The 4 Types of KPIs Every Law Firm Needs to Track

Law firms accumulate and hold a tremendous amount of data, but the majority have limited access to this information. With the help of technology, firms are unlocking deep insights about their practices to improve client outcomes, maximize staff efficiency and financial performance, and grow and scale like never before.

By using technology to streamline your firm’s business processes, you can easily enable firm leaders to access the data needed to improve operations, business development, intake, performance and efficiencies, and client satisfaction.

Key Performance Indicators

As the old saying goes, you cannot manage what you do not measure. To understand your firm’s performance, it is essential to collect data on Key Performance Indicators (KPIs). Firm KPIs can be very specific, based on the characteristics of the type of practice, and should objectively measure what is important. There is no one-size-fits-all list of KPIs, rather, the most valuable KPIs are designed specifically for the individual firm so as to truly paint a picture of how the firm is performing.

Litify has considered the KPIs firms need most to offer an integrated data visualization application that makes your data work for you. Here, we offer four common types of KPIs law firms should track.

1. Firm Operations

Do you know the cost associated with acquiring a new client? Marketing, pitching work, intake processes, and consultations all involve monetary and time expenses and in legal, time is literally money. Developing a deep understanding of what matters are worth and what time and budgetary expenses are involved with bringing in work can result in significant gains for your firm.

Does your firm regularly bill? Do you end up haggling with clients over fees and end up reducing your fee regularly? What is your firm’s realization rate? Billing is among every lawyer’s least favorite tasks, but if it’s a particularly painful process for your firm, it’s  important to understand why.

By identifying KPIs that focus on specific data points such as billable hours per timekeeper, billing rates, staffing ratios and leverage, cost recovery, percentage of hours by attorney role (e.g., partner or associate), you can gain a more accurate understanding of your firm’s operation performance and identify areas to improve. Without this key data, finding solutions to problems is nothing more than a guess-and-check process. The right data can help to pinpoint a problem, identify solutions, and track how changes might be improving outcomes.

2. Business Development and Intake

Efficiently and effectively bringing in new clients is essential for every firm. Developing KPIs that provide insight into what matters best fit your practice can help firms establish a strategy for pursuing new work and engaging the most valuable clients.

KPIs can track the cost of marketing and business development per client. Other KPIs can track client growth (top-end client growth year-to-year), cross-selling opportunities (practice area utilization within the firm), and active clients, year-to-year.

For some firms, developing a clear picture of who to engage can be critical. Using KPIs that track billing and outcomes (e.g., damages awards), a firm can develop a profile of a profitable matter and use this profile when deciding on which clients to take on during the intake process.

Leveraging a tool like Litify’s intake app, which captures data about your firm’s client intake pipeline, can provide key data related to the types of matters your firm is taking on. The app can integrate with lead generators to provide insight into the effectiveness of these services and help firms identify where their most valuable leads are coming from. Litify’s intake app also includes a case qualifying scale, which determines during the intake process if the matter meets the specific qualifying criteria, and it also uses data collected from past matters to help firms determine the quality of a specific matter and whether or not it isis worth taking on. This can save a significant amount of time and money for the firm in the future.

3. Performance and Efficiencies

Delivering effective legal services is not just important for the client, but also to the firm’s bottom line. Delivering quality services inefficiently hurts the firm, while delivering low-quality services quickly puts clients and the firm at risk. Measuring firm performance with the right set of KPIs can help firms deliver services better, faster, and cheaper.

For example, KPIs focused on matter outcomes can track the time it takes, on average, to resolve certain types of matters. Over time, tracking this data may reveal that some matters are not worth taking on as they require significant time and are not cost-effective for the firm’s business model. This same data may help firm leaders identify practitioners who take significantly longer than others to resolve certain types of matters, and can address issues that may be causing these delays.

All firms should also consider including KPIs focused on work product quality. Leaders can use this data to improve client outcomes, identify efficiency gains, better evaluate technology solutions, improve profit margins, and identify practitioner strengths and weaknesses, among many other purposes.

4. Client Satisfaction

Client satisfaction KPIs can provide a window into how your firm is perceived by your current and prospective clients. Maintaining quality relationships with clients is a priority for every firm, but developing data around what clients think about the client experience—things like your firm’s responsiveness, attentiveness to client issues, and whether or not you are meeting your clients’ expectations—can help identify areas where your firm can improve relationships and better serve clients. Learning about your clients’ needs and desires can open up opportunities to engage in new ways, allowing your firm to deepen your relationship with them by identifying or anticipating issues, and potentially obtaining additional work through cross-selling opportunities.

