Law Practice Management-- How To Identify Your Costs
Figuring out costs is a difficult law practice management job for most attorneys when thinking through their law practice marketing plans. In identifying costs for specific services, attorneys typically disappoint what they must charge. Too many lawyers are scared of even charging the competitive rate for their services when making their law practice marketing strategies. Even more, they make the pricing choices typically without any data or conceptual framework. In addition, rather of focusing their efforts on how they can justify getting top dollar for what they offer, they charge a cost that is typically way too low and typically actually can frighten potential customers who believe there is something missing from a service that is " low-cost". Furthermore many lawyers don't recognize that the majority of purchasers in the marketplace by far are " worth buyers" and not looking for "cheap".
So prior to you sit down and start analyzing your law practice management rates technique you need some distinctions around pricing typically utilized in law practice marketing preparation. Then add your prices method to your law office marketing strategies. You need to be sure that you are charging a sufficient fee on everything to guarantee you a good revenue not just a great living. Do understand a law practice management law company marketing strategy is not reliable if you only attract people who wish to pay the most affordable charge for a service. These are not devoted clients. Instead, you wish to focus your law practice management and law company marketing plans on drawing in clients who will become long term assets to the firm. Low rate clients are not developing your base of long term customers I can guarantee you that.
There are basically four methods of determining how much you need to be charging for your services. Lets move right into those now.
The Marketplace Approach In Law Practice Management Pricing
Get your assistant to support you in this law practice management task and invest some time finding what the variety of prices is in the community. To keep it easy for them include a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. My suggestion in law firm marketing planning is to charge at the 75% level of the list.
Remember that in basic it is not a excellent law practice management technique to contend on cost. Many prospective customers will see pricing that is too low as a signal that there is something missing either from the service, the provider, or the company.
The Expense Method in Law Practice Management Prices
This law practice management pricing technique is extremely simple actually. One just identifies what the costs are to deliver services or products and includes on a sensible revenue, somewhere between fifteen percent at the least and possibly thirty 3 percent at the most. The most common mistake in law practice management utilizing this method is to overlook to consist of some form of your expense. Solo and small company lawyers tend to not include their own income!
OK, let me say it once again. In law practice management typically you count yourself out of the expenses and you ought to include yourself in the expenses. Why? Often you are doing at least a few of the technical work. Yes? Frequently you are doing a minimum of some of the management work. Yes? As the owner of business you are due a sensible revenue. Yes? If you are all 3 of these in one, you need to consider one wage as due you for your time and competence as the technician and supervisor in addition to a revenue of fifteen to thirty percent due you as the owner. So make certain to include a affordable cost for your technical and supervisory work in the expenses part of this formula.
Fixed Rate Method in Law Practice Management Rates
This is the technique used by lots of car mechanics (it is called "the flat rate book") and other company. This approach is where you identify a set rate for different jobs and charge that rate no matter what. He makes more if the mechanic invests less time than allocated for the task. He makes less if he spends more time than allocated. However in the end, everything levels (well, normally to the mechanics' favor if you ask me). Another example utilizing this approach is how managed health care has actually utilized this system with physicians and hospitals . If they desire, attorneys can utilize this system.
The "Rule of Three" in Law Practice Management Pricing
This " guideline" called the " guideline of 3" used in law practice management is not what your Certified Public Accountant may tell you and it does not fail you either. Ask your CPA what they think of it and they will like it. To begin we are going to be thinking in thirds. For the very first 3rd we will take the total amount of salaries/bonuses (not benefits just salaries-- advantages enter into the second third coming next) for the income generators and/or timekeepers (this includes you if you are creating profits) and call that our very first third. Include up the salaries of the lawyers, paralegals, and legal secretaries who produce revenue or are timekeepers and call this your first third (lets just state that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your 2nd 3rd which we will call your "overhead" ( therefore that second 3rd is $100,000 and do not forget you if you are doing some handling partner type tasks because that news part of your time goes here in overhead). Then take that very same number and we will call that your last 3rd, which we will call gross revenues (another $100,000). What you need 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 repaired rate or how many contingency charge cases won to be sure you struck the target we need to strike offered our very first 3rd number times three (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 are worthy of a reasonable earnings as well do not you agree? If this method is a bit too confusing do feel free to contact me and I will help you arrange it out in a couple of minutes on the phone.
It is a excellent idea to believe through all of these pricing techniques in identifying your law practice management pricing technique before setting a cost and moving ahead with a law company marketing strategy to ensure you are thoroughly exploring all choices. In another short article I will inform you how to speak to possible clients so you never have a issue getting the charge you should have.