Figuring out charges is a challenging law practice management job for the majority of attorneys when thinking through their law firm marketing strategies. In determining charges for particular services, attorneys typically fall short of what they should charge. Too lots of lawyers are scared of even charging the competitive cost for their services when making their law firm marketing strategies.
So before you take a seat and start analyzing your law practice management rates method you require some distinctions around pricing commonly utilized in law company marketing preparation. Add your rates technique to your law firm marketing strategies. You need to be sure that you are charging a sufficient cost on everything to guarantee you a good revenue not just a excellent living. Do know a law practice management law firm marketing plan is not effective if you just bring in people who want to pay the most affordable cost for a service. These are not loyal clients. Rather, you desire to focus your law practice management and law firm marketing strategies on attracting customers who will become long term properties to the firm. Low cost clients are not constructing your base of long term clients I can guarantee you that.
There are basically 4 ways of determining just how much you must 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 range of rates is in the neighborhood. To keep it easy for them include a stamped, self-addressed envelope with a list of the most common services used in your practice area. My recommendation in law firm 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 strategy to contend on cost. Many prospective customers will see rates that is too low as a signal that there is something missing either from the service, the provider, or the firm. And people who are searching for a low cost will follow that low cost any place they can discover it instead of ending up being long-lasting customers. So make certain that your rate covers your expenses and a affordable earnings margin.
The Cost Method in Law Practice Management Rates
This law practice management pricing technique is very uncomplicated actually. The most common error in law practice management using this method is to overlook to consist of some form of your cost.
OK, let me state it again. In law practice management frequently you count yourself out of the costs and you ought to include yourself in the costs. Why? Typically you are doing at least some of the technical work. Yes? Often you are doing at least some of the management work. Yes? As the owner of the service you are due a affordable earnings. Yes? If you are all 3 of these in one, you should consider one wage as due you for your time and competence as the professional and supervisor along with a revenue of fifteen to thirty percent due you as the owner. Be sure to include a sensible cost for your supervisory and technical work in the costs part of this formula.
Fixed Rate Approach in Law Practice Management Prices
This is the method used by lots of car mechanics (it is called "the flat rate book") and other company. This technique is where you identify a fixed rate for various jobs and charge that rate no matter what. He makes more if the mechanic spends less time than allotted for the task. He makes less if he invests more time than designated. In the end, it all evens out (well, generally to the mechanics' favor if you ask me). Another example utilizing this technique is how managed healthcare has utilized this system with medical professionals and healthcare facilities . Attorneys can utilize this system if they want.
The " Guideline of Three" in Law Practice Management Rates
This " guideline" 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 think about it and they will like it. To begin we are going to be thinking in thirds. For the very first third we will take the total quantity of salaries/bonuses (not advantages simply salaries-- advantages go into the second third following) for the income generators and/or timekeepers (this includes you if you are creating profits) and call that our first 3rd. Include up the wages of the attorneys, paralegals, and legal secretaries who create income or are timekeepers and call this your very first 3rd (lets simply say 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" ( hence that second third is $100,000 and don't forget you if you are doing some managing partner type duties because 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 require to do is take like it the total amount (in this example $300,000) and now find out how much you must charge per billable hour, per repaired rate or how many contingency charge cases won to be sure you struck the target we need to strike given our very first third number times three (in this example $300,000).
This approach reveals you how much per hour you require to charge. Given that you know how many billable hours each profits generator can do each month, 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 guaranteed of a 15% to 30% net revenue from your operations. If you are the owner of the practice you are worthy of a fair revenue as well don't you concur? This technique is referred to as the Rule of Three. If this technique is a bit too complicated do do not hesitate to contact me and I will assist you sort it out in a couple of minutes on the phone.
It is a great concept to think through all of these pricing techniques in identifying your law practice management prices method before setting a cost and moving ahead with a law firm marketing plan to ensure you are thoroughly checking out all choices. In another post I will inform you how to speak to prospective customers so you never have a issue getting the charge you deserve.