Key Performance Indicators (KPIs) provide valuable data law firms can use to make strategic business decisions, evaluate trends and determine opportunities for growth.
There are many metrics law firms can track, but the following are the most critical.
FINANCIAL & OPERATIONAL
These KPIs can give you insight into the firm’s financial health:
- Revenue billed by matter
- Fixed/contingency fee profitability ratios
- Work in Progress (WIP – what’s due to be billed)
- Profitability by case, practice area and partner
- Accounts Aging by Receivable (what’s owed to the firm)
- Realization rate: ratio of fees collected to fees incurred
Also be sure to look for any overall financial trends. Increases or decreases over short periods of time may not have significant meaning, but when there is a consistent upward or downward trend the firm should take note and react accordingly.
PERFORMANCE & PRODUCTIVITY
These KPIs can help you determine if your firm’s resources are being allocated appropriately and where they may be room for improvement or budget cuts:
- Utilization rate: ratio of fees billed to fees incurred
- Ratio of billable to non-billable hours
- Administrative vs. overhead cost proportion
These KPIs can help you see what’s working and what isn’t when it comes to making current clients happy and getting new ones:
- Percentage of repeat and referred business
- Business development effort & cost analysis
- Percentage of leads converted to clients
- Average fee per client
- Trends in client growth/retention rates
Client satisfaction can also be measured through the use of surveys.
Sign up now to get more tips and news from CosmoLex
- 5 Ways CosmoLex Can Help Organize Your Practice (33:23)
- What Should Our Law Firm Client Intake Process Look Like?
- How can our law firm automate document creation?
- Revitalizing Your Law Firm: Selecting the Best Practice Management Software (26:57)
- Revitalizing Your Law Office: How to Migrate to Modern Practice Management Software (29:16)