Law Practice Management-- How To Identify Your Fees
When thinking through their law firm marketing strategies, determining charges is a challenging law practice management task for a lot of attorneys. In determining costs for particular services, lawyers typically fall short of what they need to charge. Too numerous attorneys hesitate of even charging the competitive cost for their services when making their law practice marketing plans. Further, they make the rates decisions frequently with no data or conceptual structure. Furthermore, instead of focusing their efforts on how they can justify getting leading dollar for what they provide, they charge a charge that is frequently way too low and frequently in fact can scare off possible clients who think there is something missing from a service that is "cheap". Furthermore lots of attorneys don't realize that a lot of purchasers in the marketplace by far are "value buyers" and not trying to find " inexpensive".
Before you sit down and start believing through your law practice management pricing method you require some differences around rates typically used in law company marketing planning. Do know a law practice management law company marketing plan is not reliable if you only draw in individuals who want to pay the lowest cost for a service. Rather, you want to focus your law practice management and law company marketing plans on bring in clients who will end up being long term assets to the company.
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 Approach In Law Practice Management Pricing
This is one great way of figuring out pricing. Get your assistant to support you in this law practice management task and invest some time discovering what the range of pricing is in the neighborhood. Have her do a "mystery buyer" research study by calling around as if he/she were a potential client and discover what your rivals state on the phone to her around pricing. She might need to call from her house phone to prevent caller ID. As another option you could have him/her call other assistants or paralegals at your competitors and provide to exchange your fees for their fees or you could do that with other lawyers yourself in your market. If you truly want to enter into it and have optimal data you can compose possibly a couple of lots rivals in your market and say you are doing a cost study and if they would send you their charge list you will develop a composite list that does not recognize those responding and send them a copy of the results. To keep it simple for them consist of a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. Now you will see what individuals are charging for services similar to those you offer. You ought to be able to create a variety of prices. Utilize this variety to set rates for your own services. My recommendation in law office marketing planning is to charge at the 75% level of the list. So you ought to be at or in the top 25% of the charges.
Remember that in basic it is not a great law practice management strategy to complete on cost. A lot of possible clients will see prices that is too low as a signal that there is something missing either from the service, the supplier, or the firm. And individuals who are looking for a low price will follow that low cost any place they can find it instead of becoming long-term clients. Be sure that your cost covers your expenses and a sensible profit margin.
The Expense Approach in Law Practice Management Pricing
This law practice management prices technique is really straightforward really. The most common mistake in law practice management utilizing this technique is to neglect to include some kind of your expense.
OK, let me Continued say it again. In law practice management frequently you count yourself out of the costs and you must include yourself in the expenditures. Why? Typically you are doing a minimum of a few of the technical work. Yes? Frequently you are doing a minimum of some of the management work. Yes? As the owner of the service you are due a sensible revenue. Yes? If you are all three of these in one, you must think about one income as due you for your time and proficiency as the professional and supervisor as well as a profit of fifteen to thirty percent due you as the owner. So be sure to include a sensible cost for your technical and managerial work in the expenditures part of this formula.
Fixed Rate Method in Law Practice Management Rates
This is the method used by many car mechanics (it is called "the flat rate book") and other service suppliers. This method is where you determine a set rate for numerous jobs and charge that rate no matter what. Another example utilizing this method is how managed health care has utilized this system with medical professionals and hospitals .
The "Rule of 3" in Law Practice Management Prices
This " guideline of thumb" called the " guideline of 3" used in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your Certified Public Accountant what they consider it and they will like it. To start we are going to be believing in thirds. For the very first 3rd we will take the total amount of salaries/bonuses (not advantages just wages-- advantages enter into the 2nd 3rd coming next) for the revenue generators and/or timekeepers (this includes you if you are generating profits) and call that our first 3rd. Include up the salaries of the attorneys, paralegals, and legal secretaries who produce profits or are timekeepers and call this your first 3rd (lets just state that number was $100,000 to keep it easy). Whatever that number is take that number once again and it is your second third which we will call your "overhead" ( therefore that 2nd 3rd is $100,000 and do not 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 3rd, which we will call gross earnings (another $100,000). What you need to do is take the total amount (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 hit the target we need to hit given our first 3rd number times three (in this example $300,000).
This technique reveals you how much per hour you require to charge. If you are the owner of the practice you should have a reasonable profit as well don't you agree? If this technique is a bit too confusing do feel complimentary to contact me and I will assist you sort it out in a few minutes on the phone.
It is a great concept to think through all of these prices techniques in determining your law practice management prices method before setting a price and continuing with a law office marketing plan to ensure you are thoroughly checking out all options. Remember the tendency for the majority of lawyers is to price too low. Do not do that! In another post I will inform you how to speak to prospective customers so you never have a problem getting the cost you deserve.