Everyone who starts a business wants to be successful, and law firms are no exception. Just like a typical business, law firms should be focusing on market needs and key performance indicators (KPIs) to ensure the growth of their business.
If you’re going to achieve your goals, you’re going to need to identify what those goals are. After all, “making more money” might be a good start, but if you don’t know what will drive that, then how can you quantify growth? To ensure greater margins of success, make sure the KPIs reflect your firm’s specific goals, are crucial to a firm’s success, and are quantifiable. Here are a few KPIs that would be a great starting point.
Unbilled Days
As the name suggests, this is any amount of time worked that is not billed to a customer. Perhaps this is research, or the initial client meeting, or any other work completed that is not listed in the contract with a client. This time exists as time that must pay lawyers or interns or secretaries, and this time also isn’t building a profit. Therefore, law firms need to make sure that all of their unbilled time is accounted for when considering profits and performance.
Uncollected Days
These are days which are billed to a client, but have not been collected. Either these are expected to be collected at a later date, or a bill that was dropped by a client. Whatever the case may be, it’s a hard fact of business that not all work comes with pay. The best way to cope with this sort of financial KPI is to plan ahead. Track hours that are paid, hours that are not paid, work with customers ahead of time to plan payments and do not allow your firm members to work past an agreed and paid upon time.
Staffing Ratio
Staffing seems to be an obvious matter to focus on for increasing performance, but it’s also often overlooked. In a law firm this can especially be true because the ratio is not always one lawyer to one client, so how is this addressed? Consider your company and what you’d like to be your focus, as well as the clients that are being marketed towards. Decide how many lawyers you believe fit to handle each individual client, and set a cap so that you can always manage the ratio of work per payment. This is a somewhat difficult balance, because you have to balance the needs of the client and the needs of your employees. Solid advice to always follow here is open communication. Listen to clients, listed to staff, and make sure the balance is as it should be.
Number of Open Cases
Quality not quantity should be the main focus on a law firm, or the reputation may suffer. If there are too many open cases then the firm may look like it doesn’t know how to close a case. However, too few open and the revenue is restricted. How many cases are needed to sustain your employees, and set aside reserves for business growth?