Do you use Key Performance Indicators (KPIs) to measure how your firm is doing?
If your answer to that question was, “What are Key Performance Indicators?” – you’d better keep reading.
Key Performance Indicators are metrics that evaluate your firm’s performance and success. They give you the data and knowledge to answer critical questions, like what practice areas are the most profitable, and what type of cases yield the highest return.
“As a lawyer you’re an expert on the practice of law—but are you taking the time to track what’s important when it comes to guiding the success of your firm?” asks Teresa Matich on the Clio Blog. “Do you know which attorney or which client is contributing to or reducing your profits? Do you know which marketing expenses lead to the most valuable clients? Are your clients happy?”
Key Performance Indicators can provide answers to those and other crucial questions.
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Here are some KPIs that Matich says you should consider using:
“Businesses and law firms alike fail because they pay out more than they bring in,” writes Matich. “Measuring more than the traditional billable hour metrics can help your firm better understand its current and potential monetary situation. Here are a few marketing KPIs to consider.”
- Number of marketing actions taken
- Marketing budget ratio (the ratio of the total marketing spend to the total fees billed)
- Marketing cost per client (the ratio of the total marketing spent to the number of clients billed)
- Firm website traffic
- Email marketing performance
- Website landing page conversions
Client Acquisition KPIs
“New clients are vital to the success of your law firm—but finding them is a complex process. Consider using some of the following client acquisition KPIs to show you what’s working for your firm.”
- Cost of acquiring a new client
- Number of new cases/matters opened
- Number of new clients
- Number of new clients by source (referral, website, review site, etc.)
- Estimated average value of each new case
- Number of consultation appointments set
- Number of potential new clients who showed up to their consultation appointments
- Number of potential clients converted into clients
Client Development KPIs
“Once you have a client, what do you do to develop your relationship with them? How efficiently are you resolving their cases? To get a better understanding of your client base, try adding some of the following client development KPIs to your assessment roster.”
- Number of cases/matters closed
- Average value of cases closed
- Client growth rates
- Dormant client rates (the ratio of clients with no recent matters to the number of total clients)
- Average fee per client
- Average fee per new client
- Growth in fees for top clients
- Practice areas per client
- Number of lawyers per client
- Number of matters per client
Client Satisfaction KPIs
“Measuring client satisfaction is a new concept for the legal industry, but knowing what you can improve upon—based on solid feedback—is critical to business success, today. Here are some performance indicators to help you evaluate client satisfaction.”
- Number of client referrals
- Client satisfaction scores (this could be through a manual survey or software)
- Client retention rates
“An efficient law firm is a profitable law firm—yet productivity is a huge issue for most, with legal professionals billing an average of just 2.4 hours of an 8-hour day, according to the 2018 Legal Trend Report. By tracking your firm’s productivity, you can locate areas where time is being wasted—and, in doing so, you can identify areas where time can be redirected to revenue-creating opportunities. Here are some law firm KPIs to consider when it comes to productivity.”
- Number of billable hours
- Utilization rate (number of billable hours worked divided by the number of hours in the workday)
- Ratio of billed hours compared to non-billable hours worked
- Number of unbilled days
- Number of uncollected days
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