Join us at noon in Salon A3 at the ABA TECHSHOW on March 16th to discuss how to measure what matter to your law firm's bottom line with law practice management software, FIRM CENTRAL. Key Performance Indicators (KPIs) for law firms
MEASURE WHAT MATTERS TO YOUR FIRM'S BOTTOM LINE WITH FIRM CENTRAL
1. MEASURE WHAT MATTERS TO YOUR FIRMâS
BOTTOM LINE WITH FIRM CENTRAL
March 16, 2017
Mary Juetten & Kathy Freije
2. 2 Measure What Matters to Your Firm's Bottom Line with Firm Central
MEASURES WHAT MATTERS
TO YOUR FIRMâS BOTTOM
LINE WITH FIRM CENTRAL
12:00 Measures that Matter: State of Small Law
12:10 KPIs Examples
- Pipeline | Net Promoter Score
- Individual Collections | Accounts Receivable (A/R) Aging
- Matter profitability
12:40 Getting Started
12:50 Questions
3. 3 Measure What Matters to Your Firm's Bottom Line with Firm Central
Measures that Matter
4. 4
Solos and Small Law Firm Partners SayâŚ
7
88%
50%+
Types of challenges experienced by at least 50% of small
law firms
Firms with significant challenges have taken no action to
address them, with the exception of keeping up with legal
changes
Client satisfaction ratings are how they define firm
success
2016 State of Smaller Law Firms Study, Thomson Reuters
5. Small Law Firm Success Defined
36%
38%
50%
76%
81%
82%
87%
88%
0% 100%
Profit per partner
Revenue per partner
Case win percentage
Overall revenues
Work/life balance
Overall profits
Repeat business
Client satisfaction ratings
2016 State of Smaller Law Firms Study, Thomson Reuters
6. 6
Small Law Firm Challenges
⢠Challenges acquiring new client business
⢠Spending too much time on administrative tasks
⢠Cost control and expense growth
⢠Clients demand more for less or rate pressure
⢠Increasing complexity of technology
⢠Lack of internal efficiency
⢠Keeping up with changes in the legal market
⢠Succession planning
⢠Information overload from growth in legal documents
2016 State of Smaller Law Firms Study, Thomson Reuters
Experienced
Challenge
78%
69%
62%
62%
63%
54%
56%
47%
47%
7. 7
Those With Significant ChallengesâŚ.
Implemented
Change
37%
19%
46%
34%
28%
54%
11%
27%
18%
Living with the
Problem
63%
81%
54%
66%
72%
46%
89%
73%
82%
⢠Challenges acquiring new client business
⢠Spending too much time on administrative tasks
⢠Cost control and expense growth
⢠Clients demand more for less or rate pressure
⢠Increasing complexity of technology
⢠Lack of internal efficiency
⢠Keeping up with changes in the legal market
⢠Succession planning
⢠Information overload from growth in legal documents
2016 State of Smaller Law Firms Study, Thomson Reuters
8. 8 Measure What Matters to Your Firm's Bottom Line with Firm Central
WHAT ARE KPIs?
Key Performance Indicators are metrics for
measuring all aspects of business and are
beyond the traditional billable hour.
Law can borrow from other professional
services and industries for KPIs.
Focus on outputs, client experience,
collections rather than inputs such as hours
billed.
Move from Profits per Partner.
9. 9 Measure What Matters to Your Firm's Bottom Line with Firm Central
Thomson Reuters Small Law Firm KPI and Benchmark Survey
Participants:
⢠690 surveys sent out to customer panel June 2016
⢠62 Firms Responded: 10 Solos & 50% under 10 Attorneys
Stats:
⢠81% use technology (time & billing (34%) and practice management (44%))
⢠58% do NOT use KPIs beyond traditional billable hours
⢠Only 6 or <10% use more than 4 KPIs
â 19 use Collected Billings by Attorney
â 15 measure overdue Accounts Receivable (A/R)
â 14 track Matter Profitability
â 3 measure client satisfaction (less than 5%)
10. 10 Measure What Matters to Your Firm's Bottom Line with Firm Central
KPI Examples
11. 11 Measure What Matters to Your Firm's Bottom Line with Firm Central
Start with Client Satisfaction
Positive and Predictable Cash Flow:
Satisfied clients tend to pay and itâs easier
to upsell or have happy clients refer friends
and associates.
