Key Performance Indicators: Measure Measure Measure

MEASURE3 Chicago, October 19, 2015Clio Conference

MEASURE, MEASURE, MEASURE

Key Performance

Indicators (KPIs) for

Modern Law Firm Success

Measure3

KPIs for Modern Law Firm Success

Billie MaryPracticing Attorney – Modern Law

Access LegalMom

Law Degree | Canadian and US Professional Accountant

Traklight | Evolve LawMom

ABOUT US

I LOVE WHAT I DO

My crew.

MEASURE3

1. WHY MEASURE2. BUSINESS INTO LEGAL3. WHAT TO MEASURE?4. MEASURE, COMPARE, & ACT5. WHERE FROM HERE?

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See the conference application for KPI Worksheet | Slides.

1. WHY MEASURE

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FEELING LUCKY?

How’s my marketing?

Is my pricing right?

Should I hire?

Am I getting any ROI?

Should I switch vendors?

Why isn’t my phone ringing?

Man, I sure feel busy. Why aren’t I making more money?

Is my business growing ethically?

THE OVERWHELMING QUESTIONS

GOAL: Understanding that measuring and acting upon KPIs will impact your Firm’s profitability

WHY MEASURE

CASE STUDY: Modern Law’s Client Development KPI Measurement Part I

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(FEB 2015)

SNAPSHOT OF MODERN LAW’S CLIENT DEVELOPMENT PROCESS

STEP 1 STEP 2 STEP 3 STEP 4

Book Potential Client Calls

42 phone calls scheduled

30-minute calls

40 Phone Calls Completed

Done by Attorney Billing @ $250/hr

New Clients

7 New ClientsOne Referred6 from Phone

Calls

Measure

18% Conversion Rate

$5000 Billable TIme

Why Measure KPIs for Modern Law Firm Success

WHAT DOES THIS 18% MEAN? WHAT DOES THIS $5000 MEAN?

Nothing – if Modern Law does not have a target cost of customer acquisition.


Nothing – if Modern Law does not have baseline/target conversion rate.

MEASURE AND ACT TO ENSURE PROFITABILITY

BILLINGS COLLECTEDIncludes Marketing,

Rent, Admin Salaries

FIRM OVERHEAD FIRM FAILURE

$ $ $


- Knowledge is power

- Car goes faster downhill with brakes

- Data driven decisions

- Not just cranking out billable hours

- NEED TO CREATE VALUE FOR CLIENTS


Measuring Results vs. Guesswork/SWAG

2. BUSINESS INTO LEGAL

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GOAL: View your Practice as a BusinessBUSINESS INTO LEGAL

Step Back and look at Traditional Law Firm Measures

Business into Legal


BORROWING FROM CLIO’S 2014 PRESENTATION:

a Jessica Pearson works 60 hours in a week.

b She was in meetings and talking to potential clients for 10 hours.

c Jessica bills at $250.

d She billed $10K last week.

e Firm collected $7K.

Measure 3 KPIs for Modern Law Firm Success

TRADITIONAL KPIs

1Utilization Rate

83%50 Billable/60 Available Hours 2

Realization Rate

80%Potential to bill: $12.5K

50 Billable hours recorded @ $250

Billed $10K/$12.5K potential

3Collection Rate

70%$7K Collected/$10K Billed

4NET Collection Rate

56% $7K collected/$12.5K Potential

Business Into Legal


- Focused on supply of billable hours not demand for services

- Therefore not focused on the value of services, client needs, or satisfaction

- What about fixed fees???

- What about targets???

- Charging correct rates?

Need to focus on return on investment, contribution margin, and cost of client acquisition, plus client and form satisfaction. All with targets.

Business into Legal KPIs for Modern Law Firm Success

Traditional KPIs...

