It’s an utmost importance for businesses which market services to be able to calculate a charge-out rate. Since providing services aren’t a tangible value propositions, pricing services are tad more challenging.
Arriving at a suitable price for charging legal services is a generally complex strategy especially for small or new firms. Setting of realistic charge-out rate is difficult and requires tremendous effort as well as reviewing regularly. You are required to carefully analyse if the rate is underpriced or overpriced as this will make-or-break your firm.
Establishing prices for services, demands apportioning time and some tedious effort to calculate an accurate hourly charge-out rate. Accuracy when it comes to charging out the proper rate on your legal services is one of the keys to survive and last longer in the market.
Two crucial factors to consider when calculating a competent charge-out rate are:
- Is your rate competitive?
- Is it lower or higher than average?
While it is important to arrive at a competitive rate, you need to make sure also that you are indeed making a profit. You have to work out and see how your rate compares to your competitors. Being aware of the average rate, be it within industry scale of fees or not, is fundamental. Your charge out rate can determine profit or loss, so undertaking a careful review of all its aspects is a necessity before making any adjustments.
However, you can make this daunting task easier with this handy tips. Here are the five most basic steps to consider:
- Find out your desired income. Consider the standard of living you want, or how much is your desired salary if you are earning it elsewhere. This step is simply taking into account how much you are worth per annum that also reflects market value.
- How many hours can you work (realistically) per year? In a given year, you need to estimate how many hours are you capable of working each day. These hours are your billable or chargeable hours. An estimate of your non-billable hours per day is also needed, taking into consideration as well your annual leave, possible sick days, and holidays.
- Cover your income needs. Next is to figure out your charge-out rate to cover your income needs.
- Factor in your overheads. Basing from your business plan and cash flow forecasts or your profit and loss statement, work out your overhead costs.
- Add a profit margin. Your business won’t be able to grow if you will only cover your required income and overheads. Adding a profit margin is a must in order to maintain the financial health of your firm.
What are Charge-out rate calculators and the benefits of using it?
Charge-out rate calculators, like Bottrell’s Legal Charge-out Rate Calculator, is a tool used to make calculations easier. It is usually in the form of a downloadable excel-based calculator. And as you use the tool, helpful tips will pop-up to guide you.
Working out your charge-out rate in the future will become easy simply by using this excel-based calculator. Legal charge-out rate calculators are designed in ensuring you hit your ultimate goal by computing rate that covers your time, your costs, and your profitability. While at the same time, considers the current market rates.
Charge-out rate calculators will help you establish a fair, yet profitable rate by establishing the following:
- Arrive at a competent rate
- Generate positive and maximize long-term free cashflow potential
- Improve profitability and increase revenue
With the use of charge-out rate calculator, you can become more competitive in such a way that you could easily charge clients the correct amount for your professional services. Therefore, eliminating the time worrying and constantly analysing if you are making profit or not.
It enables you to readily forecast and allot funds to cover future operational costs and expansion since the calculation became less complex and is no longer time-consuming.
A charge-out rate calculator helps improve your profitability not only because of its ability to calculate fast and accurately; it also spares you from hiring someone else to do the work. It helps lessen operational costs therefore allowing you to earn more.
Bottrell’s legal charge-out rate calculator for instance, helps ensure you are staying competitive, helps you budget for future profits in your hourly rate, and calculate new staff rates. For only $79, you can keep this calculator forever! You can use it as many times as you want, stay up-to-date and check your rates regularly.
It’s a simple to use tool as it will also provide a step-by-step experience. Once you purchase your Charge-Out Rate Calculator for Legal, it will immediately be available for download in .xls (excel) format.
It’s an easy, accurate way to calculate your charge-out rate as well as your employees. All you need is your most recent Profit & Loss Report to get started. You can use it to project profits by allowing you to enter desired profit and it will adjust your charge-out rates.
So, if you are ready to make calculations easier for you and your employees, click on this link.