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Key Performance Indicators: Measure Measure Measure

Key Performance Indicators: Measure Measure Measure

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KPIs are critical to the success of a law firm but measuring is just the start. Learn why, what, and how to measure. Using Modern Law case studies insert business into your law firm to measure, evaluate, and act.

KPIs are critical to the success of a law firm but measuring is just the start. Learn why, what, and how to measure. Using Modern Law case studies insert business into your law firm to measure, evaluate, and act.

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Key Performance Indicators: Measure Measure Measure

  1. 1. MEASURE3 Chicago, October 19, 2015 Clio Conference
  2. 2. MEASURE, MEASURE, MEASURE Key Performance Indicators (KPIs) for Modern Law Firm Success
  3. 3. Measure3 KPIs for Modern Law Firm Success Billie Mary Practicing Attorney – Modern Law Access Legal Mom Law Degree | Canadian and US Professional Accountant Traklight | Evolve Law Mom ABOUT US
  4. 4. I LOVE WHAT I DO My crew.
  5. 5. MEASURE3 1. WHY MEASURE 2. BUSINESS INTO LEGAL 3. WHAT TO MEASURE? 4. MEASURE, COMPARE, & ACT 5. WHERE FROM HERE? Measure3 KPIs for Modern Law Firm Success See the conference application for KPI Worksheet | Slides.
  6. 6. 1. WHY MEASURE Measure3 KPIs for Modern Law Firm Success
  7. 7. FEELING LUCKY?
  8. 8. THE OVERWHELMING QUESTIONS
  9. 9. GOAL: Understanding that measuring and acting upon KPIs will impact your Firm’s profitability WHY MEASURE CASE STUDY: Modern Law’s Client Development KPI Measurement Part I Measure3 KPIs for Modern Law Firm Success
  10. 10. (FEB 2015) SNAPSHOT OF MODERN LAW’S CLIENT DEVELOPMENT PROCESS STEP 1 STEP 2 STEP 3 STEP 4 Book Potential Client Calls 42 phone calls scheduled 30-minute calls 40 Phone Calls Completed Done by Attorney Billing @ $250/hr New Clients 7 New Clients One Referred 6 from Phone Calls Measure 18% Conversion Rate $5000 Billable TIme Why Measure KPIs for Modern Law Firm Success
  11. 11. WHAT DOES THIS 18% MEAN? WHAT DOES THIS $5000 MEAN? Nothing – if Modern Law does not have a target cost of customer acquisition. Why Measure KPIs for Modern Law Firm Success Nothing – if Modern Law does not have baseline/target conversion rate.
  12. 12. MEASURE AND ACT TO ENSURE PROFITABILITY BILLINGS COLLECTED Includes Marketing, Rent, Admin Salaries FIRM OVERHEAD FIRM FAILURE $ $ $ Why Measure KPIs for Modern Law Firm Success
  13. 13. - Knowledge is power - Car goes faster downhill with brakes - Data driven decisions - Not just cranking out billable hours - NEED TO CREATE VALUE FOR CLIENTS Why Measure KPIs for Modern Law Firm Success Measuring Results vs. Guesswork/SWAG
  14. 14. 2. BUSINESS INTO LEGAL Measure3 KPIs for Modern Law Firm Success
  15. 15. GOAL: View your Practice as a Business BUSINESS INTO LEGAL Step Back and look at Traditional Law Firm Measures Business into Legal KPIs for Modern Law Firm Success
  16. 16. BORROWING FROM CLIO’S 2014 PRESENTATION: a Jessica Pearson works 60 hours in a week. b She was in meetings and talking to potential clients for 10 hours. c Jessica bills at $250. d She billed $10K last week. e Firm collected $7K. Measure3 KPIs for Modern Law Firm Success
  17. 17. TRADITIONAL KPIs 1 Utilization Rate 83% 50 Billable/60 Available Hours 2 Realization Rate 80% Potential to bill: $12.5K 50 Billable hours recorded @ $250 Billed $10K/$12.5K potential 3 Collection Rate 70% $7K Collected/$10K Billed 4 NET Collection Rate 56% $7K collected/$12.5K Potential Business Into Legal KPIs for Modern Law Firm Success
