KPIs and Reporting for Law Firms

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Measure3

A Clio WebinarJoshua Lenon – Clio

Mary Juetten – Evolve Law & TraklightBille Tarascio – Modern Law & Access Legal

MEASURE, MEASURE, MEASUREKey PerformanceIndicators (KPIs) for Modern Law

Firm Success

Measure3 KP Is for Modern Law F i rm S uccess

Billie MaryPracticing Attorney – Modern Law

Access LegalMom

Law Degree | Canadian and US Professional Accountant

Traklight | Evolve LawMom

ABOUT US

Identify innovation. Safeguard success.

I LOVE WHAT I DO

My crew.

MEASURE3

1. WHY MEASURE

2. BUSINESS INTO LEGAL

3. WHAT TO MEASURE?4. MEASURE, COMPARE, & ACT

5. WHERE FROM HERE?

Measure3 KP Is for Modern Law F i rm S uccess

See the conference application for KPI Worksheet | Slides.

1. WHY MEASURE

Measure3 KP Is for Modern Law F i rm S uccess

FEELING LUCKY?

THE OVERWHELMING QUESTIONS

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

WHY MEASURE

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

Measure3 KP Is for Modern Law F i rm S uccess

(FEB 2015)

SNAPSHOT OF MODERN LAW’S CLIENT DEVELOPMENT PROCESS

STEP 1

STEP 2

STEP 3

STEP 4Book Potential

Client Calls

42 phone calls scheduled

30-minute calls

40 Phone Calls Completed

Done by AttorneyBilling @ $250/hr

New Clients

7 New ClientsOne Referred6 from Phone

Calls

Measure

18% Conversion Rate

$5000 Billable TIme

Why Measure KP Is for Modern Law F i rm S uccess

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

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

Why Measure KP Is for Modern Law F i rm S uccess

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

$ $ $

Why Measure KP Is for Modern Law F i rm S uccess

- Knowledge is power

- Car goes faster downhill with brakes

- Data driven decisions

- Not just cranking out billable hours

- NEED TO CREATE VALUE FOR CLIENTS

Why Measure KP Is for Modern Law F i rm S uccess

Measuring Results vs. Guesswork/SWAG

2. BUSINESS INTO LEGAL

Measure3 KP Is for Modern Law F i rm S uccess

GOAL: View your Practice as a Business

BUSINESS INTO LEGAL

Step Back and look at Traditional Law Firm Measures

B usiness i nto Legal KP Is for Modern Law F i rm S uccess

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.

Measure3 KP Is for Modern Law F i rm S uccess

TRADITIONAL KPIs

1Utilization Rate

83%50 Billable/60 Available Hours

2Realization Rate

80%Potential to bill: $12.5K

50 Billable hours recorded @ $250Billed $10K/$12.5K potential

3Collection Rate

70%$7K Collected/$10K Billed

4NET Collection Rate

56%$7K collected/$12.5K potential

<50% - $7K/$15K True Potential

B us iness i nto Legal KP Is for Modern Law F i rm S uccess

- Focused on supply of billable hours not demandfor 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.

B us iness i nto Legal KP Is for Modern Law F i rm S uccess

Traditional KPIs...

3. WHAT TO MEASURE?

Measure3 KP Is for Modern Law F i rm S uccess

GOAL: Expand Traditional KPIs to include Business Concepts

WHAT TO MEASURE

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

Measure3 KP Is for Modern Law F i rm S uccess

- Client Satisfaction

- Client Development

- Company Culture

- Cost of Client Acquisition

- Throughput & Productivity

- Profitability & Margins

- Individual Performance

Measure3 KP Is for Modern Law F i rm S uccess

See the conference application for KPI Worksheet | Slides.

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

eRevenue per Matter ($)Contribution Margin per Matter ($)Attorney Leverage ($)Paralegal Leverage ($)

THROUGHPUT & PRODUCTIVITY

f

Billable Hours Paid by AttorneygINDIVIDUAL PERFORMANCE

Return on Owner Equity (Investment) (%)Profitability Margin (%)

PROFITABILITY & MARGINS

What to Measure KP Is for Modern Law F i rm S uccess

See the conference application for KPI Worksheet | Slides.

4. MEASURE AND COMPARE

Measure3 KP Is for Modern Law F i rm S uccess

GOAL: See the Value of Measuring and Setting Targets

4. MEASURE AND COMPARE

CASE STUDY: Modern Law’s Client Satisfaction NPS

Measure3 KP Is for Modern Law S uccess

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.

