Law firm KPIs (Key Performance Indicators) explain every moving part of your business and are one of the essential parts of management. Every business, big or small, monitors specific KPIs to measure the success or shortcomings of its business strategy. Law firms also have to keep a close eye on KPIs, but first, let’s understand what a KPI is:
When you own a law firm, you are considered a business owner, and it is vital to track the performance of your law firm beyond billable hours. A KPI gives business owners and managers an overview of how their business – or individual departments – is performing at any given time. A KPI measures the business’s goals against the actual, quantifiable data over a specified period.
The benefits of tracking, analyzing, and taking action based on data are essential in any business. Numerous aspects must be taken into consideration while choosing KPIs. If your firm wants to bring in $X of revenue in a year, and you know that closing Y number of cases in that year would be required to accomplish the revenue target, you may track the number of cases that need to be closed on a monthly basis to meet the total yearly goal. This goes for any department — finance, hiring, marketing, and legal.
The truth is that there are more KPIs for your law firm to measure than you may imagine. Case management, revenue and marketing, client service, hiring, and many other divisions of your organisation can benefit from KPIs.
If you don’t want to lose money on your company’s investments, you need to start keeping track of statistics. The statistics don’t lie, and compiling this data reveals tendencies. Use it to your advantage to take over your competition and fine-tune your prior revenue objectives.
Why Should Law Firm Kpis Be Monitored?
If you’re not tracking KPIs for your legal practice yet, you might be wondering whether it’s even required.
Consider this: how will your team know what’s essential, what they should focus on, and what the final product of all their hard work should look like if they don’t have a clear direction?
Here’s why KPIs are essential to your law firm’s success:
The Right Kpis for Law Firms Measure Progress
Monitoring law firm KPIs shows team member’s progress toward the firm’s long-term goals. This gives you the ability to manage effectively with the future in mind. Indicators are low, and you’ll know where the team needs to pick up the slack to improve the outlook.
Kpis Focus the Team’s Attention on What Matters Most
Law firm KPIs provide a key focus that empowers your team to improve strategy and operation based on analytical and informed decisions.
When each team member understands what KPIs they should track, why these are vital to the law firm, and how everyone contributes to overall team success, you will have an aligned team working toward a common goal.
Kpis Help Teams Perform Better as a Whole
There’s a considerable difference between gathering information and evaluating it. If you want to utilise data to see if you performed successfully, you must first figure out what you’re attempting to accomplish. You can measure how your organisation is operating by setting and tracking goals for performance indicators (for example, the KPI of monthly sales).
The use of KPIs as a quantitative metric for gauging performance will lead to natural improvements within the team. When people understand why they do what they do, they can work together to create a clear vision for the future. Furthermore, making law firm KPIs visible to the entire team provides a clear sense of direction and inspires individuals to improve their performance.
What they say is true: What gets measured, gets managed. What gets measured and made public gets significantly improved. If you’re not tracking KPIs in your law firm, it’s time for you to start.
Types of Law Firm KPIs
Now that we understand why data-driven KPIs are so important, stay scrolling for a list of KPIs to track and manage at your law firm. For each KPI, ensure that you set a time period to keep track.
Whatever law firm KPIs you pick, keep in mind that none of these figures is meaningful unless they are seen in context. Setting the targets to evaluate these data depends on the type of practice, firm, and attorneys as well.
1. Marketing KPIs
Businesses and law firms both fail because they spend more money than they earn. Measuring more than just billable hours might help your company better understand its current and future financial status.
Here are some marketing KPIs to consider:
- Number of marketing actions taken
- Marketing budget ratio (the ratio of the total marketing spend to the total fees billed)
- Marketing cost per client (the ratio of the full marketing spent to the number of clients billed)
Firm website traffic: Tracking the traffic on your firm’s website is imperative to understand how your audience interacts with each webpage. If your blogs get low traffic, you need to put more effort into content marketing & law firm SEO. If the bounce rate of your landing page is high, make sure you’re speaking your audience’s language.
