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Reboot Your Firm for 2018 - KPIs for the Modern Law Firm
1. REBOOT YOUR FIRM
FOR 2018
KPIs for the Modern Law
Practice
Mary Juetten, Dec 2, 2017
Dec 2 KPIs for the Modern Law Practice 1
2. 2Dec 2 KPIs for the Modern Law Practice
Measures that Matter: Key Performance
Indicators to Improve your Firm’s Results
1:15 KPI Overview
1:25 Start with Clients
1:35 Next Focus on Cash
1:50 Getting Started
1:55 Questions
4. 4Dec 2 KPIs for the Modern Law Practice
KPI Overview: Ws
Who
What
Why – billable hour
misconceptions
When
Where it worked – client
experience
Q&A during session
5. 5Dec 2 KPIs for the Modern Law Practice
WHO
Law firms are businesses
Accounting, payroll, KPIs are in
addition to the practice of law &
can be overwhelming
Outsource or use technology
KPIs are for all size firms because
use the same principles; just add
zeros
6. 6Dec 2 KPIs for the Modern Law Practice
WHAT
Key Performance Indicators are
metrics for measuring all aspects of
business and are beyond the
traditional billable hour.
KPIs are not “check the box” and
are not like financials – they are
actionable
Law can borrow from other
professional services and industries
for KPIs & Technology.
Focus on outputs, client
experience, collections rather than
inputs such as hours billed.
Move from Profits per Partner.
7. 7Dec 2 KPIs for the Modern Law Practice
WHY
Number one reason for business failure
is lack of cash flow.
Cash is King
Clients bring Cash & repeat business
Develop KPIs that support positive
client experience and collections.
Don’t dwell on billable hours; focus on
happy clients and collections.
Record all hours regardless of fee
structure.
Use the KPI data for creating pricing
and billing models.
8. 8Dec 2 KPIs for the Modern Law Practice
PEFORMANCE KPI: 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.
For one month he was at 88% using Billings Collected KPI
Align your KPIs with firm goals: Cash is King.
Have timekeeper’s focus on collections, not billing. 160 hours does
not matter if only 120 hours are collected.
9. 9Dec 2 KPIs for the Modern Law Practice
WHERE IT WORKED
Positive and Predictable Cash
Flow comes from Clients.
Satisfied clients tend to pay and
it’s 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.
10. 10Dec 2 KPIs for the Modern Law Practice
Starter Spreadsheet
12. 12Dec 2 KPIs for the Modern Law Practice
WHY FOCUS on CLIENTS
Clients bring cash & repeat
business; Cash is King and critical
to firm survival
Clients are demanding more for
less and lawyers must pay attention
to their needs
13. 13Dec 2 KPIs for the Modern Law Practice
Happy Clients; Profitable Practice
What: KPIs, metrics& Data Driven
decisions
When: Throughout the Matter
Where it’s worked – client
experience – net promoter score
(NPS) but it is more:
- Client needs: expert systems, like
Traklight for business; WeVorce for
divorce; and Neota Logic for others.
Hint: Your firm must be open to
change in terms of process.
14. 14Dec 2 KPIs for the Modern Law Practice
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?
Why or Why Not?” as an optional question
Allow for feedback, good and bad.
Survey must be tracked, not anonymous.
Technology:
Google Documents or Survey Monkey, Excel for
responses.
Follow-up emails or calls.
15. 15Dec 2 KPIs for the Modern Law Practice
CLIENT ACQUISITION COST: CAC
BEYOND ADVERTISING AND MARKETING
• Advertising, sales, marketing spend
• Client development time @ the billing rates, not the cost
• Technology or automation costs
TRIAGE AND INTAKE AUTOMATION
Client does the heavy-lifting; save $W
Technology:
Accounting system, Expert systems, chatbots
Practice Specific Automation
Avvo’s “Sink or Swim: How to adapt to the new Legal Consumer”*
• Informed, Connected (online), Picky
• 1 in 5 believe can figure out what lawyers know
• Shop for legal like other purchases (online)
• 95% use reviews
*http://go.avvo.com/new-legal-consumer-download
16. 16Dec 2 KPIs for the Modern Law Practice
Final Thoughts on Clients
Lawyers are dependent on referrals
and our reputations.
Define your IDEAL client
Do not be afraid to end bad client
relationships
Monitor relationships throughout
the matter and beyond.
17. 17Small Law KPIs with Mary Juetten
CLIENT DEVELOPMENT: Pipeline
Adjusted Prospect Pipeline ($)
Total dollar value of the Prospective Clients’ 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).
Some Practice Management have CRM capability.
