Law Practice Management-- How To Determine Your Costs
Figuring out fees is a challenging law practice management job for a lot of attorneys when believing through their law company marketing strategies. In figuring out charges for certain services, attorneys frequently fall short of what they must charge. Too numerous attorneys are scared of even charging the competitive cost for their services when making their law company marketing strategies.
Prior to you sit down and begin thinking through your law practice management pricing technique you require some differences around rates frequently utilized in law firm marketing planning. Do understand a law practice management law company marketing plan is not reliable if you just draw in people who desire to pay the most affordable charge for a service. Instead, you want to focus your law practice management and law company marketing strategies on bring in customers who will end up being long term properties to the firm.
There are essentially 4 methods of figuring out just how much you ought to be charging for your services. Lets move right into those now.
The Market Approach In Law Practice Management Rates
Get your assistant to support you in this law practice management task and spend some time finding what the variety of rates is in the neighborhood. To keep it easy for them consist of a stamped, self-addressed envelope with a list of the most typical services offered in your practice location. My recommendation in law firm marketing planning is to charge at the 75% level of the list.
Remember that in general it is not a good law practice management technique to contend on cost. A lot of possible 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 Technique in Law Practice Management Pricing
This law practice management pricing method is very uncomplicated really. One simply determines what the expenses are to provide service or products and includes on a sensible profit, someplace in between fifteen percent at the least and perhaps thirty three percent at the most. The most typical error in law practice management using this approach is to neglect to include some kind of your expenditure. Solo and small firm lawyers tend to not include their own salary!
In law practice management frequently you count yourself out of the expenses and you should include yourself in the costs. Typically you are doing at least some of the management work. If you are all three of these in one, you should think about one salary as due you for your time and knowledge as the technician and manager as well as a revenue of this post fifteen to thirty percent due you as the owner.
Fixed Rate Approach in Law Practice Management Pricing
This is the technique utilized by many automobile mechanics (it is called "the flat rate book") and other service providers. This technique is where you figure out a fixed rate for different tasks and charge that rate no matter what. If the mechanic invests less time than allotted for the job, he makes more. If he invests more time than designated, he makes less. In the end, it all evens out (well, typically to the mechanics' favor if you ask me). Another example using this technique is how managed healthcare has utilized this system with medical facilities and medical professionals . If they desire, attorneys can use this system.
The "Rule of 3" in Law Practice Management Pricing
This " general rule" called the " guideline of three" used in law practice management is not what your Certified Public Accountant might tell you and it does not fail you either. Ask your Certified Public Accountant what they think about 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 wages-- benefits go into the 2nd 3rd coming next) for the earnings generators and/or timekeepers (this includes you if you are creating earnings) and call that our very first third. Include up the incomes of the legal representatives, paralegals, and legal secretaries who produce profits or are timekeepers and call this your first third (lets just state that number was $100,000 to keep it easy). Whatever that number is take that number once again and it is your 2nd 3rd which we will call your "overhead" (thus that second third is $100,000 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 profits (another $100,000). What you require to do is take the total amount (in this example $300,000) and now determine how much you should charge per billable hour, per fixed rate or how numerous contingency cost cases won to be sure you struck the target we must hit provided our first third number times three (in this example $300,000).
This method shows you just how much per hour you require to charge. Since you know how numerous billable hours each income 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 strike your targets you will be assured of a 15% to 30% net benefit from your operations. If you are the owner of the practice you deserve a reasonable earnings as well don't you concur? This method is referred to as the Rule of Three. If this method is a bit too complicated do do not hesitate to contact me and I will help you sort it out in a couple of minutes on the phone.
It is a good idea to believe through all of these prices approaches in determining your law practice management rates method before setting a price and moving ahead with a law firm marketing strategy to ensure you are thoroughly checking out all choices. Keep in mind the tendency for a lot of attorneys is to price too low. Don't do that! In another post I will inform you how to speak to prospective customers so you never have a problem getting the cost you deserve.