Email marketing performance: There are a number of key metrics that you should track in order to gauge the success of your law firm email marketing campaigns. These metrics include open rate, click-through rate, unsubscribe rate, and conversion rate. You can get a clear picture of how your email marketing is performing and make necessary adjustments to improve your results by tracking these metrics.
Website landing page conversions: When you’re running a website, it’s crucial to track your landing page conversions. This will give you insight into your website’s effectiveness in converting visitors into leads or customers.
2. Client Acquisition KPIs
New clients are vital to the success of your law firm—but finding them is a complex process.
Consider using some of the following client acquisition KPIs to show you what’s working for your firm:
- Cost of acquiring a new client
- Number of new cases/matters opened
- Number of new clients
It is also crucial to analyze the number of new clients via source (referral, website, review site, etc.) to continuously refine your marketing strategy and focus your efforts on one channel. The number of potential clients converted into clients must be tracked to ensure the results of said strategy.
3. Client Satisfaction KPIs
Measuring client satisfaction is a new concept for the legal industry, but knowing what you can improve upon—based on solid feedback—is critical to business success today.
Here are some performance indicators to help you evaluate client satisfaction:
- Number of client referrals
- Client retention rates
4. Productivity KPIs
An efficient law firm is a profitable law firm—yet productivity is a massive issue for most. According to the 2021 Legal Trends Report legal professionals bill an average of just 2.5 hours of an 8-hour day.
You can locate areas where time is wasted by tracking your firm’s productivity. By doing so, you can identify areas where time can be redirected to revenue-creating opportunities.
Here are some law firm KPIs to consider when it comes to productivity:
- Number of billable hours
- The ratio of billed hours compared to non-billable hours worked
- Number of unbilled days
- Number of uncollected days
Another technique to measure productivity KPIs is to look at the Utilization rate i.e. the number of billable hours worked divided by the number of hours in a workday) and the Realization rate (the number of billable hours worked divided by the number of hours on a weekday)
5. KPIs for Individual Performance
While law firm business KPIs are valuable for tracking the success and growth of your company, you may also want to measure the performance of individual members of your team, whether it’s you or your staff. Individual performance KPIs might contain information such as:
- Average work rate
- Number of matters referred to the firm
- Originating revenue referred to the firm
- Number of cases completed
6. Financial KPIs
A written long-term financial plan and profitability model should be in place for every legal business. Any healthy company, in fact, has a documented plan that forecasts revenue, costs, net profit, and cash reserves. Track your company’s profitability and financial KPIs to ensure you stick to your goal.
Working with a bookkeeper to establish your objectives based on what’s healthy for your company is a good way to choose financial KPIs that make sense. Then, choose financial metrics that correspond to your objectives.
Here are 4 financial KPIs to be aware of at all times in order to assess your company’s health:
- Profit percentage: This figure indicates how much of your income is profit. A decent percentage to aim for is 10-15%, with all partners receiving the market rate.
- Accounts receivable over 30 days: This measure gives you a high-level picture of how much money your clients owe you right now—the lower the figure, the more cash you have in your bank account.
Cash on hand refers to the quantity of cash you have on hand, whether it’s in your wallet or in your company bank account. A good aim for your company is 30-90 days of running expenditures.
- Labor percentage: This metric relates to the overall payroll expense for your firm as a proportion of your gross sales. Aim for 30-33 percent.
- Realization rate (collected fees): Finally, your realization rate is the number of collected fees in a specific period, usually a month. Your goal here should be 95 percent or greater.
7. Firm Culture KPIs
When looking at law firm KPIs, you might consider looking beyond revenues and clients and into your firm culture. A healthy culture starts from effective law firm branding which boosts employee retention, which is beneficial to the firm.
Firm culture KPIs may provide vital insights into your organization’s health that would otherwise go unnoticed—which is crucial because office culture has an influence on clients and hence your whole business.
Employee satisfaction scores can be tracked through conducting surveys and having meetings with employees to understand the best way to improve your firm’s culture
If employee turnover rates are high, this means that you must fill in the gaps and figure out how to boost employee retention.
