Add value to your firm’s data
As a lawyer, you are particularly comfortable in your area(s) of expertise. But when it comes to accessing an information relating to your activity, things get complicated. For example, can you say in a few seconds:
- Which client or collaborator contributes the most to the growth or reduction of the firm's activity?
- What is the average payment time for your invoices?
- How many new files were created this month? This trimester ? This year ?
Why are KPIs important for your law firm?
The word KPI has been a very fashionable word for several years, particularly following the rise of startups and the fundraising that goes with them. Entrepreneurs and investors swear by meticulous, sometimes obsessive, monitoring of KPIs. But how can this be useful for your law firm and your business in particular? THE key performance indicators, or KPI, are business indicators that measure the performance of your activity and your organization. KPIs provide you with information and quantified data that allow you to respond to your firm's challenges. They must therefore be measurable, unique and oriented specifically towards your own activity. By learning to identify, measure and leverage these specific performance indicators, your firm's KPIs provide you with:- A measurable performance : There is a big difference between collecting data and analyzing it. If you want to determine whether you have been performing well or not, you must first determine your goals. By identifying and monitoring your performance indicators, you can better measure the success of your firm.
- Responsibility : If you have not defined the KPIs to track, it is difficult to know who or what is responsible for the successes or failures encountered. Which makes it all the more difficult to reproduce or avoid in the future. Selecting and monitoring specific performance indicators makes it possible to better identify success factors.
- Predictability : In the absence of KPIs, you are forced to speculate on the positive or negative events that could occur within the firm. With key indicators in place and easily consultable, it is now easy to anticipate and implement the actions that will be most likely to succeed.
- Automated : Once your KPIs are in place and a fully automated tracking system, using the data is relatively simple. All you have to do is set aside a little time to analyze your data and identify typical behaviors (good or bad). You then have a clear vision of the adjustment opportunities to be made.
How to choose the best KPIs for your law firm?
While it is obvious that it is vital to measure the performance of the firm to determine its strengths, it now remains to be identify KPIs that matter and that fit your firm and practice. Not all KPIs are necessarily useful for understanding your firm's business. Wanting to monitor all available performance indicators will make little sense and risk drowning out the information rather than highlighting it. You must therefore first ask yourself what the main objectives of your practice are and what is your definition of success. Here are the essential questions to ask yourself before defining the KPIs to follow: 1. What do you need to measure? When it comes to considering what data can be tracked, the possibilities are almost limitless. Start by determining what types of data can provide insight relevant to your business and what data is needed to get that insight. 2. What information do you already have? Needless to say, it's impossible to track data you don't own. The first step to establish your list of KPIs therefore involves identifying the data that is accessible to you within your management solution.- Establish a list of available data.
- Identify if there is a gap between the information you want to obtain and the accessible data.
- Check if your practice uses applications that are integrated with each other to query and make best use of data.
KPIs to follow
“Only what can be measured can be managed. » Whatever KPIs you choose to track, it's important to keep in mind that none of them make sense outside of your context. The area of expertise, the form of the firm, the type of association, the functioning between partners are all parameters which directly influence the KPIs and their analyses.Marketing KPIs
Law firms, like businesses, fail when they spend more than they earn. It is therefore not enough to measure indicators relating to traditional hourly billing. Your practice can understand its current and future cash flow position by following the Following Marketing KPIs :- Number of marketing actions undertaken
- Marketing budget ratio (ratio between the total amount of marketing expenses and the total fees charged)
- Marketing cost per customer (ratio of total marketing spend to total amount billed to customers)
- Traffic on the firm’s website
- Email marketing performance.
- Conversions on the firm’s landing pages
Customer Acquisition KPI
New clients are important for the growth of the firm and its sustainability; finding and convincing them, however, proves to be an arduous task. Tracking the KPIs below will help you identify what is working well for your own firm on new client acquisition:- Cost of acquiring new customers
- Number of new files opened
- Number of new clients.
- Number of new customers by source (website, emailing, trade shows, etc.)
- Average income per new file
- Number of scheduled appointments
- Number of prospects who showed up for the consultation appointment
- Number of prospects converted into customers
Customer relationship management KPIs
Once you have acquired a new customer, it is essential to develop the relationship with the latter. To better understand the functioning of your customer base, integrate the following indicators into your monitoring:- Number of files closed
- Average amount invoiced per closed file
- Customer growth rate
- Rate of inactive clients (ratio between the number of clients for whom no file is active to the firm's total clients)
- Average fees per client
- Average fees per new clients
- Growth in fees for the 10 best clients
- Area of expertise per client
- Number of lawyers involved per client
- Number of files per client
Productivity KPIs
An effective law firm is a profitable firm. However, this remains a major difficulty for many law firms. Monitoring the firm's productivity allows you to quickly identify time-consuming topics and those that are not sufficiently addressed even though they are opportunities to generate more revenue. Here are some key indicators to monitor firm productivity:- Number of billable hours
- Efficiency rate (number of billable hours out of the number of hours in a typical working day)
- Ratio of the number of hours billed to the number of non-billable hours worked
- Number of days without billed time
- Number of unclaimed days
Individual Performance KPI
While key firm indicators are useful for measuring overall performance et Success of your firm, you are certainly attentive to the individual performance of each employee within your teams. The following key indicators can help you in this regard:- Monthly expenses
- Average rate charged
- Average billable rate
- Percentage of associate hours
- Number of open files
- Number of billable hours per assistant
- Number of files brought to the office
- Origin of income brought to the firm
- Number of tasks completed
Financial KPIs
Of course, the financial aspects, profitability and margins are all important. success criteria or failure for your law firm. Also, the indicators below require very specific attention:- CA billed per month
- Write-off (amount invoiced on total billable hours)
- Monthly collection
- Collection rate (amount collected on the total amount invoiced)
- Updated annual growth (Projected annual revenue based on turnover achieved over the last 3 months)
- Updated annual expenses (total anticipated annual expenses, including salaries, based on costs for the last 3 months)
- Difference between discounted annual growth and discounted annual spending
- Operating account balance
- Amount of unpaid amounts
- Aged balance
- Average net overhead (direct operating costs per employee)
- Average fees per file
- Average fees per new file
- Average billing rate
- Amount of turnover per square meter
- Amount of turnover per employee
- Amount of turnover per file
Firm State of Mind KPI
Looking beyond financial or productivity indicators is also instructive. This is in fact the opportunity to measure the state of mind of employees, the level of adherence to the values and culture of the firm. These indicators reveal the health of your office which are too often neglected even though they can have a direct impact on relationships with your clients and more broadly on the firm's activity.- Level of satisfaction of employees and collaborators
- Ratio of departures/arrivals within the firm
6 steps to using KPIs within the firm
Now that you have a clearer idea of what metrics to track within your practice, what do you actually need to do to use them to your advantage? We advise you to follow the following 6 steps:- Choose the KPIs relevant to your business. Make sure you understand the KPIs you're using and that you have the right data to power them.
- Setting goals. Make sure your goals can be measured and match the strategy set by the firm.
- Accumulate data for each KPI. While some KPIs can provide relevant information instantly, others require accumulation of data over several months to form a trend.
- Measure results. Consult your dashboards at least once a month and quickly analyze them to take appropriate action.
- Arbitrate. Armed with the information collected and the analyzes carried out, you make the right decisions to correct what needs to be corrected. The important thing is that your decisions and actions remain consistent with the objectives of your firm.
- Repeat the cycle. Your work is not finished. Once you have acted on the data collected, you will need to regularly review your KPIs to ensure that you are collecting the right data, that you have set the right targets and that your efforts are having a positive impact on the elements you are looking to improve.
