The document discusses key performance indicators (KPIs) and metrics for law practices. It begins by describing traditional law firm metrics like billable hours, utilization rate, and collection rate. It then argues that practices should think more like entrepreneurs and startups by focusing on metrics like customer acquisition funnel, contribution margin, and return on investment to drive decisions. The document provides examples of how to measure these newer metrics and use the data to identify an ideal customer profile to build a successful business model around superior customer experience.

1. Entrepreneurship in Law:
KPIs, Metrics, and the
Modern Law Practice
A Clio Webinar
by George Psiharis
@GeorgePsiharis
Clio #ClioWeb

2. a bit about me
(George Psiharis)
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3. Vice President of Business
Development & Partnerships
In my role, I work with:
• legal professionals;
• law societies and bar associations;
• law schools;
• clio certified consultants;
• and Clio’s partners to grow our business and create long-term
value for our customers.
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4. this means that…
• I’m an in-house entrepreneur;
• I’m constantly conducting new business experiments;
• I identify, measure, and report on Key Performance
Indicators (KPIs) on each and every experiment.
• my decisions are driven data;
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5. our agenda
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6. i. Traditional law firm metrics (10 minutes);
ii. Thinking like an entrepreneur (10 minutes);
iii. Measuring your practice like a startup (10
minutes);
iv. Building a successful business model (15
minutes).
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7. i. traditional law firm
metrics
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8. Source: http://fortune.com/2014/08/06/15-most-profitable-business-sectors/
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9. this year, law firms ranked #2 - profit
margin of 17.8%
(down from #1 and 18.3% in 2013)
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10. i. Available hours;
ii. Utilization rate;
iii. Average hourly rate;
iv. Realization rate;
v. Collection rate.
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11. i. Available Hours
The total number of hours that are available to be
billed.
Think of this as your maximum inventory, e.g. 40
hours/week
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12. ii. Utilization Rate
chargeable hours
available hours
Of your available hours, how many are actually
chargeable, netting out all non-client facing activities?
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13. ii. Average hourly rate
billable value of utilized hours
# of utilized hours
What is the average sale price of a utilized hour of your
time?
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14. ii. Realization rate
value of billed hours
value of utilized hours
Considering the value of your utilized hours, how much
of what you record is ending up on invoices delivered
to your clients?
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15. ii. Collection rate
total collected revenue
value of billed hours
The all important metric: how much of what you bill
actually converts to positive cash flow for your practice?
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16. Let’s work through an example…
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17. i. Mike Ross worked 60 hours last week.
ii. He spent 10 of those hours in non-billable
meetings.
iii. His average hourly rate is $250.
iv. He billed a total of $10,000 last week.
v. His finance team collected a total of $7,000.
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18. i. Available hours = 60, max billable = $250 x 60 = 15,000
ii. Utilization rate = 50/60 or 83%
iii. Average hourly rate = $250
iv. Realization rate = $10,000 / ($250 x 50) or 80%
v. Collection rate = $7,000 / $10,000 = 70%
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19. If we take collected revenue and subtract fixed
and variable costs we can determine profits and
profit margins (where we started).
Another very popular traditional metrics is PPP -
Profits per Partner.
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20. does all this sound
familiar so far?
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21. Clio #ClioWeb

22. ii. think like an
entrepreneur.
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23. Clio #ClioWeb

