approach is called the Rule of Three. , if this technique is a bit too confusing do feel complimentary to contact me and I will help you sort it out in a few minutes on the phone.
It is a great concept to think through all of these pricing techniques in determining your law practice management prices technique prior to setting a price and moving ahead with a law firm marketing strategy to guarantee you are completely exploring all options. In another article I will inform you how to speak to possible customers so you never have a problem getting the charge you are worthy of.