By Jared Correia, IndyBar Law Practice Management Consultant and Red Cave Consulting
The chief method for law firm business management is inertia, largely. That means you can pretty much default to lawyers doing nothing, rather than something.
That, of course, extends to financial management. Lawyers tend to run up accounts receivable, because they don’t bill regularly. They never run revenue projections either so they can’t build to specific financial goals. They don’t run financial reports regularly so they don’t have a consistent understanding of the financial health of their law firms.
Neither do attorneys raise rates regularly. Across the country, law firm rates struggle to keep up with inflation. That’s not enough.
While most attorneys think that raising rates is a dangerous step, there are ways to manage it without alienating new or existing clients. In the first instance, don’t go crazy: it’s okay to raise your rates by $25 per hour, let’s say. You don’t necessarily have to make up for lost time by doubling your rates or adding a triple digit rate increase. Just start small, and then set up a process. To that end, you’ll want to raise your rates at least annually, by letter, to your existing clients, and update your rate sheet to reflect those changes. Let your clients know that this is something you will do on a recurring basis, each year. It’s easier for new clients: just apply the new rates. Make sure your original fee agreement includes language reflecting rate increases, too. Like many things related to more effective business management for law firms, this is mostly about creating a system and sticking to it.
If you can send out holiday cards every year, you can raise your rates every year.
Looking to revise your financial management tactics? We can help.
The IndyBar offers FREE law practice management consulting services for Practice Builder subscribers and IndyBar members through Red Cave Law Firm Consulting. To request a consult, visit the IndyBar law practice management consulting landing page, and start running your law firm like a business.
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