Targets:
Should tie into the monthly revenue in your budget.
18. Next Focus on Cash
Dec 2 KPIs for the Modern Law Practice 18
19. 19Dec 2 KPIs for the Modern Law Practice
Cash is King
Profitability on paper only if you never
collect the cash.
Stats show that small law firms collect cash
from 90 to 150 days after recording the
hours.
If you have to pay all your bills within 30 to
60 days, you have a problem.
Check on percentage of ”old” A/R.
Focus on lowering the days that your cash
is ”locked up.”
Important to calculate lock-up days for
both WIP and A/R if you have a cash flow
issue.
Deeper dive depending on results.
20. 20Dec 2 KPIs for the Modern Law Practice
PROFITABILITY: Aging Tolerance
Profitability (f) Aging Tolerance (%)
Total collections within 60 days divided by total billings.
Set deadline for recording WIP by month-end & payment terms.
Policy to bill out all WIP each month (where practical) or at end
of each engagement, regardless of timing.
Investigate factoring or other services if necessary. Use e-billing
and consider accepting credit cards.
Unbilled(
Time
Billed(
Time
Collected
Time
22. 22Dec 2 KPIs for the Modern Law Practice
Make a Plan
• Pick your biggest pain point
• Design your survey or feedback - make it
easy for clients (WPLG ex)
• Test it on a small group (McCarthy Tetrault)
• Don’t be afraid to make changes (Modern
Law)
23. 23Dec 2 KPIs for the Modern Law Practice
Technology: Process before Purchase
Infinite possibilities:
Potential client calendaring
Client Development – automation
Practice Management including time
& billing
Accounting
Client Feedback
Excel
Document Signing & Storage
Legal Research
E-discovery
Customer Relationship Management
(CRM)
24. 24Dec 2 KPIs for the Modern Law Practice
Systems & Data
Systems – 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, QuickBooks
data to automatically
populate your
spreadsheet.
25. 25Dec 2 KPIs for the Modern Law Practice
Targets
Go back to the Previous Year or Years for a
LIMITED number of KPIs.
Measure more often at the start, start monthly or
weekly depending on KPI.
Do a first quarter review and make adjustments.
Look for industry benchmarks but also outside to
other professional services.
This is not a check the box exercise or like
financials which are historical info – KPIs are
actionable
Targets depend on your circumstances!
27. 27Dec 2 KPIs for the Modern Law Practice
Small Law Firm KPIs:
How to Measure Your Way to Greater Profits
Order your copy today:
http://legalsolutions.com/Juetten
10Juetten for 10% discount
Until Nov 14th, 2017
Mary Juetten
@maryjuetten
mejuetten@traklight.com
Free Starter spreadsheet emailed to
participants.
Editor's Notes
Key Performance Indicators (KPIs) are critical to measure client satisfaction, performance, profitability, and collections, all measures that are more than traditional billable hours and profits per partner. However, knowing how to get started; where to focus; and how to follow-up can be overwhelming. We will review a KPI framework; discuss the seven areas of measurement, including new client development; and examine the data and approach to support KPI implementation to improve your firm’s profitability. Case study approach for several metrics and the resulting changes will be used plus attendees will receive a starter spreadsheet for 5 simple metrics.
Clients are online so you must be online – gathering their data includes data on their needs – forms like Traklight and other expert systems.
average small law firms collect cash anywhere from almost 90 to 150 days after recording the hour – GLSA and Evolve Law.
Depends what your policy is to pick target.
average small law firms collect cash anywhere from almost 90 to 150 days after recording the hour – GLSA and Evolve Law.
Depends what your policy is to pick target.
Consistency
Monthly bills a must – clients remain well informed and happier overall
Show expenses and time entries - be sure expenses are clear if you are fronting those cost
Be sure clients understand the bills, the time entries and what retainer or A/R there is
Retainers
When you tell a client to bring you a $5,000.00 retainer, they hear my case costs $5,000.00.
Showing the retainer decreasing as work is completed prepares the client for replenishment requests.
Sending a bill at the end of the case showing all work, retainer being used and requesting additional funds is often a huge complaint for clients – and a way to ensure write offs or reductions will happen
Non-refundable fees
Non-refundable fees must still be billed in a way that shows the fee was reasonable and earned
Bills should bill time as 0.00 but track actual time – adjustments may be required based on amount of time
Firing a client
Waiting until the case is over, or almost over is too late to recoup time and costs
Waiting until trial could mean motions to withdraw are denied
Clients who do not pay do not grow a business
Drains on time and resources from other paying clients
Typically are not satisfied clients – even if they received the service for free or large discount