Measure3 KP Is for Modern Law S uccess

CLIENT SATISFACTION

TakeAways:• Alldetractorshadsameattorney• Manyneutralrespondersalsohadthatattorney• Evidencebaseddecisions

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

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

Total Score: 71

Calculations

5. WHERE FROM HERE?

Measure3 KP Is for Modern Law S uccess

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

Measure3 KP Is for Modern Law F i rm S uccess

a Our clients are happy with our services

b

CLIENT SATISFACTION

We are effectively converting leads to sales CLIENT DEVELOPMENT

Billie

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? KP Is for Modern Law F i rm S uccess

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

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

3Client 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? KP Is for Modern Law F i rm S uccess

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? KP Is for Modern Law F i rm S uccess

ANY QUESTIONS ON THE OTHER KPIs ON THE

WORKSHEET?

Measure3 KP Is for Modern Law F i rm S uccess

1

KPI$$WorksheetMeasure,$Measure,$Measure$

Key$Performance$Indicators$(KPIs) How$Calculated Target Tells$Us…. FrequencyCLIENT'SATISFACTIONNet$Promoter$Score$$(%) %$of$Clients$who$say$they$would$recommend$us ≥X% Our$Clients$are$happy$with$our$services Quarterly

CLIENT'DEVELOPMENTSales$Conversion$Rate$(%) #$of$New$FullPScope$Clients$/#$of$Potential$Client$Intakes ≥$X% We$are$effectively$converting$leads$to$sales Monthly

FIRM'CULTUREAverage$Work$Climate$Satisfaction$(#) Total$Work$Climate$Survey$Score$(Scale$1P5)$/$#$Surveys ≥$X Our$employees$feel$safe,$positive$and$comfortable Quarterly

COST'OF'CLIENT'ACQUISITION

Cost$of$client$acquisitionP$CAC$($)$$sales$and$marketing$+$opportunity$cost$of$staff$or$lawyer/#new$clients ≤$$X We$understand$our$cost$of$acquiring$new$clients Monthly

LifePtime$or$Annual$customer$value$P$CV$or$LTV$($)

Total$Revenue$per$year$by$client$(if$not$one$and$done,$then$cumulative) ≥$$X

We$understand$the$long$term$revenue$from$clients Annually

LTV$to$CAC$ratio$(ratio) CV$or$LTV$/$CAC ≥$1X Revenue$covers$costs$of$efforts$to$acquire$clients$ Annually

THROUGHPUT'&'PRODUCTIVITYRevenue$per$Matter$($) Gross$Revenue$/$#$New$Matters$in$CLIO$(same$period) ≥$$X We$are$seeing$the$most$profitable$types$of$cases Monthly

Contribution$Margin$per$Matter$($) Gross$Revenue$P$CV$P$Variable$Cost ≥$$X We$are$seeing$the$most$profitable$types$of$cases Monthly

Attorney$Leverage$($) Total$$$Billings$of$All$Attorneys$/$Total$($)$Billables ≥$X% We$have$the$right$staffing$levels Quarterly

Paralegal$Leverage$($) Total$$$Billings$of$All$Paralegals$/$Total$($)$Billables ≥$X% We$have$the$right$staffing$levels Quarterly

PROFITABILITY'&'MARGINSReturn$on$Owner$Equity$(Investment)$$(%) Owner$Compensation$/$Gross$Revenue ≥$X% Business$is$meeting$industry$profitability$standards Annually

Profitability$Margin$(%) Total$Net$Operating$Income$/$Total$Income ≥$X% We$meet$profitability$expectations Monthly

INDIVIDUAL'PERFORMANCEBillable$Hours$Paid$by$Attorney$(%) Total$Collected$$$by$Attorney$/$Total$$$Billings$by$Attorney ≥$$X Are$Attorneys$managing$Clients$well$enough? Monthly

Measure3 KP Is for Modern Law F i rm S uccess

CONTACT US

602 882 6287

mejuetten@traklight.com

Measure3 KP Is for Modern Law F i rm S uccess

Billie@mymodernlaw.com

@maryjuetten @mymodernlaw

480 649 2605

#ClioWeb

QUESTIONS?

Thank You

Joshua Lenon

joshua@clio.com

@JoshuaLenon

Linkedin.com/in/joshualenon