Law Practice Management-- How To Determine Your Costs
Determining costs is a difficult law practice management task for most attorneys when believing through their law company marketing strategies. In figuring out costs for specific services, attorneys frequently fall short of what they must charge. Too lots of lawyers are afraid of even charging the competitive price for their services when making their law firm marketing plans.
Prior to you sit down and begin believing through your law practice management pricing technique you need some distinctions around rates commonly used in law company marketing preparation. Do know a law practice management law company marketing strategy is not effective if you only bring in people who desire to pay the most affordable cost for a service. Rather, you desire to focus your law practice management and law company marketing plans on attracting customers who will become long term possessions to the firm.
There are essentially four ways of identifying just how much you must be charging for your services. Lets move right into those now.
The Marketplace Approach 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 invest a long time finding what the variety of prices is in the neighborhood. Have her do a " secret buyer" study by calling around as if he/she were a potential client and discover what your competitors state on the phone to her around pricing. She may need 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 charges for their charges or you might do that with other legal representatives yourself in your market. If you really want to enter into it and have maximum data you can compose perhaps a few dozen competitors 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 determine those responding and send them a copy of the results. To keep it simple 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 people are charging for services similar to those you provide. You must have the ability to create a variety of costs. Use this variety to set costs for your own services. My suggestion in law office marketing preparation is to charge at the 75% level of the list. You must be at or in the leading 25% of the costs.
Remember that in general it is not a good law practice management strategy to contend on cost. The majority of possible customers will see pricing that is too low as a signal that there is something missing either from the service, the supplier, or the company. And individuals who are trying to find a low cost will follow that low cost any place they can find it rather than becoming long-term customers. Be sure that your cost covers your costs and a affordable earnings margin.
The Cost Technique in Law Practice Management Rates
This law practice management pricing approach is extremely uncomplicated actually. One merely identifies what the costs are to deliver services or products and adds on a sensible profit, someplace between fifteen percent at the least and perhaps thirty 3 percent at the most. The most common error in law practice management utilizing this method is to overlook to consist of some type of official statement your cost. Solo and small firm lawyers tend to not include their own wage!
In law practice management often you count yourself out of the expenses and you need to include yourself in the expenses. Often you are doing at least some of the management work. If you are all three of these in one, you ought to consider one income as due you for your time and proficiency as the specialist and manager as well as a profit of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Rates
This is the approach used by numerous automobile mechanics (it is called "the flat rate book") and other provider. This approach is where you determine a fixed rate for various tasks and charge that rate no matter what. He makes more if the mechanic invests less time than allocated for the job. He makes less if he spends more time than allocated. But in the end, everything evens out (well, typically to the mechanics' favor if you ask me). Another example using this technique is how handled healthcare has utilized this system with medical facilities and medical professionals . If they want, lawyers can use this system.
The " Guideline of Three" in Law Practice Management Prices
This "rule of thumb" called the "rule of 3" used in law practice management is not what your Certified Public Accountant might inform you and it does not fail you either. For the very first 3rd we will take the total amount of salaries/bonuses (not advantages simply salaries-- advantages go into the 2nd third coming next) for the revenue generators and/or timekeepers (this includes you if you are creating earnings) and call that our first third. What you require 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 lots of contingency fee cases won to be sure you hit the target we must strike given our first 3rd number times 3 (in this example go right here $300,000).
This technique reveals you how much per hour you need to charge. Considering that you understand how lots of billable hours each revenue generator can do per month, merely divide that into your overall 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 assured of a 15% to 30% net earnings from your operations. After all if you are the owner look what i found of the practice you are worthy of a fair revenue also don't you concur? This approach is called the Rule of 3. , if this method is a bit too complicated do feel free to call me and I will help you arrange it out in a few minutes on the phone.
It is a great concept to think through all of these pricing techniques in identifying your law practice management pricing technique prior to setting a price and moving ahead with a law firm marketing strategy to guarantee you are thoroughly exploring all alternatives. In another post I will tell you how to speak to prospective clients so you never ever have a issue getting the charge you should have.