How to Leverage Law Firm Data Sources and Track your KPIs
If you’re still with us, congratulations! This is a lot of data to take in, especially if you’re new to the KPI world. The most difficult step is determining which data pieces are critical to your business and which are not. Make things simple by starting with the following:
Choose three business-related questions. Choose three business questions to answer and a mechanism to quantify them based on your objectives. “How many new clients am I bringing in each month?” for example, or “How much monthly revenue do I need to meet my yearly goal?” are some of your inquiries. Choose metrics to assist you in answering these questions.
Plan a system for updating and tracking. How will you track your metrics? Who will be responsible for monitoring them? Create a plan to stick to going forward.
We propose accumulating your data on a weekly basis and comparing it to past data.
Gathering and Organizing Your Law Firm Data
There are numerous ways to gather data depending on your chosen points. For example, if you want to track leads from your website or internet traffic, you may use Google Analytics to do so. Other indicators, such as the number of new customers you get each week, may need to be entered manually or through your law firm’s CRM system.
The idea is to arrange your data such that you don’t have statistics all over the place and can quickly and easily get insights from it. Furthermore, well-organized data makes it easy for your team to visualise.
If you don’t already have a central data repository, we propose developing a new document or spreadsheet that important participants in your company may access and edit. Consider utilising a Google Sheet or an Excel spreadsheet on a shared disc, for example.
Team Accountability and KPIs
You’re not alone in measuring your law firm KPIs if you have a staff. Consider assigning a KPI to each person in your team. Then, when they’ve achieved their goal, reward them for their efforts. As a consequence, your employees will feel accountable for the company’s success, which will raise morale while also assisting you in meeting your objectives.
Review Law Firm KPIs and Data Points
It’s not enough to collect data; you also need to do something with it. In weekly meetings, go over your KPIs and data points with your team. Make a list of what’s working and what isn’t in order to build a strategy for going forward. Devote a portion of your team’s agenda to discussing how to improve while simultaneously recognising accomplishments.
You might be wondering if you have the time—or even the skills—to handle everything we’ve covered here, as well as your client caseload and your firm’s day-to-day operations. You may even consider hiring a company manager to collect and evaluate the data on your behalf. While this is a great option for firms collecting a lot of data, we think it’s overkill when you’re just getting started.
You should be well-versed in the financials of your legal practice. You must understand what you’re tracking and why you’re tracking it. Make tracking and measuring the key performance metrics for your legal company a top responsibility. Set aside time each week to bring everything together. Make it a point of discussion at your weekly meeting to go over the data and any action items that arise from them.
How to Choose the Best KPIs for Your Law Firm
It’s great that you want to monitor performance to analyse your business’s strengths, but how can you choose which precise KPIs are most helpful for your law firm when there seem to be so many to consider?
Keep in mind that not every single KPI is valuable to your firm. Trying to track every single performance metric possible is exhausting, time-consuming, and ineffective. With this in mind, consider your practice’s broad goals and how your business assesses performance before looking at the firm-specific KPIs you want to track.
Before diving into particular KPIs, consider the following questions:
1. How Do You Know What You Need to Measure?
The choices are unlimited when it comes to measuring metrics. Begin by determining what sort of data gives significant insight into your company’s performance, as well as what data is required to produce that knowledge.
2. Do You Already Have Any Existing Data for Your Reference?
What you don’t monitor, you can’t measure. Looking at the data you already have in your practice management system is the first step in defining your KPIs.
Make a list of the information you’ve gathered. Check for any gaps between what you have and what you require. Check to see if your company uses systems that are linked together to make pulling numbers easier. You’ll almost certainly need to construct a spreadsheet for all of your metrics.
3. What Are Your Targets?
Are you a personal injury attorney who hopes to work with a client just once? Or are you working on intellectual property that you can reuse over time? What is each client’s lifetime value?
Every firm has to set its targets before choosing KPIs to measure because they are unique to your practice. For example, your target for client acquisition cost depends on the type of law and the return on investment per client.
How to Begin Using Law Firm KPIs
Consider using the “Plan, Do, Check, Act” management strategy. Prepare to collect data for your KPIs. Then, take remedial action and repeat this monthly once you’ve completed and assessed these KPIs.