24. 1. Traditional law firm KPIs revolve
around billable hours and the fee
earner, not the customer.
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25. 2. The single most important KPI in any
business is ROI, not PPP.
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26. 3. These metrics are frozen in time and
have not adapted to a disrupted
market.
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27. Definition of an entrepreneur:
“a person who organizes and
operates a business or businesses,
taking on greater than normal
financial risks in order to do so.”
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28. Average debt of the class of 2013: $125,000
Source: http://grad-schools.usnews.rankingsandreviews.com/best-graduate-schools/
top-law-schools/grad-debt-rankings
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29. what are some examples of
entrepreneurship in law?
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30. solo practices
and small firms
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31. According to the American Bar
Association 50% of private
practitioners are solos, while 70%
work in firms of 10 lawyers or
fewer.
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32. alternative fee arrangements
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33. examples of alternative fees
- Capped fees;
- Blended rates;
- Value-based fees;
- Fixed / flat fees;
- Portfolio-based fees;
- Performance-based / contingency fees
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34. alternative practice models
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35. alternative practice models
- Virtual and distributed law firms;
- Corporate secondments / in-house
positions
- Legal freelancers;
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36. self-help & online legal forms
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37. we’re
screwed…
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38. There are a number of opportunities to
take risks, experiment, and build success
in this space - but before you do, you have
to know what to measure an look for.
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39. iii. measuring your
practice like a startup
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40. 1. look at customer acquisition as a
funnel, across the business
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41. # of customer inquiries
# of converted / new customers
average annual revenue per customer
customer retention rate
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42. 2. consider contribution margin
instead of profit per partner
(PPP)
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43. contribution margin:
Revenue per unit sold less the variable cost
per unit.
you can then subtract fixed costs to
calculate profits and profit margins.
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44. contribution margin per practice area
contribution margin per matter
contribution margin per customer
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45. contribution margin per customer
Average Cost of
Acquiring a Customer
Average revenue per
customer
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46. $100,000 on marketing and
business development
This resulted in 20 new customers
Average CAC = $100,000/20
or $5000
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47. These 20 new customers generated $154,000
in collected revenue this year
Or $7700 in annual revenue per new
customer.
Your contribution margin per customer is
$7700 - $5000 = $2700
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48. Customers over this average are likely the
most desirable.
Customers under this average are typically
not profitable.
You can apply this to individual matters and
roll it up into practice area totals.
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49. 3. set yourself up to track
Return on Investment (ROI) for
everything you try.
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50. Clio #ClioWeb

51. 4. Based on ROI, identify your
ideal customer profile.
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52. iv. building a successful
business model
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53. we’re screwed…
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54. Unbundling
+
Competition
+
IT
= Commoditization
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55. Clio #ClioWeb

56. Clio #ClioWeb

57. Clio #ClioWeb

58. what these premium brands offer is
superior customer service, or what
we at Clio might call customer
experience.
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59. that just happens to sell legal
‟" advice
your law firm is a service company
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60. build and differentiate your customer
experience based on your ideal
customer profile.
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61. Clio #ClioWeb

62. Clio #ClioWeb

63. Clio #ClioWeb

64. Clio #ClioWeb

65. Clio #ClioWeb

66. Clio #ClioWeb

67. Clio #ClioWeb

68. Clio #ClioWeb

69. your firm here!
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70. Clio #ClioWeb

71. putting KPIs and ideal customer
profiles into action.
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72. Branigan Robertson:
How I Started My Own Law Firm
Right After Law School.
http://landing.goclio.com/How-I-Started-My-Own-Law-Firm-Right-After-Law-School-Web.html
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73. Clio #ClioWeb

74. Thank you.
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75. Appendix A- Useful Resources!
• http://fortune.com/2014/08/06/15-most-profitable-business-sectors/!
• http://www.managingpartner.com/sites/default/files/ARK1708%20-%20Financial%20Planning%20and
%20Management%20for%20Law%20Firms_Sample_Chapter.pdf!
• http://www.law21.ca/2013/08/law-firm-profitability-metrics-just-subtract-lawyers/!
• http://www.americanbar.org/publications/law_practice_magazine/2013/september-october/your-financial-dashboard.
html!
• http://www.altmanweil.com/dir_docs/resource/41ff6ad2-da67-406e-9999-ca2aaae63539_document.pdf!
• http://www.managingpartnerforum.org/tasks/sites/mpf/assets/image/MPF%20-%202012%20Survey%20of
%20LF%20Economics%20-%20Exec%20Summary%20-%209-20-12.pdf!
• http://insidelegal.typepad.com/files/ILTAInsideLegalTechnologyPurchasingSurvey2012.pdf !
• http://www.appliedstrategies.ca/documents/kpi_primer.php !
• http://landing.goclio.com/How-I-Started-My-Own-Law-Firm-Right-After-Law-School-Web.html !
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76. Appendix B - Business Model Generation!
• http://www.businessmodelgeneration.com/canvas/bmc!
• https://www.youtube.com/watch?v=QoAOzMTLP5s !
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77. Thank You!
Joshua Lenon!
!
joshua@goclio.com!
!
@JoshuaLenon!
!
Linkedin.com/in/joshualenon!
!
Clio #ClioWeb

78. Entrepreneurship in Law:
KPIs, Metrics, and the
Modern Law Practice
A Clio Webinar
by George Psiharis
@GeorgePsiharis
Clio #ClioWeb