Law Practice Management-- How To Determine Your Fees
Determining fees is a tough law practice management job for a lot of lawyers when thinking through their law company marketing strategies. In identifying fees for certain services, lawyers typically fall short of what they need to charge. Too lots of lawyers are afraid of even charging the competitive price for their services when making their law firm marketing plans.
So prior to you sit down and begin thinking through your law practice management pricing strategy you need some distinctions around prices typically utilized in law company marketing preparation. Add your rates method to your law firm marketing strategies. You require to be sure that you are charging a sufficient charge on whatever to ensure you a good profit not just a good living. Do understand a law practice management law firm marketing plan is ineffective if you just draw in individuals who want to pay the most affordable charge for a service. These are not devoted customers. Instead, you wish to focus your law practice management and law company marketing strategies on attracting clients who will end up being long term possessions to the firm. Low cost clients are not constructing your base of long term customers I can promise you that.
There are essentially four methods of figuring out just how much you must be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
This is one great way of identifying prices. Get your assistant to support you in this law practice management job and spend a long time finding what the variety of prices is in the community. Have her do a "mystery buyer" study by calling around as if he/she were a potential client and learn what your rivals say on the phone to her around rates. She might require to call from her house phone to prevent caller ID. As another choice you could have him/her call other assistants or paralegals at your rivals and provide to exchange your costs for their fees or you might do that with other attorneys yourself in your market. If you truly want to get into it and have optimal data you can compose perhaps a few dozen competitors in your marketplace and state you are doing a cost survey and if they would send you their fee list you will create a composite list that does not identify those reacting and send them a copy of the outcomes. To keep it simple for them consist of a stamped, self-addressed envelope with a list of the most typical services provided in your practice location. Now you will see what individuals are charging for services similar to those you offer. You should be able to develop a variety of prices. Utilize this variety to set prices for your own services. My suggestion in law practice marketing planning is to charge at the 75% level of the list. So you need to be at or in the top 25% of the charges.
Remember that in basic it is not a great law practice management strategy to compete on cost. 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 supplier, or the firm.
The Cost Approach in Law Practice Management Rates
This law practice management rates technique is really uncomplicated really. One just identifies what the costs are to deliver services or items and adds on a reasonable earnings, somewhere in between fifteen percent at the least and maybe thirty 3 percent at the most. The most common mistake in law practice management using this approach is to overlook to consist of some type of your expenditure. Solo and small company lawyers tend to not include their own income!
OK, let me say it again. In law practice management frequently you count yourself out of the expenditures and you must include yourself in the expenditures. Why? Frequently you are doing at least 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 revenue. Yes? If you are all 3 of these in one, you should think about one wage as due you for your time and competence as the professional and supervisor as well as a profit of fifteen to thirty percent due you as the owner. So be sure to include a sensible expense for your managerial and technical work in the expenditures part of this formula.
Fixed Rate Approach in Law Practice Management Prices
This is the method used by many car mechanics (it is called "the flat rate book") and other service suppliers. This approach is where you identify a set rate for various tasks and charge that rate no matter what. Another example utilizing this method is how managed health care has utilized this system with hospitals and physicians .
The "Rule of 3" in Law Practice Management Prices
This " guideline" called the "rule of 3" utilized in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your CPA what they consider 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 total quantity of salaries/bonuses (not benefits just salaries-- benefits go into the second 3rd following) for the earnings generators and/or timekeepers (this includes you if you are generating revenue) and call that our very first third. So build up the salaries of the attorneys, paralegals, and legal secretaries who produce income or are timekeepers and call this your very first third (lets just say that number was $100,000 to keep it basic). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" ( hence that 2nd third is $100,000 and don't forget you if you are doing some handling partner type tasks 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 profits (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now determine just how much you must charge per billable hour, per fixed rate or the number of contingency fee cases won to be sure you struck the target we should strike provided our first third number times three (in this example $300,000).
This approach reveals you how much per hour you require to charge. Given that you understand how numerous billable hours each profits generator can do monthly, just divide that into your total of all thirds ($300,000) to see what you require to charge per billable hour to make your numbers come out properly. As long as you hit your targets you will be assured of a 15% to 30% net benefit from your operations. If you are the owner of the practice you are worthy of a reasonable revenue as well don't you agree? This approach is called the Rule of 3. If this technique is a bit too complicated do do not hesitate to contact me and I will help you arrange it out in a couple of look at this website minutes on the phone.
It is a excellent idea to analyze all of these pricing approaches in determining your law practice management prices strategy before setting a price and continuing with a law office marketing strategy to guarantee you are thoroughly checking out all options. Keep in mind the propensity for many lawyers is to price too low. Don't do that! In another short article I will inform you how to talk to potential customers so you never have a issue getting the fee you are worthy of.