Law Practice Management-- How To Determine Your Charges
Identifying fees is a difficult law practice management task for a lot of attorneys when believing through their law practice marketing strategies. In figuring out charges for particular services, attorneys typically disappoint what they must charge. A lot of attorneys are scared of even charging the competitive rate for their services when making their law practice marketing strategies. Further, they make the pricing choices often with no data or conceptual framework. In addition, instead of focusing their efforts on how they can validate getting leading dollar for what they offer, they charge a fee that is frequently way too low and typically actually can frighten possible clients who believe there is something missing from a service that is "cheap". Additionally numerous attorneys do not recognize that the majority of purchasers in the marketplace by far are "value purchasers" and not trying to find "cheap".
Prior to you sit down and start thinking through your law practice management pricing technique you need some differences around prices frequently used in law firm marketing planning. Do know a law practice management law company marketing plan is not efficient if you just bring in people who desire to pay the most affordable charge for a service. Rather, you want to focus your law practice management and law company marketing strategies on bring in clients who will become long term possessions to the company.
There are essentially four ways of determining how much you should be charging for your services. Lets move right into those now.
The Marketplace 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 invest a long time discovering what the series of pricing remains in the community. Have her do a " secret shopper" study by calling around as if he/she were a prospective customer and find out 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 alternative you might have him/her call other assistants or paralegals at your competitors and offer to exchange your costs for their charges or you might do that with other attorneys yourself in your market. If you truly want to enter it and have maximum information you can write maybe a few dozen competitors in your market and state you are doing a cost study and if they would send you their fee list you will create a composite list that does not determine those reacting and send them a copy of the outcomes. To keep it easy 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 individuals are charging for services similar to those you provide. You ought to be able to come up with a variety of rates. Use 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 ought to be at or in the top 25% of the costs.
Remember that in basic it is not a good law practice management method to contend on price. Most possible clients will see rates that is too low as a signal that there is something missing out on either from the service, the company, or the firm.
The Cost Method in Law Practice Management Pricing
This law practice management prices approach is extremely straightforward truly. The most typical mistake in law practice management utilizing this approach is to neglect to include some form of your cost.
In law practice management frequently you count yourself out of the costs and you ought to include yourself try these out in the expenses. Typically you are doing at least some of the management work. If you are all 3 of these in one, you should think about one wage as due you for your time and know-how as the specialist and manager as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Pricing
This is the approach used by many car mechanics (it is called "the flat rate book") and other service suppliers. 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 set aside for the task. He makes less if he spends more time than designated. In the end, it all evens out (well, typically to the mechanics' favor if you ask me). Another example using this approach is how handled healthcare has actually used this system with medical facilities and physicians . Legal representatives can utilize this system if they desire.
The " Guideline of Three" in Law Practice Management Prices
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 think of it and they will like it. To start we are going to be believing in thirds. For the very first third we will take the overall amount of salaries/bonuses (not benefits simply incomes-- benefits go into the 2nd third following) for the income generators and/or timekeepers (this includes you if you are creating revenue) and call that our very first 3rd. So build up the salaries of the attorneys, paralegals, and legal secretaries who generate revenue or are timekeepers and call this your first 3rd (lets just state that number was $100,000 to keep it basic). Whatever that number is take that number again and it is your 2nd third which we will call your "overhead" ( therefore that 2nd third is $100,000 and do not forget you if you are doing some handling partner type responsibilities 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 earnings (another $100,000). What you need to do is take the total quantity (in this example $300,000) and now figure out just how much you should charge per billable hour, per fixed rate or how lots of contingency cost cases won to be sure you hit the target we should strike given our first 3rd number times three (in this example $300,000).
This approach reveals you how much per hour you require to charge. If you are the owner of the practice you deserve a reasonable revenue as well do not you concur? If this approach is a bit too confusing do feel complimentary to contact me and I will help you sort it out in a couple of minutes on the phone.
It is a excellent idea to analyze all of these rates approaches in identifying your law practice management pricing method prior to setting a rate and moving ahead with a law firm marketing strategy to ensure you are thoroughly checking out all options. Remember the propensity for many lawyers is to price too low. Do not do that! In another post I will tell you how to speak with possible clients so you never have a issue getting the fee you are worthy of.