Identifying charges is a tough law practice management job for many lawyers when believing through their law company marketing strategies. In figuring out costs for particular services, lawyers typically fall short of what they must charge. Too lots of lawyers are afraid of even charging the competitive rate for their services when making their law company marketing strategies.
Prior to you sit down and begin thinking through your law practice management prices strategy you require some distinctions around pricing frequently used in law company marketing planning. Do understand a law practice management law firm marketing strategy is not efficient if you only draw in people who desire to pay the lowest cost for a service. Instead, you desire to focus your law practice management and law company marketing strategies on drawing in customers who will become long term assets to the company.
There are generally four methods of figuring out just how much you should be charging for your services. Lets move right into those now.
The Marketplace Technique In Law Practice Management Rates
This is one excellent way of determining prices. Get your assistant to support you in this law practice management task and spend a long time discovering what the series of rates is in the community. Have her do a "mystery shopper" study by calling around as if he/she were a prospective customer and discover what your rivals say on the phone to her around pricing. She might need to call from her home phone to avoid caller ID. As another alternative you might have him/her call other assistants or paralegals at your rivals and offer to exchange your charges for their charges or you could do that with other attorneys yourself in your market. If you really wish to enter it and have optimal data you can write possibly a couple of dozen competitors in your marketplace and say you are doing a cost study and if they would send you their fee list you will develop a composite list that does not identify those responding and send them a copy of the outcomes. To keep it basic for them include a stamped, self-addressed envelope with a list of the most common services used in your practice location. Now you will see what individuals are charging for services comparable to those you provide. You must have the ability to create a series of costs. Utilize this variety to set rates for your own services. My suggestion in law office marketing preparation is to charge at the 75% level of the list. So you need to be at or in the leading 25% of the costs.
Keep in mind that in basic it is not a great law practice management strategy to complete on price. A lot of possible clients will see pricing that is too low as a signal that there is something missing out on either from the service, the company, or the firm.
The Cost Technique in Law Practice Management Pricing
This law practice management rates technique is very straightforward actually. The most typical mistake in law practice management using this technique is to disregard to consist of some type of your cost.
In law practice management typically you count yourself out of the expenses and you must include yourself in the expenditures. Typically you are doing at least some of the management work. If you are all 3 of these in one, you need to consider one income as due you for your time and competence as the technician and supervisor as well as a revenue of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Pricing
This is the method used by numerous auto mechanics (it is called "the flat rate book") and other service companies. This approach is where you determine a fixed rate for numerous jobs and charge that rate no matter what. Another example utilizing this approach is how managed health care has used this system with doctors and hospitals .
The "Rule of Three" in Law Practice Management Pricing
This " general rule" called the "rule of three" used in law practice management is not what your CPA may inform you and it does not fail you either. Ask your CPA what they consider it and they will like it. To begin we are going to be believing in thirds. For the first third we will take the overall amount of salaries/bonuses (not benefits just wages-- advantages enter into the second 3rd following) for the earnings generators and/or timekeepers (this includes you if you are generating income) and call that our first 3rd. Include up the salaries of the lawyers, paralegals, and legal secretaries who generate revenue or are timekeepers and call this your very first third (lets just state that number was $100,000 to keep it easy). Whatever that number is take that number again and it is your second 3rd which we will call your "overhead" (thus that second third is $100,000 and don't forget you if you are doing some handling partner type tasks because that part of your time goes here in overhead). 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 just how much you need to charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you struck the target we should strike given our very first 3rd number times 3 (in this example $300,000).
This approach reveals you how much per hour you need to charge. Because you know how many billable hours each earnings generator can do each 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 strike your targets you will be guaranteed of a 15% to 30% net make money from your operations. If you are the owner of the practice you should have a fair profit as well do not you agree? This useful reference method is referred to as the Rule of 3. , if this approach is a bit too complicated 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 think through all of these prices approaches in determining your law practice management pricing method prior to setting a cost and moving ahead with a law company marketing plan to ensure you are completely exploring all choices. In another post I will inform you how to speak to potential clients so you never have a problem getting the cost you should have.