Law Practice Management-- How To Determine Your Costs
Figuring out charges is a difficult law practice management job for most lawyers when believing through their law firm marketing strategies. In figuring out fees for particular services, attorneys frequently fall short of what they must charge. Too numerous attorneys are afraid of even charging the competitive cost for their services when making their law firm marketing strategies.
Before you sit down and begin thinking through your law practice management rates method you require some distinctions around prices typically utilized in law firm 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 lowest charge for a service. Rather, you desire to focus your law practice management and law company marketing strategies on attracting clients who will end up being long term properties to the company.
There are essentially four methods of determining how much you need to be charging for your services. Lets move right into those now.
The Market Technique In Law Practice Management Rates
Get your assistant to support you in this law practice management job and invest some time finding what the range 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 recommendation in law company marketing planning is to charge at the 75% level of the list.
Keep in mind that in basic it is not a good law practice management strategy to compete on price. A lot of prospective clients will see rates that is too low as a signal that there is something missing either from the service, the service provider, or the company.
The Cost Approach in Law Practice Management Prices
This law practice management pricing method is extremely uncomplicated really. The most common mistake in law practice management using this method is to neglect to consist of some type of your cost.
OK, let me say it again. In law practice management frequently you count yourself out of the costs and you ought to include yourself in the expenses. Why? Frequently you are doing a minimum of 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 reasonable profit. Yes? If you are all 3 of these in one, you ought to consider one salary as due you for your time and competence as the specialist and supervisor along with a earnings of fifteen to thirty percent due you as the owner. So make certain to consist of a reasonable cost for your technical his comment is here and supervisory work in the costs part of this formula.
Fixed Rate Technique in Law Practice Management Prices
This is the method utilized by many car mechanics (it is called "the flat rate book") and other company. This method is where you identify a set rate for different tasks and charge that rate no matter what. If the mechanic spends less time than set aside for the task, he makes more. He makes less if he invests more time than allotted. In the end, it all evens out (well, generally to the mechanics' favor if you ask me). Another example using this technique is how managed health care has used this system with hospitals and medical professionals . If they want, legal representatives can use this system.
The " Guideline of Three" in Law Practice Management Rates
This " general rule" called the "rule of 3" utilized in law practice management is not what your CPA may tell you and it does not fail you either. Ask your Certified Public Accountant 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 simply salaries-- benefits go into the 2nd 3rd coming next) for the profits generators and/or timekeepers (this includes you if you are creating profits) and call that our very first 3rd. So add up the wages of the lawyers, paralegals, and legal secretaries who create earnings or are timekeepers and call this your first third (lets simply say that number was $100,000 to keep it simple). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" ( hence that second third is $100,000 and do not forget you if you are doing some managing 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 earnings (another $100,000). What you need to do is take the total quantity (in this example $300,000) and now find out just how much you need to charge per billable hour, per repaired rate or the number of contingency charge cases won to be sure you hit the target we need to strike given our very first 3rd number times 3 (in this example $300,000).
This method shows you how much per hour you need to charge. If you are the owner of the practice you should have a reasonable revenue as well don't you agree? If this method is a bit too complicated do feel free to call me and I will assist you arrange it out in a couple of minutes on the phone.
It is a excellent idea to believe through all of these pricing methods in determining your law practice management prices strategy before setting a price and moving ahead with a law firm marketing plan to ensure you are completely checking out all alternatives. Keep in mind the propensity for the majority of legal representatives is to price too low. Do not do that! In another post I will inform you how to talk to prospective clients so you never have a problem getting the cost you deserve.