Law Practice Management-- How To Identify Your Fees
Identifying costs is a challenging law practice management job for most lawyers when believing through their law company marketing plans. In figuring out fees for specific services, lawyers frequently fall brief of what they should charge. Too lots of lawyers are scared of even charging the competitive cost for their services when making their law firm marketing strategies.
Prior to you sit down and start believing through your law practice management prices technique you need some differences around prices typically used in law company marketing planning. Do understand a law practice management law company marketing strategy is not efficient if you only draw in individuals who want to pay the most affordable cost for a service. Rather, you desire to focus your law practice management and law firm marketing plans on attracting clients who will end up being long term assets to the company.
There are essentially four ways of identifying how much you should be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Prices
This is one excellent way of figuring out 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 shopper" study by calling around as if he/she were a potential client and discover what your competitors say on the phone to her around rates. She may require 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 competitors and offer to exchange your costs for their fees or you could do that with other legal representatives yourself in your market. If you actually wish to enter it and have optimal information you can write maybe a few dozen competitors in your marketplace and state you are doing a charge study and if they would send you their fee list you will produce a composite list that does not identify those reacting and send them a copy of the results. To keep it simple for them include a stamped, self-addressed envelope with a list of the most common services used in your practice location. Now you will see what people are charging for services similar to those you use. You need to be able to create a series of prices. Use this variety to set rates for your own services. My suggestion in law firm marketing planning is to charge at the 75% level of the list. So you must be at or in the top 25% of the fees.
Keep in mind that in general it is not a excellent law practice management strategy to compete on price. The majority of possible clients will see prices that is too low as a signal that there is something missing either from the service, the service provider, or the company.
The Expense Method in Law Practice Management Prices
This law practice management pricing technique is very straightforward actually. One just determines what the expenses are to provide services or products and includes on a affordable profit, someplace between fifteen percent at the least and possibly thirty three percent at the most. The most typical mistake in law practice management utilizing this method is to overlook to include some type of your expense. Solo and small firm lawyers tend to not include their own income!
OK, let me say it again. In law practice management typically you count yourself out of the expenses and you need to include yourself in the expenses. Why? Frequently you are doing a minimum of some of the technical work. Yes? Often you are doing a minimum of a few of the management work. Yes? As the owner of business you are due a reasonable revenue. Yes? If you are all 3 of these in one, you must think about one wage as due you for your time and proficiency as the technician and supervisor in addition to a profit of fifteen to thirty percent due you as the owner. So be sure to include a affordable cost for your technical and managerial work in the costs part of this formula.
Fixed Rate Approach in Law Practice Management Prices
This is the method used by lots of auto mechanics (it is called "the flat rate book") and other company. This approach is where you figure out a set rate for numerous tasks and charge that rate no matter what. He makes more if the mechanic invests less time than allotted for the task. If he spends more time than allocated, he makes less. In the end, it all evens out (well, usually to the mechanics' favor if you ask me). Another example utilizing this method is how handled health care has used this system with medical professionals and health centers . If they prefer, lawyers can use this system.
The "Rule of Three" in Law Practice Management Pricing
This " general rule" called the "rule of 3" used in law practice management is not what your CPA may inform you and it does not fail you either. Ask your CPA what they consider it and they will like it. To begin we are going to be believing in thirds. For the very first 3rd we will take the total quantity of salaries/bonuses (not advantages simply wages-- benefits go into the second 3rd following) for the profits generators and/or timekeepers (this includes you if you are generating income) and call that our very first 3rd. Add up the wages of the legal representatives, paralegals, and legal secretaries who produce income or are timekeepers and call this your first third (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" (thus that 2nd 3rd is $100,000 and don't forget you if you are doing some handling partner type responsibilities since 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 earnings (another $100,000). What you require to do is take the overall quantity (in this example $300,000) and now determine how much you must charge per billable hour, per fixed rate or how numerous contingency charge cases won to be sure you hit the target we should strike offered our first 3rd number times 3 (in this example $300,000).
This approach reveals you just how much per hour you need to charge. Since you know how numerous billable hours each earnings generator can try here do monthly, 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 properly. As long as you strike 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 are worthy of a reasonable profit also don't you agree? This technique is called the Guideline of Three. , if this method is a bit too complicated do feel complimentary to call me and I will help you arrange it out in a couple of minutes on the phone.
It is a excellent concept to think through all of these rates approaches in determining your law practice management rates technique prior to setting a rate and moving ahead with a law firm marketing strategy to guarantee you are thoroughly exploring all choices. In another post I will tell you how to speak to potential clients so you never ever have a problem getting the charge you deserve.