Law Practice Management-- How To Determine Your Fees
Determining charges is a challenging law practice management task for most attorneys when believing through their law company marketing strategies. In identifying fees for certain services, lawyers frequently fall short of what they ought to charge. Too many lawyers are scared of even charging the competitive rate for their services when making their law company marketing plans.
Prior to you sit down and start believing through your law practice management pricing strategy you require some distinctions around prices typically used in law company marketing planning. Do know a law practice management law firm marketing plan is not effective if you only draw in people who want to pay the lowest cost for a service. Rather, you desire to focus your law practice management and law company marketing strategies on bring in customers who will end up being long term possessions to the company.
There are essentially 4 methods of identifying just how much you must be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Rates
This is one excellent way of figuring out rates. Get your assistant to support you in this law practice management job and spend some time discovering what the variety of prices remains in the neighborhood. Have her do a " secret consumer" study by calling around as if he/she were a prospective customer and discover what your competitors state on the phone to her around rates. She may need to call from her house phone to prevent caller ID. As another choice you could have him/her call other assistants or paralegals at your competitors 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 get into it and have optimal data you can write possibly a few lots rivals in your marketplace and state you are doing a cost study and if they would send you their charge list you will create a composite list that does not identify those reacting and send them a copy of the results. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. Now you will see what people are charging for services comparable to those you offer. You must be able to create a variety of rates. Use this variety to set rates 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 top 25% of the charges.
Keep in mind that in basic it is not a good law practice management technique 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 provider, or the firm. And people who are searching for a low rate will follow that low rate wherever they can find it rather than becoming long-term clients. So make sure that your rate covers your expenses and a affordable earnings margin.
The Expense Approach in Law Practice Management Prices
This law practice management rates method is very straightforward really. One just determines what the expenses are to deliver product and services and includes on a reasonable earnings, somewhere in between fifteen percent at the least and perhaps thirty 3 percent at the most. The most common mistake in law practice management utilizing this approach is to disregard to consist of some type of your cost. Solo and small company lawyers tend to not include their own salary!
OK, let me say it again. In law practice management typically you count yourself out of the costs and you ought to 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 affordable revenue. Yes? If you are all 3 of these in one, you must consider one wage as due you for your time and expertise as the technician and manager along with a revenue of fifteen to thirty percent due you as the owner. So be sure to include a sensible expense for your technical and supervisory work in the expenditures part of this formula.
Fixed Rate Approach in Law Practice Management Pricing
This is the technique utilized by many vehicle mechanics (it is called "the flat rate book") and other service suppliers. This approach is where you identify a set rate for various tasks and charge that rate no matter what. Another example using this technique is how handled health care has used this system with medical facilities and physicians .
The "Rule of 3" in Law Practice Management Pricing
This " general rule" called the "rule of three" used in law practice management is not what your CPA might inform you and it does not fail you either. Ask your Certified Public Accountant what they believe about 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 quantity of salaries/bonuses (not advantages just incomes-- benefits go into the 2nd 3rd coming next) for the revenue generators and/or timekeepers (this includes you if you are generating revenue) and call that our very first third. Include up the salaries of the legal representatives, paralegals, and legal secretaries who create earnings or are timekeepers and call this your first 3rd (lets just 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" ( 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). Take that very 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 total amount (in this example $300,000) and now determine how much you need to charge per billable hour, per repaired rate or the number of contingency cost cases won to be sure you struck the target we must hit given our very first third number websites times 3 (in this example $300,000).
This method shows you how much per hour you need to charge. If you are the owner of the practice you should have a fair profit as well do not you concur? If this technique is a bit too complicated do feel complimentary to call me and I will assist you arrange it out in a few minutes on the phone.
It is a excellent idea to believe through all of these prices approaches in identifying your law practice management pricing strategy prior to setting a cost and moving ahead with a law practice marketing plan to ensure you are thoroughly checking out all choices. Keep in mind the tendency for a lot of lawyers is to price too low. Do not do that! In another post I will tell you how to speak to prospective clients so you never have a problem getting the fee you are worthy of.