Law Practice Management-- How To Identify Your Costs
When thinking through their law company marketing plans, determining costs is a challenging law practice management task for the majority of lawyers. In figuring out charges for specific services, attorneys frequently fall short of what they need to charge. A lot of attorneys are afraid of even charging the competitive price for their services when making their law practice marketing plans. Further, they make the prices decisions typically without any information or conceptual structure. In addition, rather of focusing their efforts on how they can justify getting top dollar for what they provide, they charge a cost that is often way too low and often in fact can frighten possible clients who believe there is something missing from a service that is "cheap". In addition lots of attorneys don't realize that many buyers in the market by far are "value purchasers" and not looking for "cheap".
Before you sit down and start thinking through your law practice management pricing method you require some differences around prices typically used in law company marketing preparation. Then include your prices strategy to your law office marketing strategies. You need to be sure that you are charging a enough charge on everything to ensure you a great profit not simply a great living. Do understand a law practice management law office marketing plan is ineffective if you only bring in individuals who wish to pay the most affordable cost for a service. These are not devoted customers. Instead, you wish to focus your law practice management and law company marketing strategies on drawing in customers who will become long term properties to the firm. Low price clients are not developing your base of long term customers I can guarantee you that.
There are essentially 4 ways of identifying just how much you ought to be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Prices
Get your assistant to support you in this law practice management task and spend some time discovering what the variety of prices is in the neighborhood. To keep it basic for them consist of a stamped, self-addressed envelope with a list of the most typical services used in your practice area. My recommendation in law firm marketing preparation is to charge at the 75% level of the list.
Remember that in basic it is not a good law practice management method to complete on cost. Many potential customers will see rates that is too low as a signal that there is something missing out on either from the service, the provider, or the firm.
The Cost Approach in Law Practice Management Rates
This law practice management pricing technique is really simple truly. The most typical mistake in law practice management using this technique is to neglect to include some kind of your expenditure.
OK, let me say it once again. In law practice management typically you count yourself out of the expenditures and you should include yourself in the expenditures. Why? Often you are doing a minimum of a few of the technical work. Yes? Often you are doing at least a few of the management work. Yes? As the owner of business you are due a reasonable profit. Yes? If you are all 3 of these in one, you need to consider one salary as due you for your time and expertise as the service technician and manager along with a profit of fifteen to thirty percent due you as the owner. Be sure to include a sensible cost for your technical and managerial work in the expenditures part of this formula.
Fixed Rate Approach in Law Practice Management Pricing
This is the technique utilized by many car mechanics (it is called "the flat rate book") and other company. This approach is where you identify a fixed rate for different tasks and charge that rate no matter what. He makes more if the mechanic spends less time than set aside for the task. If he invests more time than allocated, he makes less. In the end, it all evens out (well, typically to the mechanics' favor if you ask me). Another example using this technique is how managed healthcare has actually used this system with medical facilities and medical professionals . If they desire, legal representatives can use this system.
The "Rule of Three" in Law Practice Management Rates
This " guideline" called the " guideline of three" used in law practice management is not what your CPA may tell you and it does not fail you either. Ask your Certified Public Accountant what they think of it and they will like it. To begin we are going to be believing in thirds. For the first 3rd we will take the overall amount of salaries/bonuses (not advantages just salaries-- benefits enter into the 2nd 3rd coming next) for the income generators and/or timekeepers (this includes you if you are producing income) and call that our first third. Add up the salaries of the lawyers, paralegals, and legal secretaries who produce profits or are timekeepers and call this your very first third (lets just say that number was $100,000 to keep it easy). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" ( hence that 2nd 3rd is $100,000 and do not forget you if you are doing some managing partner type tasks since that part of your time goes here in overhead). Then take that same number and we will call that your last 3rd, which we will call gross earnings (another $100,000). What you require to do is take the total amount (in this example $300,000) and now find useful source out just how much you need to charge per billable hour, per repaired rate or the number of contingency charge 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 fair profit as well do not you agree? If this approach is a bit too complicated do feel free to contact me and I will help you sort it out in a few minutes on the phone.
It is a excellent concept to think through all of these pricing methods in determining your law practice management pricing strategy before setting a rate and continuing with a law office marketing strategy to ensure you are thoroughly checking out all alternatives. Keep in mind the tendency for most legal representatives is to price too low. Don't do that! In another post I will inform you how to talk to possible customers so you never have a issue getting the fee you deserve.