Setting your billing rates in a new law practice really depends on a number of factors. Some legal books and websites will offer calculations you can use to set your prices, but in the real world, that’s just not how it works.
The legal market is quite sizeable. In the united states, the industry is worth $292 billion, and it has seen an annual growth of 0.8% on average between 2011 and 2016. The industry keeps growing and adapting, and as a new legal practice, you need to consider the market environment, as well as local conditions and economics.
There are three main factors you need to consider when setting the prices of your new practice, and these are geography and local environment, your company’s size, and your experience and years since graduation.
Billing rates vary quite substantially across the United States, as well as locally. Setting your prices starts with your local environment and market. To decide what kind of rates you can set, you must first establish how much your potential clients can afford to pay.
In poorer areas, you should consider ways to reduce your operating costs in order to keep your prices low. In middle class areas, you can afford to spend more on operating costs, and in rich areas, you can charge more and spend more.
One ideal way to reduce your operating costs is to cut back on server costs, and use a cloud based-system, such as PracticePanther instead. The software takes away the need for regular server maintenance, and creates an online hub for all your communication and file management.
The size of your company also allows you to set your prices. From the client’s end, they may well expect to pay less in a smaller, local firm, but this price must also match your outgoings. As mentioned, it’s essential to manage your outgoings. This allows you to keep your price as low as possible.
Then of course, your experience comes into play with your pricing. The longer you have spent in the profession, and the more you have specialized, the more you can charge. These larger fees will be happily paid by your clients, so long as they understand the wealth of your experience.
When starting a new firm, however, you will need to ensure you have appropriate marketing resources to show your knowledge and experience, especially if you plan on offering a premium, specialized experience.
Choose Your Pricing Strategy
There are also pricing strategies you need to consider. Attorneys can use a combination of hourly rates, flat fees, contingency fees and retainers. Hourly rates are the most common arrangement, but more companies are now using flat fees and retainers.
Flat fees with retainers are becoming more popular as a result of the certainty they offer clients. This is particularly beneficial for new companies opening in poorer local markets.
Choose your pricing strategy wisely, and consider your environment, and your pricing strategy will work for both you and your clients.