Law Practice Management-- How To Determine Your Fees
When thinking through their law firm marketing strategies, identifying charges is a hard law practice management task for most attorneys. In figuring out fees for certain services, attorneys typically disappoint what they need to charge. Too lots of attorneys hesitate of even charging the competitive price for their services when making their law practice marketing strategies. Further, they make the prices choices frequently with no information or conceptual framework. In addition, rather of focusing their efforts on how they can validate getting top dollar for what they provide, they charge a cost that is often way too low and frequently in fact can scare off prospective clients who think there is something missing from a service that is " inexpensive". In addition lots of lawyers do not recognize that a lot of buyers in the marketplace by far are " worth purchasers" and not trying to find " low-cost".
So before you take a seat and begin believing through your law practice management pricing method you require some distinctions around rates commonly used in law office marketing preparation. Add your pricing technique to your law firm marketing strategies. You need to be sure that you are charging a enough charge on everything to guarantee you a excellent profit not just a great living. Do understand a law practice management law practice marketing strategy is ineffective if you just attract people who want to pay the most affordable cost for a service. These are not faithful clients. Instead, you desire to focus your law practice management and law office marketing strategies on attracting clients who will become long term properties to the company. Low price customers are not building your base of long term clients I can promise you that.
There are generally 4 methods of determining just how much you should be charging for your services. Lets move right into those now.
The Marketplace Method In Law Practice Management Pricing
This is one great way of identifying rates. Get your assistant to support you in this law practice management task and invest a long time discovering what the series of prices remains in the neighborhood. Have her do a " secret shopper" study by calling around as if he/she were a prospective client and discover what your rivals say on the phone to her around prices. She might need to call from her house phone to avoid caller ID. As another alternative you might have him/her call other assistants or paralegals at your rivals and provide to exchange your fees for their charges or you might do that with other legal representatives yourself in your market. If you actually want to enter into it and have maximum information you can write maybe a few lots competitors 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 identify those responding and send them a copy of the results. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most typical services provided in your practice location. Now you will see what people are charging for services comparable to those you offer. You should be able to create a variety of costs. Use this range to set rates for your own services. My suggestion in law office marketing preparation is to charge at the 75% level of the list. You should be at or in the leading 25% of the charges.
Remember that in general it is not a great law practice management method to compete on cost. A lot of prospective customers will see rates that is too low as a signal that there is something missing out on either from the service, the service provider, or the firm.
The Expense Technique in Law Practice Management Prices
This law practice management rates approach is extremely simple actually. The most typical mistake in law practice management using this method is to neglect to include some form of your expense.
OK, let me state it once again. In law practice management often you count yourself out of the expenses and you must include yourself in the expenditures. Why? Typically you are doing a minimum of a few of the technical work. Yes? Frequently you are doing at least some of the management work. Yes? As the owner of the business you are due a affordable earnings. Yes? If you are all 3 of these in one, you need to consider one wage as due you for your time and proficiency as the technician and manager along with a profit of fifteen to thirty percent due you as the owner. So make certain to consist of a reasonable expense for your managerial and technical operate in the expenditures part of this formula.
Fixed Rate Method in Law Practice Management Pricing
This is the method utilized by many car mechanics (it is called "the flat rate book") and other provider. This method is where you identify a set rate for different tasks and charge that rate no matter what. He makes more if the mechanic invests less time than allocated for the job. 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 handled healthcare has actually used this system with doctors and medical facilities . If they want, lawyers can use this system.
The " Guideline of Three" in Law Practice Management Prices
This "rule of thumb" called the " guideline of 3" used in law practice management is not what your Certified Public Accountant might tell 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 thinking in thirds. For the very first 3rd we will take the overall quantity of salaries/bonuses (not advantages simply incomes-- benefits go into the 2nd third coming next) for the earnings generators and/or timekeepers (this includes you if you are generating revenue) and call that our very first 3rd. So build up the salaries of the legal representatives, paralegals, and legal secretaries who produce revenue or are timekeepers and call this your very 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 second third which we will call your "overhead" ( hence that second third is $100,000 you could look here and do not forget you if you are doing some handling partner type responsibilities since that part of your time goes here in overhead). Then take that 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 overall amount (in this example $300,000) and now figure out 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 hit provided our first 3rd number times try these out three (in this example $300,000).
This technique shows you just how much per hour you need to charge. Since you understand the number of billable hours each profits generator can do per 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 hit 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 deserve a fair revenue as well don't you agree? This technique is known 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 arrange it out in a few minutes on the phone.
It is a good idea to analyze all of these rates methods in determining your law practice management rates method prior to setting a rate and continuing with a law company marketing strategy to ensure you are thoroughly exploring all choices. Remember the propensity for most attorneys is to price too low. Don't do that! In another article I will inform you how to talk to prospective clients so you never have a issue getting the fee you deserve.