  18. 18. - Focused on supply of billable hours not demand for services - Therefore not focused on the value of services, client needs, or satisfaction - What about fixed fees??? - What about targets??? - Charging correct rates? Need to focus on return on investment, contribution margin, and cost of client acquisition, plus client and form satisfaction. All with targets. Business into Legal KPIs for Modern Law Firm Success Traditional KPIs...
  19. 19. 3. WHAT TO MEASURE? Measure3 KPIs for Modern Law Firm Success
  20. 20. GOAL: Expand Traditional KPIs to include Business Concepts WHAT TO MEASURE Return on Investment, Contribution Margin, and FULL Cost of Client acquisition Satisfaction Measures and Targets Firm and Personal Level Measure3 KPIs for Modern Law Firm Success
  21. 21. - Client Satisfaction - Client Development - Company Culture - Cost of Client Acquisition - Throughput & Productivity - Profitability & Margins - Individual Performance Measure3 KPIs for Modern Law Firm Success See the conference application for KPI Worksheet | Slides. WHAT TO MEASURE
  22. 22. SEVEN AREAS OF KPIs a Net Promoter Score (%) b CLIENT SATISFACTION Sales Conversion Rate (%) CLIENT DEVELOPMENT
  23. 23. c Average Work Climate Satisfaction d COMPANY CULTURE Cost of client acquisition- CAC ($) Life-time or Annual customer value – CV or LTV ($) LTV to CAC ratio (ratio) COST OF CLIENT ACQUISITION e Revenue per Matter ($) Contribution Margin per Matter ($) Attorney Leverage ($) Paralegal Leverage ($) THROUGHPUT & PRODUCTIVITY
  24. 24. f Billable Hours Paid by AttorneygINDIVIDUAL PERFORMANCE Return on Owner Equity (Investment) (%) Profitability Margin (%) PROFITABILITY & MARGINS What to Measure KPIs for Modern Law Firm Success See the conference application for KPI Worksheet | Slides.
  25. 25. 4. MEASURE AND COMPARE Measure3 KPIs for Modern Law Firm Success
  26. 26. GOAL: See the Value of Measuring and Setting Targets 4. MEASURE AND COMPARE CASE STUDY: Modern Law’s Client Satisfaction NPS Measure3 KPIs for Modern Law Success
  27. 27. One Question as part of follow-up: “On a scale of 0-10, how likely are you to recommended our firm?” 0- 6 Detractors 7-8 Neutral 9-10 Promoters Modern Law Target is 90 Measures how happy clients are with Modern Law and provides opportunity for corrective action even after matter is closed? Very important for “one and done” type law practices to have the referrals and not the usual follow-on matters. Measure3 KPIs for Modern Law Success CLIENT SATISFACTION
  28. 28. Take Aways: • All detractors had same attorney • Many neutral responders also had that attorney • Evidence based decisions Total Responses 67 Promoters: 51 Neutral: 13 Detractors: 3 To Get Score: 51/67= 76% Subtract 3/67=5% Total Score: 71 Calculations
  29. 29. 5. WHERE FROM HERE? Measure3 KPIs for Modern Law Success
  30. 30. GOAL: Understand the action required after measuring and comparing to targets. 5. WHERE FROM HERE? CASE STUDY: Modern Law’s Client Development Process Part II Measure3 KPIs for Modern Law Firm Success
  31. 31. a Our clients are happy with our services b CLIENT SATISFACTION We are effectively converting leads to sales CLIENT DEVELOPMENT
  32. 32. c Our employees feel safe, positive, and comfortable d COMPANY CULTURE We understand our cost of acquiring new clients. We understand the long term revenue from clients. Revenue covers costs of efforts to acquire clients. COST OF CLIENT ACQUISITION e We are seeing the most profitable types of cases. We have the right staffing levels.THROUGHPUT & PRODUCTIVITY
