A law firm is a business, and behind every successful business is a list of key performance indicators (KPIs) that are identified, measured, benchmarked, and acted upon. What are KPIs and why should you care? KPIs are business metrics that evaluate an organization’s performance and success. These key metrics measure a firm’s success versus a set of targets, objectives, or industry peers. Measuring KPIs can be essential to the growth of your law firm, and focusing on the right metrics can help your business goals.
For example, primary KPIs can be financial, including net profit (or the bottom line, gross profit margin), or revenues minus certain expenses, which measures your firm’s overall profitability. However, to put it simply, a KPI is a measurement of progress towards a particular goal. Breaking it down:
- Key = crucial to success
- Performance = level of progress
- Indicator = the way in which it is measured
Why should you track law firm KPIs?
There are numerous reasons on why you should track law firm KPIs. The first being all the many benefits a law firm can receive by doing so. Benefits of tracking law firm KPIs include:
- Identifying areas of improvement within your law firm. KPIs allow you to track anything from your finances to your team performance, therefore helping you understand the strengths and weaknesses of your business.
- Maintaining accountability inside the law firm. KPIs track the numbers of all the employees, ensuring everyone within the business is accountable.
- Establishing a stable and healthy work environment. Law firm KPIs make sure everything else is running smoothly within the business side of your law firm, so all you need to focus on is the legal work.
Overall, KPIs have the ability to help law firms optimize their operations and meet their business goals.
How to track law firm KPIs
When it comes to implementing a strong KPI strategy for your law firm, you must first determine what to measure. Tracking every aspect of your law firm is inefficient; the possibilities of what to measure are endless. You must decide what information is necessary and valuable to your business’s growth and success, along with what data is needed in order to gain that information. Key metrics that you may want to include are listed and discussed in the section below.
Secondly, you must check your systems. To establish which KPIs you want to track, looking at what data you already have in your law firm’s system will be valuable. It is important to find systems within your firm that are easily integrated with each other, so that collecting data and figures is efficient.
- To track your law firms KPIs, you firstly need to determine what you want to measure that will provide your business with the necessary information for performance growth and success.
- Look at data already available in your law firm, make an inventory of the data being collected and identify the areas of improvement of your firm.
Top 5 law firm KPIs to track
With the help of KPIs, law firm owners can see areas of strength, weaknesses, and where to improve. To measure law firm performance in terms of efficiency and profitability, here are 5 essential KPIs you should keep measuring:
New matters per month
This one’s pretty straightforward: you can’t sustain if you don’t grow. Without new clients or matters, you will not have a business. That’s why most firms set specific quotas for new matters each month. Whether you use a legal management software or not, it is important to keep track of your files through an internal reference numbering system. Helping you track the date the matter was created, allowing you to keep count of how many matters you created each month.
Closed matters per month
Closed matters are matters which are inactive and resolved. Tracking closed matters per month with a legal management system is important. Allowing you to identify where you need more resources or support, so you can successfully close cases.
Stalled matters/Bucket age
A Stalled matters indicator helps you identify when a case has hit a wall (typically, no movement in 90 days). Whereas bucket age is very specific, as it tells you exactly how long a case has been in a particular status. They help with the proper allocation of resources and support.
Task completion rate/task age
Task completion rate tells you the number of tasks completed out of the total tasks assigned in a given period, and task age reports the number of days it took to complete a particular task.
These two KPIs give you actionable insight into how you can improve as a firm and process cases faster.
Client acquisition cost/Conversion rate
Client acquisition cost asks, “How much are we spending on sales and marketing to land a new client?” Whereas the conversion rate reports the number of leads converted into intake/matters out of the total number of leads.As a law firm owner or partner, staying on top of your business’s performance is essential. KPIs are necessary to ensure that your business is on the right track. As you can now tell, identifying, measuring, benchmarking, and analyzing data is not an easy task. With the help of the best legal practice management software, like CloudLex, you can support your business’s growth and success.