Identify KPIs specific to your firm

The suggestions for KPIs discussed here are not meant to be exhaustive, but rather to help generate ideas for what firms need to consider. Many of these data points are universally important for every law firm to track, but some of the most important KPIs are unique to each firm.

To get to this layer of firm-specific KPIs, firms should look at the data they presently collect and use these data points as an initial guide to what is important. From there, identify what else should be tracked.

For many firms, where the data is housed could be an initial barrier to implementing KPIs. Data scattered in many places, for example, inhibits a firm’s opportunity to leverage the information they have. As a fully customizable platform, Litify is designed to allow firms to focus on client work, while it collects data throughout the entire life-cycle of each case. Litify provides a single practice management platform, allowing lawyers to view all of their KPIs in one central location.

Benchmarking

Any KPI development plan should include identification of benchmarking data. This can be internal data (e.g., the first month or quarter of data collected) or can come from external sources (e.g., the ABA, bar associations, and other legal associations). It is important to identify this benchmark data early on so that as new data from KPIs becomes available, reasoned comparisons can be made. Like other parts of the KPI development process, the benchmark data may not be perfect, especially at the outset of the project, but will improve over time as more KPI data is added to the dataset.

Dashboards and Visualization

Today, attorneys have access to tools that help them identify trends in merger deal terms, spot patterns in a specific judge’s rulings, and even evaluate the quality of a law firm’s court filings. But few tools offer a window into a firm’s own operations.

Humans are by nature visual beings and can more easily perceive differences in size than discern what data in a spreadsheet might indicate. For this reason, Litify has established a suite of visualization tools within each of its apps. The Insight app has customizable dashboards and powerful reporting functions designed to provide firms with the tools they need to understand their performance quickly and easily.

Get Started

For firms, the hardest part of developing a data-driven business approach is determining what to measure in the first place. To start, consider the four types of KPIs listed above: firm operations, performance and efficiency, business development, and client satisfaction. But also, think about which KPIs paint the most accurate picture of your firm. It is important to remember that this initial set of KPIs does not need to be perfect. In fact, KPIs will evolve as firm managers develop a deeper understanding of how the firm is performing and action is taken to address areas of concern and grow areas of strength.

More critical than the KPIs themselves is what action is done once firm leaders have these insights in hand. Litify’s apps are ready to help your firm organize your practice and matter life-cycle from beginning to end, harnessing your data to efficiently make informed, data-driven decisions for your firm.

Talk with us today to learn more about how Litify is uniquely positioned to help you track and leverage your firm’s KPIs.

 

How Leading Plaintiff Law Firms Use Data to Achieve Radical Growth

Working on your firm – versus working in your firm – means asking the right questions and finding the answers that will drive business growth. The challenge many encounter as they begin the process of growing and improving their law firm is figuring out which questions to ask.

It’s easy to get side tracked and spend time measuring the wrong KPIs (Key Performance Indicators), which can hurt, rather than help a firm’s business.

We asked a group of successful plaintiff law firms how they use data to grow and improve their businesses and found that many are measuring a range of KPIs across, Marketing, Intakes, Referrals, and Matters.

You can download the full list of insights from these leading firms in our free e-book;

Metrics That Matter: How leading plaintiff firms achieve radical growth.

Here are some highlights from the e-book:

Cost per Retainer Sent

“Cost per retainer sent tells me where to spend more money and where to stop spending money in order to acquire new business most efficiently. I use the cost per retainer sent because it’s the deepest KPI (Key Performance Indicator) that we can get fast enough to be usable in the business context.

Unlike many companies, ROI (Return on Investment) or ROAS (Return on Advertising Spending) doesn’t work due to the length of our revenue cycle. Cost per lead doesn’t work because it doesn’t account for lead quality.

Cost per retainer sent is a fast metric that weighs in quality (since we don’t send packets to people that aren’t potentially clients) and thus, is the best core metric for knowing how hard your dollar is working for you. Without an engine, having a pretty car is pointless.”

–  Anthony Johnson, Johnson Firm

 

 

 

Milestone Moments of a Case

“Our business has many different facets to it. We attempt to distill it down to several key metrics that allow us to confirm that we are moving the ball forward. We do this by watching the milestone moments of a case.

By tracking at a very high level that we are hitting specific milestones across the firm, we can quickly see if the firm is trending in the right direction. If our attorneys are opening new cases,  sending out demand letters, signing releases, and closing cases at a better pace than last month it is typically a telling sign that our business is healthy and growing.

