Law Practice Management-- How To Identify Your Costs
When thinking through their law firm marketing plans, figuring out costs is a tough law practice management task for many lawyers. In identifying costs for particular services, lawyers often disappoint what they should charge. When making their law firm marketing plans, too many lawyers are scared of even charging the competitive cost for their services. Further, they make the prices choices often with no data or conceptual framework. In addition, rather of focusing their efforts on how they can justify getting top dollar for what they offer, they charge a charge that is typically way too low and typically in fact can scare off potential clients who think there is something missing from a service that is " inexpensive". Furthermore numerous attorneys don't recognize that the majority of buyers in the market without a doubt are " worth purchasers" and not trying to find " inexpensive".
Prior to you sit down and begin thinking through your law practice management pricing technique you require some differences around pricing typically utilized in law company marketing preparation. Do understand a law practice management law company marketing strategy is not reliable if you just bring in individuals who want to pay the most affordable fee for a service. Instead, you desire to focus your law practice management and law company marketing strategies on bring in customers who will end up being long term assets to the firm.
There are essentially 4 methods of figuring out how much you must be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Rates
This is one good way of determining pricing. Get your assistant to support you in this law practice management job and invest some time discovering what the series of pricing remains in the neighborhood. Have her do a "mystery shopper" study by calling around as if he/she were a potential customer and learn what your competitors state on the phone to her around rates. She might need to call from her home phone to prevent caller ID. As another choice you could have him/her call other assistants or paralegals at your rivals and use to exchange your charges for their fees or you might do that with other legal representatives yourself in your market. If you truly wish to enter it and have maximum data you can compose maybe a couple of dozen competitors in your market and say you are doing a cost study and if they would send you their fee list you will develop a composite list that does not determine those reacting and send them a copy of the results. To keep it basic for them include a stamped, self-addressed envelope with a list of the most common services used in your practice area. Now you will see what individuals are charging for services similar to those you use. You ought to have the ability to develop a variety of costs. Utilize this range to set rates for your own services. My recommendation in law company marketing planning is to charge at the 75% level of the list. So you need to be at or in the top 25% of the costs.
Remember that in basic it is not a excellent law practice management strategy to contend on rate. Many prospective customers will see pricing that is too low as a signal that there is something missing either from the service, the supplier, or the firm. And people who are searching for a low cost will follow that low rate any place they can find it instead of ending up being long-lasting customers. So make certain that your price covers your costs and a reasonable earnings margin.
The Expense Technique in Law Practice Management Pricing
This law practice management prices technique is really simple actually. The most common error in law practice management utilizing this technique is to neglect to include some kind of your cost.
OK, let me state it once again. In law practice management frequently you count yourself out of the expenses and you must include yourself in the expenses. Why? Typically you are doing at least a few of the technical work. Yes? Often you are doing a minimum of some of the management work. Yes? As the owner of business you are due a sensible earnings. Yes? If you are all three of these in one, you need to consider one wage as due you for your time and knowledge as the technician and manager as well as a revenue of fifteen to thirty percent due you as the owner. So make certain to include a sensible expense for your supervisory and technical operate in the expenses part of this formula.
Fixed Rate Method in Law Practice Management Prices
This is the technique used by lots of automobile mechanics (it is called "the flat rate book") and other service companies. This method is where you figure out a set rate for various tasks and charge that rate no matter what. Another example using this method is how handled health care has used this system with health centers and physicians .
The " Guideline of Three" in Law Practice Management Prices
This " general rule" called the " guideline of three" utilized in law practice management is not what your CPA may tell you and it does not fail you either. redirected here Ask your Certified Public Accountant what they think of it and they will like it. To start we are going to be thinking in thirds. For the very first 3rd we will take the total quantity of salaries/bonuses (not benefits just wages-- benefits enter into the second 3rd coming next) for the profits generators and/or timekeepers (this includes you if you are generating earnings) and call that our very first third. Include up the wages of the lawyers, paralegals, and legal secretaries who produce earnings or are timekeepers and call this your first third (lets simply state that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( hence that second third is $100,000 and don't forget you if you are doing some handling partner type duties since that part of your time goes here in overhead). Then take that very 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 total amount (in this example $300,000) and now determine just how much you need to charge per billable hour, per fixed rate or how many contingency charge cases won to be sure you hit the target we should strike provided our first third number times three (in this example $300,000).
This technique shows you just how much per hour you require to charge. Considering that you understand the number of billable hours each revenue generator can do each 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 correctly. As long as you hit your targets you will be ensured of a 15% to 30% net make money from your operations. After all if you are the owner of the practice you deserve a reasonable profit too don't you concur? This approach is called the Guideline of Three. If this approach is a bit too confusing do do not hesitate to call me and I will help you arrange it out in a couple of minutes on the phone.
It is a excellent concept to believe through all of these rates approaches in determining your law practice management pricing strategy before setting a price and moving ahead with a law firm marketing plan to ensure you are thoroughly checking out all alternatives. In another post I will inform you how to speak to possible clients so you never ever have a issue getting the cost you should have.