Start with client development KPIs,
including pipeline and cost of client
acquisition and measure firm culture and
client experience.
Borrow from outside the law: Net Promoter
Score (NPS) & Pipeline.
Also on KPI Starter Spreadsheet â Client
Acquisition Cost
12. 12 Measure What Matters to Your Firm's Bottom Line with Firm Central
CLIENT EXPERIENCE: Net Promoter Score (NPS)
Net Promoter Score (NPS) (%)
The percentage of total clients responding to the
survey question who are promoters less the
percentage of total clients responding who are
detractors.
Q: On a scale of one to ten (with one being not at all
likely and ten being extremely likely), how likely are
they are to recommend your firm to their friends,
family, and colleagues?
Additional Question: Why or Why Not?
Allow for feedback, good and bad.
Help with action plan for improving NPS.
Survey must be tracked, not anonymous.
Technology:
Google Documents or Survey Monkey, Excel for
responses.
13. 13 Measure What Matters to Your Firm's Bottom Line with Firm Central
CLIENT DEVELOPMENT: Pipeline
Adjusted Prospect Pipeline ($)
Total dollar value of the Prospective Clientsâ Matters on
the Pipeline adjusted for likelihood of success divided
by total Attorneys (and Paralegals in some cases*) to
yield a dollar value.
Technology:
Can start with Excel and move to Customer Relationship
Management (CRM).
Can look at the Matter reports in Firm Central for data to create the
different types of matters (buckets).
Targets:
Should tie into the monthly revenue in your budget.
14. 14 Measure What Matters to Your Firm's Bottom Line with Firm Central
Firm Central Reports to Support KPIs
Available Reports
15. Steps to Export the Client | Matter Reports from Firm Central
1. Click the Time & Billing Tab at the top of screen
2. Click the Reports tab
3. Select appropriate report and click Generate Report button
4. Select date range (date range will default to current month
range)
5. Select individual or all client/matter data
6. Click Export button
7. Click Download button
8. Open report in Excel
16. 16 Measure What Matters to Your Firm's Bottom Line with Firm Central
Exported Firm Central Reports: Collection Realization by Matter
(in Excel)
17. 17 Measure What Matters to Your Firm's Bottom Line with Firm Central
Misplaced Focus on Billable Hours.
Allan focused on billing, not collecting
At the end of the year, Allan was a billing machine at 116.25%
utilization but 86.22% collected.
Align your KPIs with firm goals: Cash is King.
Have timekeeperâs focus on collections, not billing. 160 hours
does not matter if only 120 hours are collected.
Results are 88% when look at one month based on this data.
Firm Central provides collections realized by
timekeeper or $ collected by timekeeper to
develop these metrics for your timekeepers.
18. 18 Measure What Matters to Your Firm's Bottom Line with Firm Central
PROFITABILITY: Aging Tolerance
4- Profitability (f) Aging Tolerance (%)
Total collections within 60 days divided by total billings.
Set deadline for recording WIP by month-end.
Policy to bill out all WIP each month (where practical) or at end of
each engagement, regardless of timing.
Set payment terms.
Investigate factoring or other services if necessary.
Use e-billing and consider accepting credit cards.
Unbilled(
Time
Billed(
Time
Collected
Time
19. 19 Measure What Matters to Your Firm's Bottom Line with Firm Central
Exported Firm Central Reports: Aged A/R
(in Excel)
20. 20 Measure What Matters to Your Firm's Bottom Line with Firm Central
Steps to Export the Aged A/R Report from Firm Central
1. Click the Time and Billing Tab at top of screen
2. Click the Reports tab
3. Select Accounts Receivable and click Generate Report button
4. Date range will auto populate for current month. Change date range to
see overdue A/R (see attached Export Settings.jpg)
5. Click Export button
6. Click Download button
7. Open report in Excel (see attached Aged Excel Report â Current
Month.jpg)
21. 21 Measure What Matters to Your Firm's Bottom Line with Firm Central
PROFITABILITY
58 responses to TR KPI Survey, 31 firms
reported using either of the two profitability
metrics:
Take-home dollars
Bank Balance
KPIs need to be timely to allow for
corrective action.