We use many metrics to measure the success of our business, but these metrics that confirm the machine is both pumping and picking up speed are the key indicators that we are on the right track.”

–  Emery Brett Ledger, The Ledger Law Firm

 

 

 

 

Tracking the Full Life Cycle of a Case

“Most important to us is Cost Per Conversion of a Lead Source and the Average Attorney Fee per that Lead Source.  This allows us to compare how much it costs for us to bring in a lead from that source to what fee we can expect for a case from that lead source.   Then we can take our overhead (minus marketing costs) and divide it by how many cases we handled in a given year and find out what our margins are for our cases per lead sources.

Using these metrics we can really track the full life cycle of a case and follow it back to its origin. These metrics will influence our marketing spend, our overhead, our headcount, and our entire business.”

– AJ Bruning, The Bruning Law Firm

 

 

 

Download the ebook here for a full list of insights and metrics you can use to achieve radical growth for your firm.

Metrics that Matter Series: Matters

This is the third in a series of posts titled Metrics that Matter. Our previous post looked at the power of marketing and intakes metrics. It is Litify’s goal to inspire you to think about which questions are the right ones to ask and challenge you to find the answers. Metrics are often the best tool to help you reach these answers. In this post, we’ll examine matter metrics.

The Future is Now: Projected Inventory With Projected Close Date

The question that looms over all marketing and intake data is: What does it translate to in dollars and cents? How can you decide where to reinvest and understand the health of your business if you need to wait two years to see the results?

Begin by holding your attorneys accountable for projecting their “pipeline”. Assign an estimated value to every matter and project the month that you expect them to close. While this data is inevitably imperfect, it allows you to begin forecasting your revenue with a degree of confidence. You can begin to see if your marketing efforts are working and whether specific channels are driving better quality than others. Hold your attorneys accountable for their projections and begin to see into the future of your business.

Squeezing Oranges: Estimated vs Actual

Once you begin predicting the future, you can then turn an eye towards the past. By comparing what you have actually earned on cases to what you thought you would earn, you can learn valuable lessons about the way you used to do business, the way you currently do business, and allow you to chart a new course for the future.

There may be marketing channels that did not pan out, attorneys that underperformed, or practice areas that were not viable. Dig into the data, zone in on the areas of concern and optimize. Looking back over your historical data overlaid with what you thought the future held at that time provides you with the crystal ball you need to keep advancing your firm into the future.

Performance Review Time: Average fee and length of time by attorney

Asking questions about your business is important, but it is significantly more important to understand the performance of your attorneys.

Automate the reporting and be transparent with your team by allowing your attorneys to see how they compare to their colleagues. Display which attorneys are maximizing the case value, who is moving through their file most efficiently,  and celebrate them as winners in your firm.

Customer Highlight

“Our business has many different facets to it. We attempt to distill it down to several key metrics that allow us to confirm that we are moving the ball forward. We do this by watching the milestone moments of a case.

By tracking at a very high level that we are hitting specific milestones across the firm, we can quickly see if the firm is trending in the right direction. If our attorneys are opening new cases,  sending out demand letters, signing releases, and closing cases at a better pace than last month it is typically a telling sign that our business is healthy and growing.

We use many metrics to measure the success of our business, but these metrics that confirm the machine is both pumping and picking up speed are the key indicators that we are on the right track.”

Metrics that Matter Series: Intakes

This is the second in a series of posts titled Metrics that Matter. Our previous post looked at the power of marketing metrics. It is Litify’s goal to inspire you to think about which questions are the right ones to ask and challenge you to find the answers. Metrics are often the best tool to help you reach these answers. In this post, we’ll examine intake metrics.

Conversion Rate: Lead to Sign Up

The growth of your firm lies in the hands of your intake staff. Many firms take this aspect of their business for granted. We have seen that there is no firm too small to focus on the intake process.

The most successful firms view their intake staff as the equivalent of their sales team, and consider a signed retainer as the equivalent of a closed deal.  Sales is all about keeping the ball rolling and continuously moving deals forward. Your intake department is similar in that regard. Success is driven by a carefully designed process, rigorous attention to detail, best in class tools for your team, and relentless follow up.

At the most macro level, your conversion rate measures the health of your intake center. How many leads you have received is important,  but more important than that is how many of them are putting pen to paper and joining your client base.

To E-Sign or Not to E-Sign: Retainer Return Rate by Type

With the changing landscape of technology, consumers are getting smarter and demanding that their service providers keep up with them. Potential clients will reach out to 3-5 law firms at once and the firm that is positioned to sign them the quickest, with the best customer experience usually wins the deal.

