Law Practice Management-- How To Identify Your Costs
Determining costs is a difficult law practice management task for most lawyers when believing through their law company marketing plans. In figuring out costs for specific services, attorneys typically fall short of what they ought to charge. Too lots of attorneys are scared of even charging the competitive price for their services when making their law company marketing plans.
Prior to you sit down and start thinking through your law practice management prices strategy you need some distinctions around rates frequently utilized in law firm marketing planning. Include your prices method to your law company marketing strategies. You need to be sure that you are charging a enough cost on whatever to ensure you a good earnings not just a excellent living. Do understand a law practice management law office marketing strategy is ineffective if you just attract people who desire to pay the least expensive cost for a service. These are not faithful customers. Rather, you desire to focus your law practice management and law company marketing plans on attracting customers who will become long term assets to the company. Low price clients are not developing your base of long term customers I can guarantee you that.
There are basically four methods of figuring out just how much you need to be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Pricing
This is one excellent way of figuring out pricing. 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 " secret consumer" study by calling around as if he/she were a prospective customer and discover what your competitors state on the phone to her around prices. She may require to call from her house phone to avoid caller ID. As another choice you might have him/her call other assistants or paralegals at your competitors and offer to exchange your costs for their fees or you could do that with other lawyers yourself in your market. If you truly wish to enter it and have optimal information you can compose possibly a few dozen competitors in your market and state you are doing a charge study and if they would send you their cost list you will produce a composite list that does not identify those reacting and send them a copy of the results. To keep it basic for them consist of a stamped, self-addressed envelope with a list of the most common services used in your practice location. Now you will see what people are charging for services comparable to those you provide. You need to be able to come up with a variety of rates. Utilize this variety to set costs for your own services. My recommendation in law office marketing preparation is to charge at the 75% level of the list. So you need to be at or in the leading 25% of the charges.
Remember that in general it is not a great law practice management technique to contend on rate. Most possible clients will see pricing that is too low as a signal that there is something missing either from the service, the provider, or the company.
The Expense Technique in Law Practice Management Pricing
This law practice management prices technique is very simple truly. The most common error great site in law practice management utilizing this technique is to disregard to include some type of your cost.
OK, let me say it once again. In law practice management typically you count yourself out of the expenses and you need to include yourself in the expenses. Why? Typically you are doing at least a few of the technical work. Yes? Often you are doing at least a few of the Look At This management work. Yes? As the owner of the service you are due a reasonable earnings. Yes? If you are all three of these in one, you must think about one wage as due you for your time and proficiency as the service technician and manager in addition to a revenue of fifteen to thirty percent due you as the owner. Be sure to consist of a affordable cost for your technical and supervisory work in the expenses part of this formula.
Fixed Rate Technique in Law Practice Management Rates
This is the approach used by numerous vehicle mechanics (it is called "the flat rate book") and other service providers. This approach is where you identify a set rate for numerous jobs and charge that rate no matter what. If the mechanic invests less time than allotted for the task, he makes more. If he spends more time than allotted, he makes less. However in the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example utilizing this method is how managed health care has utilized this system with healthcare facilities and doctors . Lawyers can utilize this system if they prefer.
The "Rule of Three" in Law Practice Management Pricing
This " general rule" called the "rule of 3" used in law practice management is not what your CPA may inform you and it does not fail you either. Ask your CPA what they think of it and they will like it. To begin we are going to be believing in thirds. For the very first 3rd we will take the overall amount of salaries/bonuses (not advantages just wages-- advantages go into the second 3rd coming next) for the earnings generators and/or timekeepers (this includes you if you are producing earnings) and call that our first 3rd. So add up the incomes of the legal representatives, paralegals, and legal secretaries who create revenue or are timekeepers and call this your very first third (lets just state that number was $100,000 to keep it easy). Whatever that number is take that number my explanation again and it is your second 3rd 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 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 profits (another $100,000). What you need to do is take the overall quantity (in this example $300,000) and now find out just how much you should charge per billable hour, per repaired rate or the number of contingency fee cases won to be sure you hit the target we need to strike provided our first 3rd number times 3 (in this example $300,000).
This technique shows you how much per hour you need to charge. Considering that you understand how many billable hours each revenue generator can do per month, just 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 hit your targets you will be guaranteed of a 15% to 30% net make money from your operations. If you are the owner of the practice you are worthy of a reasonable profit as well don't you concur? This method is referred to as the Guideline of 3. , if this method is a bit too confusing do feel free to contact me and I will help you arrange it out in a few minutes on the phone.
It is a excellent idea to analyze all of these prices methods in determining your law practice management prices technique before setting a rate and continuing with a law firm marketing strategy to ensure you are completely checking out all choices. Keep in mind the propensity for many legal representatives is to price too low. Do not do that! In another post I will tell you how to talk to potential customers so you never ever have a problem getting the cost you deserve.