Law Practice Management-- How To Determine Your Costs
Determining charges is a difficult law practice management task for the majority of attorneys when believing through their law company marketing plans. In figuring out charges for specific services, lawyers often fall brief of what they should charge. Too many lawyers are afraid of even charging the competitive price for their services when making their law company marketing plans.
Before you sit down and begin thinking through your law practice management rates strategy you require some differences around prices frequently utilized in law company marketing planning. Do know a law practice management law company marketing plan is not effective if you only draw in individuals who want to pay the least expensive charge for a service. Instead, you want to focus your law practice management and law firm marketing strategies on attracting clients who will end up being long term assets to the firm.
There are essentially 4 methods of determining just how much you need to be charging for your services. Lets move right into those now.
The Market Method In Law Practice Management Prices
This is one good way of determining rates. Get your assistant to support you in this law practice management job and invest a long time discovering what the series of prices remains in the community. Have her do a " secret shopper" study by calling around as if he/she were a possible client and discover what your competitors state on the phone to her around pricing. She may 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 costs for their charges or you could do that with other lawyers yourself in your market. If you truly want to get into it and have maximum information you can write maybe a few lots rivals in your marketplace and say you are doing a charge survey and if they would send you their fee list you will develop a composite list that does not recognize those responding and send them a copy of the outcomes. To keep it simple for them consist of a stamped, self-addressed envelope with a list of the most typical services used in your practice location. Now you will see what individuals are charging for services comparable to those you offer. You must have the ability to come up with a range of costs. Utilize this range to set prices for your own services. My suggestion in law office 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 method to complete on rate. Most potential clients will see pricing that is too low as a signal that there is something missing out on either from the service, the company, or the firm.
The Expense Technique in Law Practice Management Rates
This law practice management pricing technique is really uncomplicated really. The most common mistake in law practice management using this approach is to disregard to consist of some type of your expense.
In law practice management frequently you count yourself out of the expenditures and you must include yourself in the costs. Typically you are doing at least some of the management work. If you are all 3 of these in one, you must think about one income as due you for your time and competence as the professional and manager as well as a profit of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Rates
This is the approach used by lots of car mechanics (it is called "the flat rate book") and other provider. This approach is where you figure out a set rate for numerous tasks and charge that rate no matter what. If the mechanic spends less time than set aside for the task, he makes more. If he invests more time than allocated, he makes less. But in the end, everything evens out (well, typically to the mechanics' favor if you ask me). Another example utilizing this technique is how handled healthcare has used this system with healthcare facilities and medical professionals . Attorneys can use this system if they desire.
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. Ask your Certified Public Accountant what they consider it and they will like it. To start we are going to be thinking in thirds. For the first 3rd we will take the total quantity of salaries/bonuses (not benefits just wages-- benefits enter into the 2nd third following) for the income generators and/or timekeepers (this includes you if you are creating profits) and call that our very first third. So build up the wages of the lawyers, paralegals, and legal secretaries who produce earnings or are timekeepers and call this your first 3rd (lets simply say that number was $100,000 to keep it simple). Whatever that number is take that number once again and it is your second third which we will call your "overhead" ( therefore that second third 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). Take that 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 repaired rate or the number of contingency fee cases won to be sure you hit the target we should hit given 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 know the number of billable hours each income generator can do monthly, merely divide that into your total 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 strike your targets you will be ensured of a 15% to 30% net revenue from your operations. After all if you are the owner of the practice you are worthy of a fair earnings too don't you concur? This method is referred to as the Guideline of Three. If this method is a bit too complicated do feel complimentary to contact me and I will assist you sort it out in a few minutes on the phone.
It is a good concept to believe through all of these pricing techniques in determining your law practice management pricing strategy prior to setting a cost and continuing with Learn More Here a law office marketing strategy to guarantee you are thoroughly checking out all alternatives. Remember the tendency for a lot of attorneys is to price too low. Do not do that! In another article I will tell you how to speak to prospective clients so you never ever have a issue getting the charge you should have.