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How can you develop a pricing strategy that supports practice growth and remains competitive?

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Pricing is one of the most important decisions you can make as a practice owner. It affects your profitability, your reputation, your client satisfaction, and your growth potential. However, finding the right balance between charging enough to cover your costs and deliver value, and being competitive in your market can be challenging. In this article, we will explore some key factors and steps to consider when developing a pricing strategy that supports your practice goals and reflects your unique value proposition.

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James Markham

Helping Lawyers Master the Business of Law with The Legal MBA | Increasing UK Law Firm Profitability as an Independent…
Aldeir Antonio C. Filho

Advogado | Direito Empresarial e Contencioso Cível Massificado.

1 Know your costs

The first step to developing a pricing strategy is to understand your costs of doing business. This includes both fixed and variable costs, such as rent, utilities, salaries, supplies, equipment, marketing, insurance, taxes, and so on. You need to calculate how much it costs you to provide each service or product you offer, and how much margin you need to make a profit. You also need to factor in your overheads, such as administrative and operational expenses, and your desired income level. Knowing your costs will help you set a minimum price that covers your expenses and allows you to earn a reasonable return on your investment.

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James Markham

Helping Lawyers Master the Business of Law with The Legal MBA | Increasing UK Law Firm Profitability as an Independent Consultant
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In recent years it has become all the more important to ensure that your pricing reflects inflation within your cost base. The salaries of the staff delivering the work have likely increased significantly in your firm, but your standard rate card, or legacy arrangements with longstanding clients may not have followed suit. If left unaddressed, this will act as a significant drag on gross margin and wider profitability measures, such as PEP. Pricing conversations can be difficult, but this is likely the single biggest lever available to most firms to increase profitability.

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2 Know your value

The next step is to determine your value proposition, or what makes your practice stand out from your competitors. This can include your expertise, your experience, your credentials, your quality of service, your niche, your location, your technology, your reputation, your referrals, and so on. You need to identify what benefits and outcomes you deliver to your clients, and how you solve their problems or meet their needs. Knowing your value will help you set a maximum price that reflects your worth and communicates your differentiation.

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Aldeir Antonio C. Filho

Advogado | Direito Empresarial e Contencioso Cível Massificado.
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Beside the costs previously considerated , you do have to be able to demonstrate to the customer the product's value - mostly if you're the product. By "demonstrate the value" I mean that you must let the client aware that every effort undertaken in order to satisfy his goals are above any price the someone can put in. So, put your efforts on a presentation that do not let any doubt to the client that you are the only option (and not one of many) between his wishes and fulfillment. Once you prove him the added value that only you can provide, the price subject will be gone.

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James Markham

Helping Lawyers Master the Business of Law with The Legal MBA | Increasing UK Law Firm Profitability as an Independent Consultant
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Discounts can severely undermine your value, but can be effective for both you and your client when done well. Discount strategically to drive volume with key clients, but don't discount the first piece of work expecting to increase the rates on subsequent work - this rarely works in practice. To give discounts that work for both you and your client, offer a % reduction once x number of matters have been referred to you, or once the overall account size reaches y value. This aligns your interest (higher volumes) with your client's (lower prices) without undermining your broader pricing strategy.

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3 Know your market

The third step is to research your market and understand the demand and supply for your services or products. This includes analyzing your target audience, their demographics, their preferences, their needs, their pain points, their willingness and ability to pay, and their expectations. You also need to study your competitors, their pricing, their value proposition, their strengths and weaknesses, their market share, and their feedback. Knowing your market will help you set a optimal price that matches your clients' perception of value and positions you favorably in your niche.

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4 Know your goals

The fourth step is to align your pricing strategy with your practice goals and vision. This includes defining your growth objectives, your desired market position, your ideal client profile, your revenue streams, your scalability potential, and your exit plan. You also need to consider your pricing model, or how you charge for your services or products, such as hourly, flat fee, value-based, subscription, tiered, or bundled. Knowing your goals will help you set a strategic price that supports your long-term success and sustainability.

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5 Test and adjust

The final step is to test and adjust your pricing strategy based on the feedback and results you get from your clients and the market. This includes measuring your key performance indicators, such as profitability, revenue, cash flow, client retention, client acquisition, client satisfaction, referrals, and reputation. You also need to monitor the external factors that may affect your pricing, such as inflation, regulation, competition, technology, and demand. Testing and adjusting your pricing strategy will help you stay relevant, competitive, and profitable in a changing environment.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you develop a pricing strategy that supports practice growth and remains competitive?

1

2

3

4

5

6

1 Know your costs

2 Know your value

3 Know your market

4 Know your goals

5 Test and adjust

6 Here’s what else to consider

Practice Management

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How can you develop a pricing strategy that supports practice growth and remains competitive?

1

2

3

4

5

6

1 Know your costs

2 Know your value

3 Know your market

4 Know your goals

5 Test and adjust

6 Here’s what else to consider

Practice Management

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感谢您的反馈

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