Electronic Signatures are one way technology has changed the game over the last few years. While E-Sign sacrifices the face-to-face interaction, the benefits likely outweigh the negatives. Our theory is that it is not an all or nothing question.

By arming your firm with all of the tools; electronic signature, in person meetings, and overnight mail, you position yourself to meet the needs of every potential client, regardless of their situation.

Carefully measure which methods are successful in specific situations and don’t be afraid to adapt your practice to meet the changing landscape of your client base.

Customer Highlight

“Cost per retainer sent tells me where to spend more money and where to  stop spending money in order to acquire new business most efficiently. I use the cost per retainer sent because it’s the deepest KPI (Key Performance Indicator) that we can get fast enough to be useable in the business context. Unlike many companies, ROI (Return on Investment) or ROAS (Return on Advertising Spending) doesn’t work due to the length of our revenue cycle. Cost per lead doesn’t work because it doesn’t account for lead quality.

Cost per retainer sent is a fast metric that weighs in quality (since we don’t send packets to people that aren’t potentially clients) and thus, is the best core metric for knowing how hard your dollar is working for you. Without an engine, having a pretty car is pointless.”

Know Your Cream of the Crop: Number of Calls/Sign Ups by Agent

The first contact that a potential client has with your firm is often with your intake staff. The potential client may have recently suffered an injury or is calling regarding a lost loved one. Make sure that they are received by a competent, caring voice with a proven track record that can guide them through their issues.

Make sure your intake staff is the most appreciated team in your office. Find your best performers. Track their efficiency and conversion rates closely. With the proper incentives the results will come quickly. Begin by knowing the numbers and who your closers are.

The Junkyard: TD by TD Reason

Are good cases slipping through the cracks? An intake department that is running smoothly should be deliberately turning down a large percentage of their overall lead volume. Strict criteria and decisive turndowns are crucial to streamlining the overall efficiency of your practice.

However, it is important to track why cases are being turned down. Are clients choosing another firm? Are you losing contact with them? Are clients simply turning you down? Is your marketing broken?  This data allows you to identify the areas of concern and adjust the knobs on your intake machine so that you can optimize, adjust and recover the cases that are falling by the wayside.

Metrics that Matter Series: Marketing

Building and growing a law firm comes with a great deal of responsibility. As attorneys, your ultimate goal is to ensure that clients receive the best representation and get the best result. In order to deliver the best client experience, firms have to consistently meet internal benchmarks and ensure that they are operating efficiently.

Working on your firm — versus just working in your firm — forces you to ask both simple and difficult questions. Nevertheless, the challenge many encounter as they begin the process of growing and improving their firm is that they don’t know the correct questions to ask. It is Litify’s goal to inspire you to think about which questions are the right ones to ask and challenge you to find the answers. Metrics are often the best tool to help you reach these answers. With this post, we will explore the power of marketing.

The First Line of Defense: CPA vs CPM

When marketing, it is important to stay focused on results. The key metric to track is your CPA (Cost per Acquisition).  While marketers will toss around other jargon such as CPM (Cost Per Thousand Impressions) to justify their efforts, your CPA is the one key metric that will drive your success.

Don’t focus on how many people are seeing your online and offline campaigns, focus on how many of those eyes turn into leads and more importantly how many of those leads turn into cases.

Leads are Not Cases: Marketing Tracking Report by Channel

Whether you are running your own Google Adwords account, purchasing leads through a third party, or driving organic traffic to your website, the metric that your marketing manager will provide you with is the number of leads received and the cost per lead.

Don’t stop there.

Push your team further, and make certain that every lead that comes in is automatically attributed to a campaign. Extend your tracking and follow that marketing campaign to the finish line. Track the success of your campaign all the way through to a signed retainer. Reinvest in the channels driving quality cases at low CPR (Cost Per Retainer), and cut away the noise of campaigns that generate hundreds of dead leads.

Your firm’s success can be heavily influenced by the quality of your leads and in your ability to generate a consistent flow of clients. Knowing where your good cases are coming from is the first step in that mission.

Customer Highlight

“Most important to us is Cost Per Conversion of a Lead Source and the Average Attorney Fee per that Lead Source.  This allows us to compare how much it costs for us to bring in a lead from that source to what fee we can expect for a case from that lead source.   Then we can take our overhead (minus marketing costs) and divide it by how many cases we handled in a given year and find out what our margins are for our cases per lead sources.

Using these metrics we can really track the full lifecycle of a case and follow it back to its origin. These metrics will influence our marketing spend, our overhead, our headcount, and our entire business.”