  33. 33. f Are Attorneys managing Clients well enough?gINDIVIDUAL PERFORMANCE Business is meeting industry profitability standards. We meet profitability expectations. PROFITABILITY & MARGINS Where from Here? KPIs for Modern Law Firm Success
  34. 34. 1 Cost of Client Acquisition (CAC) Refresh Memory from before: $5K of billable time for 6 new clients Need to add in sales & marketing costs: $5K Total CAC = $10K/6 = $1.7K 2 Client Lifetime Value (LTV) 3 Limited Service Clients – average $1K 3 Full Service Clients – average $4K 3 Client Contribution Margin Limited Service Clients = $1K - $1.7K = -$.7K Full Service Clients = $4K - $1.7K = $2.3K 4 Modern Law Changes: First, created in-person PAID consultations Second, added in $12 per hour Intake Positions (non billable) Third, added Flat Fee option Fourth, use Access Legal for clients that cannot afford 5 Impact of Changes on KPIs Conversion Rate increased by 59% CAC dropped by the $5K of Billie’s time & increased by $12 per hour person’s time Where from Here? KPIs for Modern Law Firm Success RESULTS
  35. 35. NEXT STEPS 1 Create a KPI workbook or dashboard 2Revisit your Practice Management & CRM to mine Data 3 Set Targets and Time to review results 4Knowledge is Power Where from Here? KPIs for Modern Law Firm Success
  36. 36. ANY QUESTIONS ON THE OTHER KPIs ON THE WORKSHEET? Measure3 KPIs for Modern Law Firm Success
  37. 37. Measure3 KPIs for Modern Law Firm Success KPI Worksheet Measure, Measure, Measure Key Performance Indicators (KPIs) How Calculated Target Tells Us…. Frequency CLIENT SATISFACTION Net Promoter Score (%) % of Clients who say they would recommend us ≥X% Our Clients are happy with our services Quarterly CLIENT DEVELOPMENT Sales Conversion Rate (%) # of New Full-Scope Clients /# of Potential Client Intakes ≥ X% We are effectively converting leads to sales Monthly FIRM CULTURE Average Work Climate Satisfaction (#) Total Work Climate Survey Score (Scale 1-5) / # Surveys ≥ X Our employees feel safe, positive and comfortable Quarterly COST OF CLIENT ACQUISITION Cost of client acquisition- CAC ($) $ sales and marketing + opportunity cost of staff or lawyer/#new clients ≤ $X We understand our cost of acquiring new clients Monthly Life-time or Annual customer value - CV or LTV ($) Total Revenue per year by client (if not one and done, then cumulative) ≥ $X We understand the long term revenue from clients Annually LTV to CAC ratio (ratio) CV or LTV / CAC ≥ 1X Revenue covers costs of efforts to acquire clients Annually THROUGHPUT & PRODUCTIVITY Revenue per Matter ($) Gross Revenue / # New Matters in CLIO (same period) ≥ $X We are seeing the most profitable types of cases Monthly Contribution Margin per Matter ($) Gross Revenue - CV - Variable Cost ≥ $X We are seeing the most profitable types of cases Monthly Attorney Leverage ($) Total $ Billings of All Attorneys / Total ($) Billables ≥ X% We have the right staffing levels Quarterly Paralegal Leverage ($) Total $ Billings of All Paralegals / Total ($) Billables ≥ X% We have the right staffing levels Quarterly PROFITABILITY & MARGINS Return on Owner Equity (Investment) (%) Owner Compensation / Gross Revenue ≥ X% Business is meeting industry profitability standards Annually Profitability Margin (%) Total Net Operating Income / Total Income ≥ X% We meet profitability expectations Monthly INDIVIDUAL PERFORMANCE Billable Hours Paid by Attorney (%) Total Collected $ by Attorney / Total $ Billings by Attorney ≥ $X Are Attorneys managing Clients well enough? Monthly
  38. 38. CONTACT US 602 882 6287 mejuetten@traklight.com Measure3 KPIs for Modern Law Firm Success Billie@mymodernlaw.com @maryjuetten @mymodernlaw 480 649 2605

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