Growth will be a key aim for many firms going into 2021. However, have you updated your law firm KPIs to reflect this? When you’re tracking your growth, it’s vital to do this in a way that is both easy to monitor and gives you useful, actionable insights.
What is a KPI for law firms?
KPI stands for key performance indicators and this basically means the metrics you choose to track to understand whether your firm is meeting its goals. Gathering and analyzing this data makes it easy to identify successes and failures over time. If you choose the right KPIs, you’ll be able to pinpoint specific actions that influenced your data and use these to inform your strategy moving forwards. But, if you select KPIs that don’t match your goals, or don’t provide you with focused data, you could get misleading information that can hinder your growth.
A good goal needs to be SMART; that is:
- Specific – what do you want to achieve?
- Measurable – what data will you use to quantify success?
- Achievable – is your goal possible for you to accomplish?
- Relevant – does your goal match your business values?
- Timely – does your goal have a clear end date?
This means that ‘sign more clients’ is not a helpful goal, whereas ‘increase number of signed clients by 10% in the next quarter’ delivers on every one of these points. In this second goal, you can assign it a clear KPI: the percentage increase in the number of clients signed in the quarter, compared to last quarter.
So if growth is a key aim for your firm, which law firm KPIs should you choose to track your progress? Here are five recommendations to start your thinking.
Number of good leads MoY
As you track your incoming leads, it is a good plan to organize them based on quality. Monitoring your number of good leads tells you how successful your marketing efforts are in reaching your target audience. These should be compared to the previous year to identify your busiest periods, as well as track the results of your long-term marketing efforts.
For more detail, you can break down the source of these leads to understand which marketing channels are performing best for you. Put more spend behind these, but also look at the channels which are not winning for you, and try to identify ways to improve.
Your conversion rate is the metric to track if you want to understand how well your intake is working. There is no point in bringing in hundreds of leads if only a small percentage convert.
Conversion rate is calculated as the percentage of good leads who sign your firm. While you will never get every lead to convert, low conversion rates either suggest that your marketing doesn’t match your firm, or that your intake process is losing you potential clients. Audit your intake process and try to gather qualitative feedback from leads who do not choose you.
Marketing cost per client
Depending on your firm, you may spend a great deal on marketing your firm or your spending might be minimal. Marketing spend is a metric that is best tracked on a per-client basis – helping you anchor your budgets to their outcome and assess the efficiency of your chosen marketing techniques.
We would also suggest breaking this figure down by channel, and identifying how much you spend on each client from each source. If social media advertising is particularly efficient, you could reduce your spend in other areas to focus on giving your ads greater reach on Facebook. If you find you are spending too much per client, you can explore cheaper marketing routes – improving your website SEO to perform better in organic search, for example.
We don’t have to tell you that tracking your revenue is one of the most important metrics. However, assessing your revenue according to the month before can be misleading. Seasonal fluctuations in some practice areas can cause your monthly revenue to fluctuate during the year.
Therefore, calculating your revenue change from the same month of the previous year allows you to see long-term growth trends, while also removing the external factor of seasonality.
Number of cases closed YoY
Tracking the number of cases you closed compared to the year before is an excellent way to see your firm’s growth, but also your efficiency. How well can your firm deliver for each of your clients?
While many firms will measure the number of cases they take on, understanding the number of cases that you have successfully closed helps you to understand your client experience. Tracking this helps you to ensure that your firm is taking on a suitable number of clients and that your growth is supported by a strong base.
This list is certainly not complete. Ideally, your firm will track as many metrics as you can, to ensure the greatest amount of data to form a base for your strategy. There are many other metrics that might be important for your firm to track – based on your own goals, you might want to track billable hours, client retention, the average value of new clients, or realization rate.
Whichever KPIs you choose, it’s worth taking the time at the start of the new year to consider how you can track your success over the year and which metrics give you the most valuable information.
What are your law firm’s KPIs? Let us know your essential performance metrics in the comments. Are you looking for a way to improve your conversion rate? Speak to the LEX Reception team for more information about how we can help.