Law Practice Management-- How To Determine Your Fees
Determining costs is a challenging law practice management job for the majority of attorneys when thinking through their law company marketing plans. In determining charges for particular services, attorneys typically fall brief of what they ought to charge. Too many attorneys are afraid of even charging the competitive cost for their services when making their law company marketing strategies.
Prior to you sit down and start believing through your law practice management prices technique you need some distinctions around rates frequently used in law company marketing preparation. Do know a law practice management law company marketing strategy is not effective if you just draw in individuals who want to pay the lowest charge for a service. Instead, you want to focus your law practice management and law company marketing plans on drawing in customers who will become long term properties to the company.
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
Get your assistant to support you in this law practice management task and spend some time finding what the variety of prices is in the community. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most common services used in your practice area. My suggestion in law company marketing planning is to charge at the 75% level of the list.
Keep in mind that in general it is not a good law practice management technique to compete on price. Most prospective clients will see pricing that is too low as a signal that there is something missing either from the service, the provider, or the firm. And individuals who are trying to find a low cost will follow that low rate wherever they can discover it rather than becoming long-term customers. So make certain that your rate covers your expenses and a reasonable profit margin.
The Expense Method in Law Practice Management Prices
This law practice management pricing method is very simple actually. The most typical error in law practice management using this method is to disregard to include some kind of your expenditure.
In law practice management frequently you count yourself out of the expenses and you should include yourself in the expenses. Frequently you are doing at least some of the management work. If you are all 3 of these in one, you must think about one income as due you for your time and expertise as the technician and supervisor as well as a profit of fifteen to thirty percent due you as the owner.
Fixed Rate Technique in Law Practice Management Rates
This is the technique used by many auto mechanics (it is called "the flat rate book") and other service providers. This approach is where you figure out a set rate for numerous tasks and charge that rate no matter what. Another example using this approach is how handled health care has actually used this system with hospitals and physicians .
The "Rule of 3" in Law Practice Management Prices
This " general rule" called the "rule of 3" used in law practice management is not what your CPA may inform you and it does not fail you either. Ask your Certified Public Accountant what they believe about it and they will like it. To start we are going to be thinking in thirds. For the very first 3rd we will take the overall amount of salaries/bonuses (not advantages just incomes-- benefits go into the 2nd third coming next) for the profits generators and/or timekeepers (this includes you if you are generating revenue) and call that our very first third. So accumulate the incomes of the legal representatives, paralegals, and legal secretaries who produce income 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 2nd 3rd which we will call your "overhead" ( therefore that second third is $100,000 and don't forget you if you are doing some managing 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 earnings (another $100,000). What you need to do is take the overall amount (in this example $300,000) and now find out just how much you should charge per billable hour, per fixed rate or the number of contingency charge cases won to be sure you struck the target we need to strike offered our first 3rd number times 3 (in this example $300,000).
This method shows you just how much per hour you need to charge. Because you understand the number of billable hours each revenue generator can do per month, simply divide that into your overall of all thirds ($300,000) to see what you need you can check here 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 make money from your operations. If you are the owner of the practice you should have a reasonable earnings as well do not you concur? This method is known as the Rule of 3. If this approach is a bit too complicated do feel complimentary to contact me and I will help you arrange it out in a couple of minutes on the phone.
It is a great idea to believe through all of these rates approaches in identifying your law practice management rates strategy before setting a price and moving ahead with a law firm marketing plan to guarantee you are completely exploring all alternatives. In another short article I will tell you how to speak to prospective clients so you never have a problem getting the cost you should have.