Not making enough money and working like crazy?
Updated: Aug 20, 2020
It might be time to review your fees to make your Small Law Firm More Profitable.
If you are starting a new Law Firm or you are not profitable you should start by reviewing your pricing structure. There are some things you need to consider in order to come out with appropriate fees to reach your goal and have a Profitable firm without compromising the great service you want to provide to your clients.
Most of the people that need legal services are worried about the amount of money they will have to pay to get their situation solved, especially with the hourly billing model because they don’t know how much they are going to spend at the end. That’s why this model is not as common anymore, but tracking your time is still important to know how much profit a case left you and adjust for future cases. This applies to every type of fee no matter if contingency, fixed, etc. Tracking your time makes you more efficient and more profitable.
Calculating your pricing depends also on different variances, your annual earning goals, your operational cost, and the type of Fee Agreements you want to offer, depending on your area of expertise and the clients you are targeting. Also, you need to know the value of your work, this can be linked to the experience you have gained through your career.
Nowadays there are so many different alternatives to pricing models: Fixed or Flat Fees, Retainers, Contingency, Subscriptions, Sliding fees and others. You will want to have flexibility here, we recommend to opt for more than one option, remember not everyone has the ability to pay upfront (Retainers) so you may want to consider an installment option. Perhaps, you want to implement a subscription program for consulting if you are a General Practice Lawyer.
You also need to consider your competition and the market. Do some research locally and also nationwide. With the current technology, you shouldn’t limit yourself to your local market unless you are not allowed to offer services in other states. (Check with your State BAR)
Ideally, you would like to set an annual earning goal, let’s say is $60,000 the first year, and you estimate a total of $30,000 of annual operational costs that include your rent, utilities, subscriptions, payroll, marketing expenses, etc. Your goal will be to get to $90,000 by the end of the year, now how do you make this happen? Let’s say you are an Inmigration lawyer, how many cases/clients will you need in order to get to this amount? If your average case price is $3,000 then you need 30 cases/clients during the year to reach your goal. That translates to 2.5 clients per month.
Now that you know your goal of new clients, focus your marketing efforts to reach that monthly goal! When you do the math that way, you can see your goals are achievable, and with that clear target in mind, you are more likely to succeed!
The right mindset is also important when talking about fees. You want to show your potential client the value that you have to offer. It is not only about fees, it is about the service and the relationship.
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Have a good day!