Understanding KPIs for Law Firms: 6 Metrics to Measure

How do you monitor your law firm’s growth? What success indicators do you use to tell that you’re on the right track? For too many attorneys, it’s revenue. While that’s certainly a critical metric, it can be misleading. If your expenses outstrip your income, you’re not generating profit. You’re not growing. Instead, you’re treading water and might be slowly drowning. 

To determine if you’re succeeding in your mission, you need a better understanding of KPIs for law firms and how they inform your growth strategy. But which KPIs should you measure? Let’s take a look at six critical metrics.

1. Client satisfaction

The true mark of a successful law firm isn’t revenue generation — it’s client satisfaction. If you’re regularly achieving positive outcomes in client cases, your client satisfaction level will be high, and you’ll benefit from positive word of mouth. Client satisfaction hinges on case outcome and the strength of your relationship with that client. 

Ask yourself, what is our approach to building strong relationships? Signs that you’re not succeeding here include low client retention rates, poor client satisfaction survey scores, and few or no client referrals. You can use polls or surveys to gather this data.

If you do have a positive reputation, ask your clients for referrals via word of mouth or online reviews. These can go a long way in terms of generating new business.

2. Client development 

Client and matter development are also crucial things to track. Understanding your clients and developing them can be challenging. To help, consider the average number of cases closed, the average fee each client pays, and the number of active clients you have. Your practice management software should be able to help generate these stats.

How efficiently do you resolve client cases? How does your efficiency compare to other law firms? Do you have a defined strategy for developing relationships with your clients that encourages them to return to your firm with new matters?

3. Marketing and advertising

All law firms must market their services, but not all do so successfully. Without an effective marketing and advertising strategy, you’ll fail to generate new leads and cannot capture your target audience’s interest. You’ll also overspend on marketing with little to show for it. 

To help you determine if your marketing is effective, track a few crucial metrics, including the number of visitors to your website, your landing page conversion rate, the number of email opens, and traffic from referrals. Google Analytics and your email marketing software will allow access to this type of data. 

4. Financial management

While most of your KPIs focus on the relationships you build with clients and how well you fulfill their needs, there is also the administrative side of the practice to consider. It’s crucial to maintain healthy finances and to generate profit. This is about more than revenue. It’s about balance, which can only be achieved through informed decision-making.

Not sure if your financial management is on par? Consider a few metrics, like your total firm debt versus monthly billed revenue. What’s your collection rate versus the length of accounts receivables? What are your current operating costs versus annual revenue? Your payment software will be your go-to resource for gathering information related to these KPIs.

5. Team member performance

Unless you’re a solo attorney, every team member plays a role in your practice’s success or failure. If you’re operating independently, these considerations also apply to you. We’re talking about team efficiency, time use, effectiveness in their roles, and other hard-to-measure metrics dictating law firm success. Look to your project management tool as the best means to review these metrics.

Measuring productivity, efficiency, and effectiveness for each employee is easier said than done. However, a few key areas to watch include billable hours and case progression, billable hours vs. non-billable hours, and the number of uncollected or unbilled days. Others include utilization and realization rates and cost and fee tracking. 

6. Lead quality

The point of your marketing and outreach activities is to generate leads that will then convert into paying clients. However, all leads are not created equal. Spending time with low-quality leads is unlikely to pay dividends. Ensuring lead quality is hard, but it’s possible if you ensure that you’re making the most of the channels that deliver the highest-quality leads and that your team is effectively vetting leads. 

Some metrics you’ll want to track with this KPI include the overall cost of acquiring new clients, the number of new cases versus the number of new clients, and the number of new clients generated by each channel you’re using. You should also consider the average value of each case, the number of consultation appointments you have, and the number of leads who become clients after a consultation. Your CRM should be the best resource for these important lead-based KPIs. 

Expert help to improve KPIs for law firm

Tracking and managing KPIs for your law firm can be immensely challenging. That’s particularly true when you realize you must balance lead generation while delivering an outstanding client experience. Thankfully, there’s help available. A legal answering service can help streamline operations, improve the client experience, and even improve your lead screening and intake process while enhancing client retention.

At Smith.ai, our virtual receptionists provide expert call answering, lead screening, and intake. We understand that many leads who contact your firm aren’t well-suited for your services, and we help weed out those who aren’t good fits. We can answer questions, collect contact and demographics information, enter details directly into your CRM, and even provide warm phone transfers so you can connect when leads are most likely to convert. 

We also offer rich call intelligence so you can continue to gather KPIs related to your leads to assist in your decision-making to grow your firm. To learn more, schedule a consultation or reach out to hello@smith.ai.