3. WHAT TO MEASURE?

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GOAL: Expand Traditional KPIs to include Business ConceptsWHAT TO MEASURE

Return on Investment, Contribution Margin, and FULL Cost of Client acquisitionSatisfaction Measures and TargetsFirm and Personal Level

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- Client Satisfaction

- Client Development

- Company Culture

- Cost of Client Acquisition

- Throughput & Productivity

- Profitability & Margins

- Individual Performance

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WHAT TO MEASURE

SEVEN AREAS OF KPIs

a Net Promoter Score (%)

b

CLIENT SATISFACTION

Sales Conversion Rate (%) CLIENT DEVELOPMENT

c Average Work Climate Satisfaction

d

COMPANY CULTURE

Cost of client acquisition- CAC ($)Life-time or Annual customer value – CV or LTV

($)LTV to CAC ratio (ratio)

COST OF CLIENT ACQUISITION

e Revenue per Matter ($)Contribution Margin per Matter ($)Attorney Leverage ($)Paralegal Leverage ($)

THROUGHPUT & PRODUCTIVITY

f

Billable Hours Paid by Attorney

gINDIVIDUAL PERFORMANCE

Return on Owner Equity (Investment) (%)

Profitability Margin (%)PROFITABILITY & MARGINS

What to Measure KPIs for Modern Law Firm Success


4. MEASURE AND COMPARE

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GOAL: See the Value of Measuring and Setting Targets4. MEASURE AND COMPARE

CASE STUDY: Modern Law’s Client Satisfaction NPS

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KPIs for Modern Law Success

One Question as part of follow-up:

“On a scale of 0-10, how likely are you to recommended our firm?”

0- 6 Detractors7-8 Neutral9-10 Promoters

Modern Law Target is 90

Measures how happy clients are with Modern Law and provides opportunity for corrective action even after matter is closed?Very important for “one and done” type law practices to have the referrals and not the usual follow-on matters.

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CLIENT SATISFACTION

Take Aways:• All detractors had same

attorney• Many neutral responders

also had that attorney• Evidence based decisions

Total Responses 67Promoters: 51Neutral: 13Detractors: 3

To Get Score:51/67= 76%Subtract3/67=5%

Total Score: 71

Calculations

5. WHERE FROM HERE?

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GOAL: Understand the action required after measuring and comparing to targets.

5. WHERE FROM HERE?

CASE STUDY: Modern Law’s Client Development Process Part II

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a Our clients are happy with our services

b

CLIENT SATISFACTION

We are effectively converting leads to sales CLIENT DEVELOPMENT

c Our employees feel safe, positive, and comfortable

d

COMPANY CULTURE

We understand our cost of acquiring new clients.

We understand the long term revenue from clients.

Revenue covers costs of efforts to acquire clients.

COST OF CLIENT ACQUISITION

e We are seeing the most profitable types of cases.We have the right staffing levels.

THROUGHPUT & PRODUCTIVITY

f

Are Attorneys managing Clients well enough?gINDIVIDUAL PERFORMANCE

Business is meeting industry profitability standards.

We meet profitability expectations.PROFITABILITY & MARGINS

Where from Here?


1Cost of Client Acquisition (CAC)

Refresh Memory from before: $5K of billable time for 6 new clientsNeed to add in sales & marketing costs: $5KTotal CAC = $10K/6 = $1.7K

2 Client Lifetime Value (LTV)3 Limited Service Clients – average $1K3 Full Service Clients – average $4K

3 Client Contribution MarginLimited Service Clients = $1K - $1.7K = -$.7KFull Service Clients = $4K - $1.7K = $2.3K

4Modern Law Changes:

First, created in-person PAID consultationsSecond, added in $12 per hour Intake Positions (non billable)Third, added Flat Fee optionFourth, use Access Legal for clients that cannot afford

5Impact of Changes on KPIsConversion Rate increased by 59%CAC dropped by the $5K of Billie’s time& increased by $12 per hour person’s time

Where from Here? KPIs for Modern Law Firm Success

RESULTS

NEXT STEPS

1 Create a KPI workbook or dashboard

2Revisit your Practice Management & CRM to mine Data

3 Set Targets and Time to review results

4Knowledge is Power

Where from Here? KPIs for Modern Law Firm Success

ANY QUESTIONS ON THE OTHER KPIs ON THE

WORKSHEET?

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CONTACT US

602 882 6287

[email protected]

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[email protected]

@maryjuetten @mymodernlaw

480 649 2605