In general, you should follow these six steps:
1. Choose KPIs that are relevant to your company’s objectives
Ensure that you have a clear understanding of what each KPI represents and why it’s essential to your company’s objectives.
2. Set goals for yourself
Make sure your goals are quantifiable and aligned with your company’s objectives.
3. Keep track of the data for each KPI
While certain KPIs might provide immediate actionable insights, most of them take a few months of data to detect trends.
4. Analyze the outcomes
Run your KPI reports on a monthly basis and examine them quickly so you can make any necessary changes.
5. Make choices
You may take remedial action based on your findings after you get the information from your legal firm’s KPIs. The key is to maintain your analyses and activities in line with your company’s objectives.
6. Continue the process
Once you’ve acted on the information you’ve gathered, your job isn’t done. You’ll want to go through your KPIs again to make sure you’re measuring the proper measures, establishing the right goals, and seeing if your efforts improved the outcomes you wanted.
Improving your KPIs
1. Split Test
Split testing is the process of experimenting with different versions. You may run tests with two variables (known as “A/B testing“) or several variables (known as (“multivariate testing”). You’re putting several versions to the test to discover which one performs the best in both cases.
For example, on one of your website’s pages, you may test two alternative headlines to see which one generates the most leads or sales. This type of online assessment is the most convenient and time-saving. Offline testing is also viable, such as experimenting with different methods to answer the phone, delivering physical mailers to leads, or modifying the structure of your offers.
2. Identify What to Fix
As there are so many possible tests to run in your business, attempt to figure out where you have the most wiggle room to enhance results. Consider the following scenario: you presently receive a large number of leads, but only a small percentage of these leads turn into paying clients. In this situation, the focus should be on testing to enhance the conversion of those leads into paying clients, rather than on tests to generate additional leads.
3. Assign KPIs to Employees
There is a massive disconnect between what employees think is essential and what management deems vital in most organizations. KPIs are one of the simplest and most effective approaches to close this gap.
Your customer service manager, for example, should set KPI targets and track performance for the KPIs over which they have control (e.g., custom returns, hold times on the phone, etc.). Similarly, the person in charge of pay-per-click advertising should be familiar with and understand their KPIs, which include optimising the spread between pay-per-click advertising expenses and revenues.
It can often get confusing to track law firm KPIs and manage your clients. In today’s digital age, the best way to improve KPIs and attract potential clients is via content. Whether enhancing your website through Law Firm SEO or your content marketing strategy, it is vital to track these efforts as a part of your law firm’s KPIs.
Ready to take your SEO and content strategy to the next level, contact us through the form.
What is the most important law firm KPI to track?
There is no one-size-fits-all approach to identifying KPIs. Hence, law firms have no fixed concept of most or least important KPIs as every business runs differently. Perhaps some firms need better marketing metrics, and others need improvement with their finances. It is up to the managing partners to recognize which aspect of their business needs
How can a law firm track data for its KPIs?
The core of law firm KPIs is data. Tracking data with the right tools is essential to understanding whether your strategies are fruitful. Having a systemized approach to monitoring your data goes a long way. For websites, Google Analytics and Google Search Console provide insights on website traffic, customer behavior and acquisition, and more. To track financials, Excel or Google Sheets would be the way to go
Why do Firm Culture KPIs matter in a law firm?
Your employees are the ones who do the heavy lifting to improve your law firm’s KPIs to ensure maximum benefit to the firm. Having quality employees is key to growth in any organization. Hence your firm must focus on a healthy work culture to retain said quality employees. Firm culture KPIs give you a clear picture of the areas that need improvement in terms of fostering a good work culture
Is there a limit to choosing law firm KPIs?
Financial KPIs are crucial to monitor for any organization; you may also track client acquisition or productivity metrics for your firm. There is no upper limit to choosing KPIs for your firm, but remember that not every metric would be relevant to the firm. Keep your attention on the metrics that play the majority role in the growth of your law firm.
What are some tools to measure Law Firm KPIs?
Any tool that tabulates your law firm’s data in a concise manner such as Excel can be used to measure your KPIs. To track your progress towards improving your KPIs, you can use project management tools such as Asana, Clickup or Hubspot that provide end-to-end CRM services to all businesses.