6 KPIs Any Law Firm Can Use to Measure Success
You know how to practice law, but do you know what other factors influence your firm's success?
Key Performance Indicators (KPIs) have become commonplace in today's business landscape, so much so that some may think of it as merely a buzzword. While the term may sound like nothing but jargon, it essentially refers to the business metrics that evaluate a company's performance.
Your efforts as a lawyer should reflect in your firm's performance, and becoming a data-driven lawyer can make a big difference in how efficiently you achieve success. Tracking key metrics ensures that your team's work achieves meaningful, consistent results.
Why is it important to track law firm KPIs?:
Tracking KPIs takes time and effort, but the rewards are worth it when you see a big difference in your revenue and client acquisition processes. Law firm KPIs should be measurable, specific, and targeted to the particular goals of your business to give you relevant data and information.
It is important to note - no firm uses ALL possible KPIs to measure their success. There are literally thousands of data points you can measure when assessing your business; however, trying to quantify every aspect of your firm will likely lead to frustration and burnout. If you're unsure where to start tracking data in your firm, there are general KPIs every firm can benefit from keeping an eye on.
How to choose which KPIs to measure and how to implement them in your firm
Law firm profitability metrics you focus on should be based on the strategies and goals of your firm. So, the million-dollar question is, how can you compare one performance indicator to another? And once you choose, how do you use the data to grow your firm? Here are three main factors to consider:
List your objectives: Create a list of realistic goals for your firm by assessing whether or not the achievements are S.M.A.R.T. (Specific, Measurable, Achievable, Relevant, and Time-Bound). Knowing where you hope to end up provides valuable insight into your business and what data is needed to properly strategize towards success.
Use data you already have: Many times, software and applications, like Google, most social media accounts, and your website host, automatically provide easy-to-read analytics. Suppose you are using payment and billing software, like LawPay, or an LPM, like MyCase. In that case, you probably already have critical data about your financials, staff productivity, and customer satisfaction at your fingertips.
MyCase’s and LawPay’s financial dashboards give you the business insights you need to stay competitive and grow your practice.
Track data for each KPI and adjust as needed: Some KPIs reveal actionable insights immediately, but most require a few months of data to reveal trends. Analyze your KPI reports monthly and make appropriate adjustments if necessary. With your KPI information in hand, you can make informed decisions based on your findings.
6 Types of legal KPI metrics to monitor
If you still need a nudge in the right direction when it comes to choosing KPIs, we believe your firm can use six specific metrics to gauge and build on its success.
Client and matter development KPIs
What is your approach to developing a relationship with a client? How efficiently are you resolving their cases? Tracking these client development KPIs will help you gain a deeper understanding of your client base:
- The average number of cases closed
- The average fee per client
- Number of lawyers per client
- Active clients
- New client acquisitions
- Number of matters per client
Client satisfaction KPIs
As you’re well aware, your firm is dependent on your clients. You can increase your business’ success by establishing solid client relationships, boosting client satisfaction, and enhancing your reputation. Ensure your firm is fostering a business that your clients want to work with by monitoring these client-related KPIs:
- Client satisfaction ratings (surveys or reports)
- Client retention rates
- Stars in reviews
- Qualitative Data (long-form reviews from clients)
- Number of client referrals
Marketing your firm will help you to generate leads and capture interest from your target audience. If you're spending money to acquire as many new clients as possible, you'll want to track your effort to ensure that you're not simply throwing cash at a strategy that isn't creating optimal results. Here are some law firm marketing metrics to keep a close eye on:
- Number of website visitors per month
- Landing page conversion rates
- Email marketing performance
- Cost per customer acquisition
- Traffic from referrals
- Lifetime customer value
- Social media engagement
Every law firm strives to maintain healthy finances and profitability. You don't need an accounting degree to strategically assess financial performance to improve your decision-making. Keep these KPIs in mind to ensure your business meets its financial goals:
- Monthly billed revenue
- Total firm debt
- Collection rate
- Length of accounts receivables
- The current estimate of operating costs
- The current estimate of annual revenue
- Net income as a percentage of revenue
- Net overhead
- Which payment methods clients prefer
Individual Performance KPIs
Monitoring team productivity is difficult when you’re busy with your day-to-day workload. Time is of the essence, and you want your team to work efficiently to generate healthy revenue. The best way to ensure your law firm performs at its best is to establish a performance management system based on quantifiable data sets. Here's a list of staff productivity KPIs to keep track of:
- Billable hours
- Case progression
- Case access
- Cost and fee tracking
- Utilization rate
- Realization rate
- Billable vs. non-billable hours
- Number of unbilled days
- Number of uncollected days
Lead Analysis KPIs
Acquiring new clients is crucial to your law firm's success, but finding them can be challenging. Check which channels bring the highest number of leads by recording how visitors or prospective clients find your firm.
- Cost of acquiring a new client
- Number of new cases/matters opened
- Number of new clients
- The number of new clients by source (referral, website, review site, etc.)
- Estimated average value of each new case
- Number of consultation appointments set
- The number of potential new clients who showed up to their consultation appointments
- Number of potential clients converted into clients
Hopefully, you now have a better understanding of KPIs and why you should be tracking them for your law firm. Quantifiable, outcome-based indicators will help you and your team monitor progress toward meeting goals and objectives and, ultimately, achieve your personal and professional goals for your firm.
However you measure success, LawPay has the tools to help you achieve them. To better understand our online payments solution can specifically benefit your firm, schedule a demo!