Law Practice Management-- How To Identify Your Costs
Figuring out costs is a difficult law practice management job for the majority of lawyers when thinking through their law firm marketing plans. In determining costs for specific services, attorneys often fall brief of what they must charge. Too many attorneys are scared of even charging the competitive cost for their services when making their law firm marketing strategies.
So before you sit down and start believing through your law practice management prices strategy you need some distinctions around pricing typically used in law practice marketing planning. Then include your pricing technique to your law firm marketing strategies. You need to be sure that you are charging a enough fee on everything to ensure you a excellent profit not just a excellent living. Do understand a law practice management law practice marketing plan is ineffective if you only bring in people who desire to pay the least expensive charge for a service. These are not faithful 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 properties to the company. Low cost clients are not developing your base of long term clients I can guarantee you that.
There are basically 4 ways of determining how much you should be charging for your services. Lets move right into those now.
The Marketplace Method 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 job and invest some time finding what the range of rates is in the community. Have her do a " secret shopper" study by calling around as if he/she were a prospective customer and find out what your rivals state on the phone to her around prices. She may need to call from her house phone to avoid caller ID. As another alternative you might have him/her call other assistants or paralegals at your competitors and use to exchange your charges for their costs or you could do that with other legal representatives yourself in your market. If you truly wish to get into it and have optimal information you can compose possibly a couple of lots rivals in your marketplace and state 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 responding and send them a copy of the outcomes. To keep it simple for them include a stamped, self-addressed envelope with a list of the most common services provided in your practice location. Now you will see what people are charging for services similar to those you provide. You must have the ability to come up with a series of rates. Utilize this variety to set prices for your own services. My recommendation in law practice marketing planning is to charge at the 75% level of the list. So you must be at or in the leading 25% of the charges.
Keep in mind that in general it is not a excellent law practice management strategy to complete on cost. Many potential 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 trying to find a low price will follow that low rate any place they can discover it rather than ending up being long-term customers. Be sure that your cost covers your expenses and a affordable earnings margin.
The Expense Method in Law Practice Management Prices
This law practice management pricing technique is really straightforward truly. One just identifies what the expenses are to deliver services or products and adds on a sensible revenue, someplace in between fifteen percent at the least and possibly thirty 3 percent at the most. The most common mistake in law practice management using this method is to overlook to consist of some type of your expense. Solo and small company lawyers tend to not include their own salary!
In law practice management typically you count yourself out of the costs and you ought to include yourself in the costs. Typically 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 salary as due you for your time and proficiency as the service technician and supervisor as well as a profit of fifteen to thirty percent due you as this post the owner.
Fixed Rate Technique in Law Practice Management Rates
This is the approach used by numerous auto mechanics (it is called "the flat rate book") and other provider. This technique is where you identify a set rate for different tasks and charge that rate no matter what. If the mechanic spends less time than allocated for the task, he makes more. If he invests more time than designated, he makes less. But in the end, everything evens out (well, normally to the mechanics' favor if you ask me). Another example using this technique is how managed health care has used this system with healthcare facilities and medical professionals . If they desire, legal representatives can use this system.
The "Rule of Three" in Law Practice Management Prices
This " guideline" called the "rule of 3" utilized in law practice management is not what your CPA might inform you and it does not fail you either. Ask your CPA what they consider it and they will like it. To start we are going to be thinking in thirds. For the first third we will take the total quantity of salaries/bonuses (not advantages simply salaries-- benefits go into the 2nd 3rd following) for the profits generators and/or timekeepers (this includes you if you are producing profits) and call that our very first third. So build up the wages of the lawyers, paralegals, and legal secretaries who generate revenue or are timekeepers and call this your 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 3rd which we will call your "overhead" (thus that second 3rd 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 3rd, 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 figure out how much you must charge per billable hour, per fixed rate or the number of contingency cost cases won to be sure you struck the target we should strike provided our very first third number times three (in this example $300,000).
This approach shows you how much per hour you require to charge. Given that you know how many billable hours each revenue generator can do each 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 correctly. As long as you strike your targets you will be guaranteed of a 15% to 30% net benefit from your operations. If you are the owner of the practice you deserve a fair earnings as well don't you concur? This method is referred to as the Rule of 3. If this technique is a bit too complicated do do not hesitate to call me and I will help you arrange it out in a few minutes on the phone.
It is a excellent concept to believe through all of these rates methods 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 completely exploring all options. In another article I will inform you how to speak to possible customers so you never ever have a problem getting the charge you are worthy of.