Matter profitability was an option on the
survey.
22. 22 Measure What Matters to Your Firm's Bottom Line with Firm Central
PROFITABILITY KPI: Contribution Margin (CM) by Matter
Look at the mini profit and loss by firm by month
PI firm with two partners so overall was 49% in Jan but OF was 60% and
PR was 46%.
Remember the CM uses Direct Costs which is at salary and/or draw costs;
not billing rates. We can do a calculation at billing rates which is Leverage
Use Firm Central to export the timekeeper value and
costs by matter â and calculate leverage KPI OR use
salaries instead of billing rates for CM.
23. 23 Measure What Matters to Your Firm's Bottom Line with Firm Central
Exported Firm Central Reports: Timekeeper & Expenses by Matter
(in Excel) Also indicates whether the matter has been billed or not in last column
24. 24 Measure What Matters to Your Firm's Bottom Line with Firm Central
Exported Firm Central Reports: Write-offs & Discounts by Matter
(in Excel)
25. 25 Measure What Matters to Your Firm's Bottom Line with Firm Central
Getting Started
26. 26 Measure What Matters to Your Firm's Bottom Line with Firm Central
KPI Framework: 40+ measures
Client
Development
Client,
Acquisition Cost
Productivity
ProfitabilityPerformance
Client,
Experience
Firm Culture
27. 27 Measure What Matters to Your Firm's Bottom Line with Firm Central
Systems & Data
Systems â from manual to high tech, define
your workflow. Pick the appropriate
technology.
Garbage In; Garbage Out.
Check the data sources and set up as many
links as possible.
For example, Firm Central to QuickBooks,
extract data to automatically populate your
spreadsheets using linking.
28. 28 Measure What Matters to Your Firm's Bottom Line with Firm Central
KPIs: monitor frequently
Client Development
Client Acquisition Cost
Productivity
Profitability
Performance
Client Experience
Firm Culture
29. 29 Measure What Matters to Your Firm's Bottom Line with Firm Central
Questions
30. 30 Measure What Matters to Your Firm's Bottom Line with Firm Central
Small Law Firm KPIs: How to Measure Your Way to Greater Profits
Order your copy today or visit the TR Booth at 1:15pm:
http://legalsolutions.com/Juetten
20Juetten for 20% off
Free Starter Spreadsheet will be emailed to participants upon request (send me a
note or give me your business card).
FREE TRIAL of FIRM CENTRAL
http://legalsolutions.thomsonreuters.com/law-products/solutions/firm-central/free-trial
Mary Juetten Kathy Freije
@maryjuetten @WestlawSmallLaw
mejuetten@traklight.com firmcentral@thomsonreuters.com
Traklight.com Thomsonreuters.com
Evolvelawnow.com
Hinweis der Redaktion
The following numbers tell a story about the state of the profession today:
88% say that client satisfaction ratings is their measure of firm success
7 - Types of challenges experienced by at least 50% of small law firms
More than 50% of those with significant challenges have taken no action to address them.
What do these numbers mean for you?
You're probably facing at least one of the challenges we identified.
It's difficult to change or even determine a plan of action to address them.
We asked each participant to identify how they define law firm success. You can see the topics they chose. 88% said client satisfactions ruled the day....KEEP GOING DOWN
We asked those same people to identify the challenges they face in their practice. 78% said its acquiring new client business...KEEP READING
Then we asked those folks - how many of you have implemented some type of change to address the challenge?
Admin Tasks: 81% live with the problem
Rate pressure: 72% live with the problem
Lack of internal efficiency: 89% live with the problem.
Let's recall the title of this presentation: Stake out your Competitive Advantage... Isn't there a spot to stake it out right here?