Identifying costs is a difficult law practice management task for a lot of attorneys when thinking through their law company marketing plans. In identifying costs for specific services, lawyers frequently fall short of what they should charge. Too numerous attorneys are scared of even charging the competitive rate for their services when making their law company marketing plans.
Prior to you sit down and start believing through your law practice management prices method you require some distinctions around pricing frequently utilized in law company marketing preparation. Do understand a law practice management law firm marketing plan is not reliable if you just bring in people who want to pay the lowest fee for a service. Rather, you desire to focus your law practice management and law company marketing strategies on attracting customers who will end up being long term assets to the firm.
There are basically 4 methods of figuring out just how much you need to be charging for your services. Lets move right into those now.
The Market Method In Law Practice Management Prices
Get your assistant to support you in this law practice management task and spend some time finding what the variety of pricing 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 offered in your practice location. My recommendation in law company marketing preparation is to charge at the 75% level of the list.
Remember that in basic it is not a good law practice management technique to complete on price. The majority of prospective customers will see pricing that is too low as a signal that there is something missing out on either from the service, the supplier, or the firm.
The Expense Approach in Law Practice Management Pricing
This law practice management prices approach is really simple actually. The most typical error in law practice management utilizing this approach is to neglect to include some form of your expense.
OK, let me say it again. In law practice management often you count yourself out of the expenses and you ought to include yourself in the expenses. Why? Frequently you are doing a minimum of some of the technical work. Yes? Typically you are doing a minimum of a few of the management work. Yes? As the owner of the organisation you are due a reasonable profit. Yes? If you are all three of these in one, you must consider one salary as due you for your time and know-how as the service technician and manager along with a earnings of fifteen to thirty percent due you as the owner. So make certain to include a reasonable expense for your technical and managerial operate in the costs part of this formula.
Fixed Rate Method in Law Practice Management Prices
This is the approach used by many car mechanics (it is called "the flat rate book") and other service providers. This method is where you identify a set rate for numerous tasks and charge that rate no matter what. If the mechanic invests less time than set aside for the check that task, he makes more. He makes less if he invests more time than allocated. But in the end, everything levels (well, normally to the mechanics' favor if you ask me). Another example utilizing this approach is how handled health care has utilized this system with physicians and healthcare facilities . If they want, legal representatives can use this system.
The "Rule of 3" in Law Practice Management Rates
This " general rule" called the " guideline of 3" utilized in law practice management is not what your Certified Public Accountant may tell you and it does not fail you either. Ask your CPA what they think of it and they will like it. To start we are going to be believing in thirds. For the very first 3rd we will take the total amount of salaries/bonuses (not advantages just wages-- advantages enter into the second third coming next) for the profits generators and/or timekeepers (this includes you if you are generating income) and call that our very first 3rd. Add up the salaries of the attorneys, paralegals, and legal secretaries who create profits or are timekeepers and call this your first third (lets simply state that number was $100,000 to keep it basic). Whatever that number is take that number once again and it is your second 3rd which we will call your "overhead" (thus that 2nd 3rd 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). Then take that exact 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 overall amount (in this example $300,000) and now figure out how much you should charge per billable hour, per repaired rate or how many contingency charge cases won to be sure you hit the target we need to strike provided our first third number times three (in this example $300,000).
This approach shows you just how much per hour you need to charge. Because you know the number of billable hours each profits generator can do monthly, just divide that into your total of all thirds ($300,000) to see what you require to charge per billable hour to make your numbers come out properly. As long as you hit your targets you will be ensured of a 15% to 30% net profit from your operations. After all if you are the owner of the practice you are worthy of a fair earnings also don't you concur? This approach is called the Rule of Three. If this method is a bit too complicated do do not hesitate to call me and I will help you arrange it out in a few minutes on the phone.
It is a excellent idea to think through all of these pricing approaches in identifying your law practice management prices technique prior to setting a rate and moving ahead with a law company marketing strategy to guarantee you are completely exploring all choices. In another short article I will inform you how to speak to prospective customers so you never ever have a issue getting the charge you should have.