Figuring out fees is a tough law practice management task for most lawyers when analyzing their law practice marketing strategies. In identifying costs for specific services, attorneys typically fall short of what they must charge. When making their law firm marketing strategies, too many attorneys are scared of even charging the competitive rate for their services. Further, they make the prices choices often with no information or conceptual structure. Furthermore, rather of focusing their efforts on how they can justify getting top dollar for what they use, they charge a cost that is often way too low and frequently actually can frighten possible clients who think there is something missing from a service that is " inexpensive". In addition many lawyers don't recognize that most purchasers in the marketplace without a doubt are " worth purchasers" and not trying to find " low-cost".
So prior to you sit down and start thinking through your law practice management rates strategy you need some distinctions around prices typically used in law office marketing planning. Then add your pricing strategy to your law practice marketing strategies. You require to be sure that you are charging a adequate fee on everything to guarantee you a excellent earnings not simply a excellent living. If you only attract individuals who want to pay the lowest charge for a service, do know a law practice management law firm marketing strategy is not efficient. These are not loyal customers. Instead, you wish to focus your law practice management and law company marketing intend on attracting clients who will end up being long term properties to the firm. Low rate clients are not building your base of long term clients I can promise you that.
There are essentially four methods of determining how much you ought to be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Rates
This is one excellent method of identifying rates. Get your assistant to support you in this law practice management task and spend some time finding what the series of prices is in the community. Have her do a "mystery consumer" study by calling around as if he/she were a possible client and discover what your rivals say on the phone to her around rates. She might require to call from her home phone to avoid caller ID. As another option you could have him/her call other assistants or paralegals at your rivals and offer to exchange your costs for their charges or you might do that with other legal representatives yourself in your market. If you actually wish to enter it and have maximum information you can write possibly a couple of lots rivals in your market and state you are doing a fee survey and if they would send you their fee list you will develop a composite list that does not recognize those responding and send them a copy of the outcomes. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services provided in your practice area. Now you will see what people are charging for services comparable to those you use. You need to have the ability to create a series of prices. Use this range to set rates for your own services. My suggestion in law practice marketing preparation is to charge at the 75% level of the list. You must be at or in the top 25% of the charges.
Keep in mind that in general it is not a great law practice management method to complete on price. A lot of potential clients will see prices that is too low as a signal that there is something missing out on either from the service, the service provider, or the firm. And individuals who are looking for a low cost will follow that low cost any place they can find it rather than becoming long-lasting clients. Be sure that your price covers your expenses and a reasonable revenue margin.
The Expense Technique in Law Practice Management Rates
This law practice management rates method is very uncomplicated really. One simply determines what the expenses are to deliver product and services and adds on a reasonable earnings, somewhere in between fifteen percent at the least and possibly thirty 3 percent at the most. The most common mistake in law practice management using this method is to overlook to include some type of your cost. Solo and small company lawyers tend to not include their own income!
In law practice management frequently you count yourself out of the expenditures and you should include yourself in the expenses. Often you are doing at least some of the management work. If you are all three of these in one, you need to consider one wage as due you for your time and proficiency as the specialist and manager as well as a earnings of fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Rates
This is the method used by lots of car mechanics (it is called "the flat rate book") and other service providers. This method is where you figure out a fixed rate for numerous tasks and charge that rate no matter what. If the mechanic spends less time than allocated for the job, he makes more. He makes less if he invests more time than designated. But in the end, all of it levels (well, original site 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 healthcare facilities . If they want, lawyers can use this system.
The "Rule of 3" in Law Practice Management Prices
This "rule of thumb" called the " guideline of 3" utilized in law practice management is not what your CPA may tell you and it does not fail you either. Ask your CPA what they believe about it and they will like it. To begin we are going to be believing in thirds. For the very first third we will take the total amount of salaries/bonuses (not advantages simply incomes-- advantages enter into the 2nd third following) for the income generators and/or timekeepers (this includes you if you are generating earnings) and call that our first 3rd. So accumulate the salaries of the attorneys, paralegals, and legal secretaries who generate revenue or are timekeepers and call this your first third (lets just say that number was $100,000 to keep it simple). Whatever that number is take that number again and it is your second 3rd which we will call your "overhead" ( therefore that second 3rd is $100,000 and don't forget you if you are doing some managing partner type responsibilities because that part of your time goes here in overhead). Take that very 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 total amount (in this example $300,000) and now find out how much you must charge per billable hour, per repaired rate or the number of contingency fee cases won to be sure you struck the target we must hit provided our very first 3rd number times three (in this example $300,000).
This approach shows you how much per hour you need to charge. Given that you understand the number of billable hours each earnings generator can do per month, merely 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 correctly. As long as you hit your targets you will be ensured of a 15% to 30% net benefit from your operations. If you are the owner of the practice you are worthy of a fair earnings as well don't you concur? This technique is called the Rule of 3. If this approach is a bit too confusing do do not hesitate to call me and I will assist you arrange it out in a few minutes on the phone.
It is a great concept to think through all of these prices approaches in determining your law practice management pricing method prior to setting a rate and moving ahead with a law firm marketing strategy to ensure you are completely checking out all alternatives. In another post I will inform you how to speak to potential clients so you never have a problem getting the cost you deserve.