Law Practice Management-- How To Identify Your Costs
Figuring out costs is a tough law practice management task for most attorneys when believing through their law firm marketing plans. In determining charges for certain services, lawyers often disappoint what they ought to charge. Too many lawyers hesitate of even charging the competitive cost for their services when making their law firm marketing strategies. Even more, they make the pricing decisions typically with no information or conceptual framework. Furthermore, 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 in fact can frighten possible clients who think there is something missing out on from a service that is " low-cost". In addition many lawyers don't recognize that a lot of buyers in the marketplace without a doubt are " worth purchasers" and not searching for " inexpensive".
Before you sit down and start thinking through your law practice management pricing technique you need some differences around prices commonly utilized in law firm marketing planning. Do know a law practice management law company marketing plan is not effective if you just attract people who want to pay the least expensive charge for a service. Rather, you want to focus your law practice management and law firm marketing plans on attracting clients who will become long term possessions to the firm.
There are generally four methods of determining just how much you should be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Rates
This is one excellent way of figuring out prices. Get your assistant to support you in this law practice management task and invest some time discovering what the variety of prices is in the community. Have her do a "mystery consumer" research study by calling around as if he/she were a possible client and discover out what your competitors state on the phone to her around prices. She might require to call from her home phone to avoid caller ID. As another choice you might have him/her call other assistants or paralegals at your rivals and use to exchange your costs for their costs or you might do that with other lawyers yourself in your market. If you actually want to enter into it and have maximum information you can compose perhaps a couple of dozen rivals in your marketplace and say you are doing a cost survey and if they would send you their charge list you will develop a composite list that does not identify those reacting 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 common services provided in your practice location. Now you will see what people are charging for services comparable to those you offer. You ought to have the ability to come up with a series of costs. Use this variety to set costs for your own services. My recommendation in law company marketing planning is to charge at the 75% level of the list. You should be at or in the top 25% of the charges.
Keep in mind that in general it is not a good law practice management method to complete on rate. The majority of potential clients will see pricing that is too low as a signal that there is something missing either from the service, the supplier, or the company.
The Cost Approach in Law Practice Management Pricing
This law practice management rates technique is very simple really. The most common mistake in law practice management using this technique is to neglect to include some type of your expense.
In law practice management typically you count yourself out of the expenses and you must include yourself in the expenditures. Frequently you are doing at least some of the management work. If you are all 3 of these in one, you need to consider one income as due you for your time and knowledge as the specialist and manager as well as a profit of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Pricing
This is the method used by lots of car mechanics (it is called "the flat rate book") and other service companies. This approach is where you determine a set rate for numerous jobs and charge that rate no matter what. He makes more if the mechanic invests less time than allotted for the task. He makes less if he invests more time than designated. In the end, it all evens out (well, generally to the mechanics' favor if you ask me). Another example utilizing this method is how managed health care has actually utilized this system with physicians and medical facilities . If they prefer, lawyers can utilize this system.
The "Rule of Three" in Law Practice Management Prices
This "rule of thumb" called the " guideline of 3" utilized in law practice management is not what your CPA may inform you and it does not fail you either. For the first 3rd we will take the total quantity of salaries/bonuses (not advantages simply wages-- benefits go into the second 3rd coming next) for the earnings generators and/or timekeepers (this includes you if you are generating revenue) and call that our first 3rd. What you require to do is take the total quantity (in this example $300,000) and now figure out how much you must charge per billable hour, per repaired rate or how numerous contingency fee cases won to be sure you hit the target we must hit given our first 3rd number times 3 (in this example $300,000).
This approach shows you how much per hour you need to charge. If you are the owner of the practice you deserve a reasonable earnings as well do not you see post concur? If this technique is a bit too complicated do feel free to contact me and I will help you sort it out in a couple of minutes on the phone.
It is a good concept to think through all of these pricing techniques in identifying your law practice management rates strategy prior to setting a cost and moving ahead with a law company marketing plan to ensure you are completely exploring all options. In another post I will inform you how to speak to potential clients so you never ever have a problem getting the cost you are worthy of.