Law Practice Management-- How To Determine Your Fees
Determining charges is a difficult law practice management task for a lot of lawyers when thinking through their law practice marketing strategies. In figuring out costs for particular services, lawyers often fall short of what they ought to charge. When making their law company marketing strategies, too many attorneys are afraid of even charging the competitive cost for their services. Further, they make the pricing decisions often without any data or conceptual structure. Furthermore, instead of focusing their efforts on how they can justify getting leading dollar for what they provide, they charge a charge that is frequently way too low and frequently actually can frighten potential customers who believe there is something missing from a service that is " low-cost". Furthermore many lawyers don't realize that the majority of purchasers in the marketplace without a doubt are " worth purchasers" and not trying to find "cheap".
So prior to you take a seat and begin thinking through your law practice management rates method you require some distinctions around pricing frequently used in law office marketing preparation. Then add your rates method 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. If you only bring in individuals who desire to pay the least expensive charge for a service, do understand a law practice management law firm marketing plan is not efficient. These are not devoted clients. Rather, you desire to focus your law practice management and law office marketing intend on bring in customers who will become long term possessions to the firm. Low rate customers are not building your base of long term customers I can promise you that.
There are basically 4 methods of figuring out 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 great way of figuring out prices. Get your assistant to support you in this law practice management job and invest some time discovering what the variety of rates remains in the neighborhood. Have her do a " secret buyer" research study by calling around as if he/she were a prospective customer and learn what your competitors say on the phone to her around rates. She may need to call from her house phone to avoid caller ID. As another alternative you could have him/her call other assistants or paralegals at your competitors and use to exchange your costs for their charges or you could do that with other attorneys yourself in your market. If you actually wish to get into it and have optimal data you can write possibly a few lots competitors in your market and say you are doing a fee study and if they would send you their fee list you will create a composite list that does not identify those responding and send them a copy of the results. To keep it easy for them consist of 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 comparable to those you provide. You must be able to come up with a variety of prices. Utilize this range to set costs for your own services. My recommendation in law practice marketing planning is to charge at the 75% level of the list. So you must be at or in the leading 25% of the charges.
Keep in mind that in basic it is not a good law practice management technique to compete on cost. Many prospective customers will see prices that is too low as a signal that there is something missing out on either from the service, the provider, or the company.
The Expense Technique in Law Practice Management Rates
This law practice management rates approach is really straightforward really. One just identifies what the costs are to deliver services or items and includes on a reasonable earnings, someplace in between fifteen percent at the least and maybe thirty 3 percent at the most. The most typical error in law practice management utilizing this approach is to disregard to include some form of your expense. Solo and little firm lawyers tend to not include their own salary!
OK, let me state it once again. In law practice management frequently you count yourself out of the costs and you need to include yourself in the costs. Why? Frequently you are doing a minimum of a few of the technical work. Yes? Often you are doing a minimum of a few of the management work. Yes? As the owner of the service you are due a reasonable profit. Yes? If you are all three of these in one, you need to think about one income as due you for your time and competence as the service technician and supervisor as well as a profit of fifteen to thirty percent due you as the owner. So make certain to include a sensible expense for your technical and supervisory work in the costs part of this formula.
Fixed Rate Method in Law Practice Management Prices
This is the approach utilized by numerous vehicle mechanics (it is called "the flat rate book") and other service providers. This approach is where you determine a fixed rate for different tasks and charge that rate no matter what. Another example using this approach is how handled health care has used this system with health centers and doctors .
The " Guideline of 3" in Law Practice Management Rates
This " guideline of thumb" called the " guideline of 3" used in law practice management is not what your CPA might tell you and it does not fail you either. Ask your Certified Public Accountant what they consider it and they will like it. To start we are going to be believing in thirds. For the first third we will take the total amount of salaries/bonuses (not advantages simply salaries-- benefits go into the second third following) for the revenue generators and/or timekeepers (this includes you if you are creating income) and call that our very first 3rd. Include up the incomes of the legal representatives, paralegals, and legal secretaries who create profits or are timekeepers and call this your first third (lets just state that number was $100,000 to keep it basic). 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 do not forget you if you are doing some handling partner type duties 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 need to do is take the overall amount (in this example $300,000) and now figure out just how YOURURL.com much you should charge per billable hour, per repaired rate or the number of contingency fee cases won to be sure you struck the target we should strike provided our very first third number times three (in this example $300,000).
This method reveals you just how much per hour you need to charge. Because you know the number of billable hours each revenue generator can do per month, just divide that into your total of all thirds ($300,000) to see what you need to charge 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 make money from your operations. After all if you are the owner of the practice you are worthy of a reasonable revenue also do not you concur? This method is called the Guideline of 3. If this approach is a bit too complicated do feel complimentary to call me and I will assist you sort it out in a few minutes on the phone.
It is a good idea to believe through all of these pricing approaches in determining your law practice management pricing technique prior to setting a price and moving ahead with a law firm marketing strategy to ensure you are completely checking out all options. In another short article I will inform you how to speak to possible customers so you never ever have a problem getting the fee you deserve.