Determining costs is a hard law practice management task for most lawyers when thinking through their law company marketing plans. In identifying fees for certain services, lawyers often fall brief of what they must charge. Too lots of lawyers are scared of even charging the competitive price for their services when making their law company marketing plans.
Before you sit down and begin thinking through your law practice management pricing strategy you need some distinctions around prices commonly utilized in law company marketing planning. Do know a law practice management law firm marketing strategy is not effective if you only attract individuals who desire to pay the most affordable cost for a service. Rather, you want to focus your law practice management and law company marketing plans on bring in clients who will become long term properties to the company.
There are basically four methods of figuring out just how much you ought to be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Pricing
Get your assistant to support you in this law practice management task and invest some time discovering what the variety of rates is in the neighborhood. To keep it simple for them consist of a stamped, self-addressed envelope with a list of the most common services used in your practice location. My recommendation in law company marketing preparation is to charge at the 75% level of the list.
Remember that in general it is not a excellent law practice management method to compete on rate. Most potential clients 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 firm. And people who are trying to find a low rate will follow that low price wherever they can find it rather than becoming long-term clients. Be sure that your rate covers your expenses and a affordable profit margin.
The Cost Method in Law Practice Management Rates
This law practice management prices approach is really uncomplicated truly. The most typical error in law practice management using this method is to neglect to consist of some type of your expenditure.
OK, let me say it again. In law practice management frequently you count yourself out of the costs and you need to include yourself in the costs. Why? Often you are doing at least some of the technical work. Yes? Frequently you are doing at least a few of the management work. Yes? As the owner of business you are due a reasonable earnings. Yes? If you are all three of these in one, you should think about one income as due you for your time and proficiency as the technician and manager in addition to a earnings of fifteen to thirty percent due you as the owner. Be sure to include a affordable expense for your supervisory and technical work in the expenditures part of this formula.
Fixed Rate Technique in Law Practice Management Prices
This is the approach utilized by many car mechanics (it is called "the flat rate book") and other service companies. This technique is where you figure out a set rate for numerous tasks and charge that rate no matter what. He makes more if the mechanic invests less time than set aside for the task. He makes less if he invests more time than designated. In the end, it all evens out (well, normally to the mechanics' favor if you ask me). Another example using this technique is how managed health care has used this system with healthcare facilities and physicians . Lawyers can utilize this system if they want.
The "Rule of 3" in Law Practice Management Prices
This " general rule" called the " guideline of 3" used in law practice management is not what your CPA 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 believing in thirds. For the first 3rd we will take the overall amount of salaries/bonuses (not advantages just wages-- benefits enter into the second 3rd coming next) for the earnings generators and/or timekeepers (this includes you if you are producing earnings) and call that our first 3rd. Add up the incomes of the legal representatives, paralegals, and legal secretaries who produce profits or are timekeepers and call this your first third (lets just state 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 don't forget you if internet you are doing some managing partner type responsibilities because that 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 profits (another $100,000). What you need to do is take the total amount (in this example $300,000) and now determine how much you should charge per billable hour, per fixed rate or how numerous contingency charge cases won to be sure you hit the target we must hit given our very first 3rd number times 3 (in this example $300,000).
This approach reveals you how much per hour you require to charge. Considering that you know how numerous billable hours each earnings generator can do monthly, just divide that into your overall 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 assured of a 15% to 30% net earnings from your operations. If you are the owner of the practice you deserve a reasonable profit as well do not you agree? This technique is referred to as the Rule of 3. If this technique is a bit too confusing do feel totally free to call me and I will help you sort it out in a couple of minutes on the phone.
It is a excellent concept to think through all of these prices approaches in determining your law practice management rates strategy prior to setting a cost and moving ahead with a law company marketing plan to guarantee you are completely exploring all choices. In another post I will tell you how to speak to possible clients so you never ever have a problem getting the cost you are worthy of.