Law Practice Management-- How To Identify Your Fees
Determining fees is a difficult law practice management job for a lot of attorneys when analyzing their law office marketing strategies. In identifying fees for certain services, lawyers frequently disappoint what they should charge. A lot of attorneys are afraid of even charging the competitive rate for their services when making their law firm marketing plans. Even more, they make the pricing choices frequently without any data or conceptual structure. Furthermore, rather of focusing their efforts on how they can justify getting leading dollar for what they provide, they charge a fee that is frequently way too low and typically actually can frighten prospective customers who think there is something missing out on from a service that is "cheap". Additionally many lawyers do not recognize that the majority of purchasers in the market without a doubt are "value buyers" and not looking for " inexpensive".
Before you sit down and start thinking through your law practice management pricing method you need some differences around pricing typically used in law company marketing planning. Do know a law practice management law company marketing plan is not efficient if you just draw in people who desire to pay the most affordable fee for a service. Rather, you want to focus your law practice management and law company marketing strategies on attracting customers who will become long term assets to the company.
There are basically 4 methods of determining just how much you should be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Rates
This is one excellent way of identifying pricing. Get your assistant to support you in this law practice management job and spend some time finding what the variety of rates remains in the community. Have her do a " secret consumer" study by calling around as if he/she were a possible client and find out what your rivals say on the phone to her around prices. She may require to call from her home phone to prevent caller ID. As another choice you might have him/her call other assistants or paralegals at your competitors and use to exchange your charges for their costs or you could do that with other lawyers yourself in your market. If you actually wish to get into it and have optimal information you can write perhaps a couple of dozen competitors in your marketplace and state you are doing a charge study and if they would send you their charge list you will produce a composite list that does not recognize those responding and send them a copy of the results. To keep it basic for them include a stamped, self-addressed envelope with a list of the most common services offered in your practice area. Now you will see what people are charging for services similar to those you use. You ought to have the ability to come up with a variety of costs. Utilize this range to set rates for your own services. My suggestion in law firm marketing preparation is to charge at the 75% level of the list. So you need to be at or in the top 25% of the costs.
Keep in mind that in basic it is not a excellent law practice management technique to compete on go to my blog rate. A lot of possible customers 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 company. And people who are searching for a low price will follow that low rate wherever they can discover it rather than becoming long-term customers. Be sure that your price covers your costs and a sensible profit margin.
The Cost Approach in Law Practice Management Prices
This law practice management rates method is extremely uncomplicated truly. One just determines what the costs are to provide product and services and adds on a affordable earnings, someplace in between fifteen percent at the least and maybe thirty 3 percent at the most. The most common mistake in law practice management utilizing this technique is to overlook to include some kind of your expense. Solo and little company attorneys tend to not include their own income!
In law practice management frequently you count yourself out of the expenditures and you should include yourself in the expenses. Frequently you are doing at least some of the management work. If you are all three of these in one, you must think about one wage as due you for your time and competence as the specialist and manager as well as a profit of fifteen to thirty percent due you as the owner.
Fixed Rate Method in Law Practice Management Pricing
This is the technique used by lots of car mechanics (it is called "the flat rate book") and other service providers. This technique is where you identify a fixed rate for various tasks and charge that rate no matter what. Another example using this approach is how managed health care has actually used this system with health centers and physicians .
The " Guideline of Three" in Law Practice Management Prices
This " guideline" called the "rule of 3" used in law practice management is not what your Certified Public Accountant might inform you and it does not fail you either. Ask your CPA what they think of it and they will like it. To start we are going to be thinking in thirds. For the very first third we will take the overall amount of salaries/bonuses (not benefits simply salaries-- benefits enter into the 2nd third coming next) for the earnings generators and/or timekeepers (this includes you if you are generating profits) and call that our very first 3rd. Include up the wages of the legal representatives, paralegals, and legal secretaries who produce profits or are timekeepers and call this your very first 3rd (lets just say that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your second third which we will call your "overhead" ( therefore that 2nd 3rd is $100,000 and don't forget you find this if you are doing some managing partner type responsibilities because that part of your time goes here in overhead). Take that very same number and we will call that your last 3rd, which we will call gross profits (another $100,000). What you require to do is take the total amount (in this example $300,000) and now determine just how much you must charge per billable hour, per fixed rate or how numerous contingency cost cases won to be sure you hit the target we need to hit provided our first third number times 3 (in this example $300,000).
This technique shows you just how much per hour you require to charge. Because you know how many billable hours each revenue generator can do each month, just divide that into your total of all thirds ($300,000) to see what you require to charge check this per billable hour to make your numbers come out properly. As long as you hit 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 should have a fair earnings also don't you concur? This approach is called the Rule of Three. If this method is a bit too complicated do do not hesitate to call me and I will help you arrange it out in a few minutes on the phone.
It is a great idea to think through all of these pricing techniques in determining your law practice management pricing strategy before setting a price and moving ahead with a law firm marketing strategy to guarantee you are thoroughly exploring all alternatives. In another post I will tell you how to speak to possible clients so you never ever have a issue getting the cost you are worthy of.