Law Practice Management-- How To Determine Your Costs
When thinking through their law firm marketing strategies, identifying costs is a challenging law practice management task for most attorneys. In figuring out costs for specific services, attorneys often disappoint what they should charge. A lot of lawyers hesitate of even charging the competitive cost for their services when making their law practice marketing plans. Further, they make the rates decisions frequently without any information or conceptual framework. In addition, rather of focusing their efforts on how they can justify getting leading dollar for what they use, they charge a fee that is typically way too low and frequently actually can terrify off possible customers who believe there is something missing out on from a service that is " inexpensive". In addition many lawyers do not recognize that the majority of purchasers in the marketplace by far are "value purchasers" and not trying to find " inexpensive".
Before you sit down and start believing through your law practice management pricing method you need some distinctions around pricing typically used in law firm marketing planning. Add your prices method to your law firm marketing plans. You need to be sure that you are charging a enough cost on everything to ensure you a excellent earnings not simply a good living. Do know a law practice management law company marketing plan is ineffective if you just bring in people who desire to pay the most affordable charge for a service. These are not loyal customers. Instead, you desire to focus your law practice management and law company marketing intend on drawing in clients who will become long term properties to the company. Low rate clients are not building your base of long term clients I can guarantee you that.
There are basically 4 methods of figuring out just how much you must be charging for your services. Lets move right into those now.
The Market 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 task and spend a long time discovering what the range of rates remains in the community. Have her do a "mystery buyer" research study by calling around as if he/she were a prospective client and learn what your rivals say on the phone to her around pricing. She might require to call from her home phone to prevent caller ID. As another alternative you could have him/her call other assistants or paralegals at your rivals and offer to exchange your charges for their fees or you could do that with other lawyers yourself in your market. If you really desire to enter into it and have maximum data you can compose maybe a couple of dozen competitors in your marketplace and state you are doing a charge study and if they would send you their cost list you will develop a composite list that does not determine 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 typical services provided in your practice location. Now you will see what people are charging for services comparable to those you provide. You should be able to come up with a variety of prices. Utilize this range to set rates for your own services. My suggestion in law office marketing preparation is to charge at the 75% level of the list. You need to be at or in the leading 25% of the costs.
Remember that in basic it is not a great law practice management method to compete on cost. Most prospective customers 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 firm. And people who are trying to find a low cost will follow that low rate any place they can discover it instead of becoming long-term customers. So make certain that your cost covers your expenses and a affordable earnings margin.
The Cost Technique in Law Practice Management Pricing
This law practice management pricing method is really uncomplicated truly. The most common error in law practice management utilizing this method is to neglect to consist of some type of your cost.
In law practice management typically you count yourself out of the costs and you need to include yourself in the expenditures. Often you are doing at least some of the management work. official website If you are all three of these in one, you need to consider one income as due you for your time and proficiency as the professional and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Pricing
This is the technique used by lots of vehicle mechanics (it is called "the flat rate book") and other service companies. This technique is where you determine a fixed rate for various tasks and charge that rate no matter what. Another example using this method is how managed health care has actually used this system with hospitals and medical professionals .
The "Rule of 3" 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 tell you and it does not fail you either. Ask your Certified Public Accountant what they think of it and they will like it. To begin we are going to be thinking in thirds. For the very first 3rd we will take the overall amount of salaries/bonuses (not benefits just wages-- benefits enter into the second third following) for the earnings generators and/or timekeepers (this includes you if you are creating profits) and call that our first 3rd. Add up the wages of the lawyers, paralegals, and legal secretaries who generate earnings or are timekeepers and call this your first third (lets just say that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your second third which we will call your "overhead" ( therefore that 2nd 3rd is $100,000 and don't forget you if you are doing some handling partner type tasks because that part of your time goes here in overhead). Then take that same number and we will call that your last third, which we will call gross revenues (another $100,000). What you require to do is take the overall amount (in this example $300,000) and now determine just how much you must charge per billable hour, per repaired rate or the number of contingency charge cases won to be sure you hit the target we must strike provided our first third number times three (in this example $300,000).
This approach shows you just how much per hour you require to charge. Since you understand how many billable hours each profits generator can do per month, simply 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 properly. As long as you hit your targets you will be assured of a 15% to 30% net benefit from your operations. After all if you are the owner of the practice you should have a reasonable revenue as well do not you concur? This technique is referred to as the Guideline of 3. , if this method is a bit too complicated do feel free to call me and I will help you sort it out in a few minutes on the phone.
It is a excellent concept to analyze all of these pricing methods in identifying your law practice management pricing strategy before setting a rate and continuing with a law office marketing plan to ensure you are thoroughly checking out all alternatives. Remember the propensity for the majority of legal representatives 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 issue getting the cost you Discover More Here deserve.