Debra L. Bruce 2017-04-27 05:54:55
Keys to Success How monitoring certain performance indicators can help firms achieve goals. Today more law firms are adopting business principles to make their practices successful. Savvy firms develop strategic goals and use key performance indicators—measurements of specific activities or results that are important to the success of the firm—to track their progress. Most law firms have time, billing, and accounting software that can provide metrics for hours logged, fees invoiced, revenue collected, amount of accounts receivable, and age of outstanding receivables. Hopefully, you already review those monthly. What other performance measurements can indicate whether people in your firm are engaging in the correct behaviors to lead to the firm’s success? Periodic review will suggest course corrections to make during the year to keep the firm on track. Here are a variety of simple metrics to monitor that may be relevant to your law firm’s success: 1) Number of referrals made to you by other lawyers. 2) Number of referrals made to you by clients. 3) Number of prospects generated otherwise. 4) Number of “touches” with a prospect before conversion to client. 5) Number of new clients. 6) Source of new clients—referral, internet search, speaking engagement, article, networking, advertising, etc. 7) Average fee collected per client, matter, or practice area. 8) Amount of new business from a former or existing client. 9) Lifetime value of a client—total of all fees collected from the same client. 10) Number of hours spent in marketing activities multiplied by billing rate. 11) Expenses related to marketing. 12) Average cost of acquiring a client, using Nos. 5, 10, and 11 above. 13) Average overhead per lawyer. 14) Direct costs—attributable only to one lawyer or matter instead of the whole firm. 15) Profitability of matter type, client, or lawyer. 16) Client satisfaction rating based on client surveys. Most of the previously listed key performance indicators, or KPIs, are easy to track, but you need a system to collect the information and provide meaningful reports. Many law practice management programs include mechanisms to capture relevant data in the course of client intake and service. Firms can then generate reports, especially when integrated with accounting software. In lieu of that, you can create a spreadsheet to track and manipulate data to generate your own reports. To gather client satisfaction data through surveys, firms can use online tools such as SurveyMonkey, Zoho Survey, and SurveyGizmo. Here are just a few examples of how KPIs might affect your activities and decisions throughout the year: 1) If data indicates that your successful lawyers have an average of 11 touches with a prospect (by networking, email, phone call, meeting, newsletter, etc.) before conversion to a client, others will know not to give up on a prospect after one phone call and a couple of emails. 2) If 67 percent of your new clients come from referrals by other lawyers, you may want to expand your bar activity and attorney networking. 3) The key factors may reveal that the client acquisition costs for multiple practice areas are relatively equal, but one area has a much greater client lifetime value; that would suggest a strategic focus for new client marketing. 4) Analysis of direct costs compared to revenues generated may inform equitable distribution of profits. When revenues are equal, partners who rely heavily on staff may be less profitable than those who leverage technology for cost effective efficiency. To hear more about KPIs, you can attend the program on Running Your Firm as a Business in the Law Practice Management track at the State Bar Annual Meeting on June 22-23. For a deeper dive into the subject, Thomson Reuters published Small Law Firm KPIs: How to Measure Your Way to Greater Profits, by Mary Juetten. DEBRA L. BRUCE is president of Lawyer-Coach, which provides executive coaching and training for lawyers on leadership and management, team effectiveness, productivity, and business development. Capitalizing on her 18 years in law practice and 17 years coaching, she helps lawyers adapt effectively to the unprecedented changes occurring in the legal industry today. She serves on the Law Practice Management Committee of the State Bar of Texas and is a member of the editorial board of the American Bar Association Law Practice magazine.
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