LAW PRACTICE MANAGEMENT: KEY PERFORMANCE INDICATORS SIMPLIFIED THURSDAY, MAY 18, :30 11:30

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1 GROUP LEGAL SERVICES ASSOCIATION SOLO, SMALL FIRM, AND GENERAL PRACTICE DIVISION STANDING COMMITTEE ON GROUP & PREPAID LEGAL SERVICES MAY 18-20, 2017 SCOTTSDALE, ARIZONA LAW PRACTICE MANAGEMENT: KEY PERFORMANCE INDICATORS SIMPLIFIED THURSDAY, MAY 18, :30 11:30 PRESENTER: MARY JUETTEN

2 Mary Juetten Traklight and Evolve Law Bellingham, WA and Phoenix, AZ Mary Juetten, JD, Founder and CEO of Traklight, has dedicated her more-than-30-year career to helping businesses achieve and protect their success. Mary recently co-founded Evolve Law, a community that is the catalyst for change in the legal industry. Using her extensive education including Bachelor of Commerce degree from McGill and a Juris Doctorate from Arizona State, as well as her US and Canadian accounting certifications, Mary created the only self-guided software platform that creates your custom intellectual property (IP) strategy plus assesses business risk - Traklight. The Traklight Pro version is lead generation or triage for companies; business, startup & venture, and IP attorneys; CPAs, consultants, and other professionals. Mary is an international author, writer, speaker, and mentor. She previously represented entrepreneurs on the Board of the Crowdfunding Investment Regulatory Advocates and as the Secretary for the Emerging Enterprise Committee of the Licensing Executives Society. She speaks internationally on change and technology adoption in the legal industry. Mary was named to the American Bar Associations's Legal Resource Technology Center 2016 Women in Legal Tech list and FastCase Class of She now serves on the Group Legal Services Association (GLSA) Board. In 2016, Mary authored Small Law KPIs: How to Measure your way to Greater Profits for Thomson Reuters.

3 Law Practice Management Key Performance Indicators Simplified 1

4 Agenda 10:30 KPI Overview 10:40 Start with Clients 11:00 Next Focus on Cash 11:10 Getting Started at your Firm 11:20 Questions 2

5 KPI Overview 5 Ws 3

6 KPI Overview: Ws Who What Why billable hour misconceptions When Where it worked client experience Q&A at the end of the presentation 4

7 WHO Law firms are businesses Accounting, payroll, KPIs are in addition to the practice of law & can be overwhelming Outsource or use technology KPIs are for all size firms because use the same principles; just add zeros 5

8 WHAT Key Performance Indicators are metrics for measuring all aspects of business and are beyond the traditional billable hour. KPIs are not check the box and are not like financials they are actionable Law can borrow from other professional services and industries for KPIs & Technology. Focus on outputs, client experience, collections rather than inputs such as hours billed. Move from Profits per Partner. 6

9 WHY Number one reason for business failure is lack of cash flow. Cash is King Clients bring Cash & repeat business Develop KPIs that support positive client experience and collections. Don t dwell on billable hours; focus on happy clients and collections. Record all hours regardless of fee structure. Use the KPI data for creating pricing and billing models. 7

10 PEFORMANCE KPI: Misplaced Focus on Billable Hours. Allan focused on billing, not collecting At the end of the year, Allan was a billing machine at % utilization but 86.22% collected. For one month he was at 88% using Billings Collected KPI Align your KPIs with firm goals: Cash is King. Have timekeeper s focus on collections, not billing. 160 hours does not matter if only 120 hours are collected. 8

11 Thomson Reuters Small Law Firm KPI and Benchmark Survey Participants: 690 surveys sent out to customer panel June Firms Responded: 10 Solos & 50% under 10 Attorneys Stats: 81% use technology (however time & billing (34%) & practice management (44%) included) 58% do NOT use KPIs beyond traditional billable hours Only 6 or <10% use more than 4 KPIs 19 use Collected Billings by Attorney 15 measure overdue Accounts Receivable (A/R) 14 track Matter Profitability 3 measure client satisfaction (less than 5%) 9

12 WHEN 58 responses to TR Survey, 31 firms reported using either of the two profitability metrics: Take-home dollars Bank Balance KPIs need to be timely to allow for corrective action. Matter profitability was an option on the survey. 10

13 WHERE IT WORKED Positive and Predictable Cash Flow comes from Clients. Satisfied clients tend to pay and it s easier to upsell or have happy clients refer friends and associates. Start with client development KPIs, including pipeline and cost of client acquisition and measure firm culture and client experience. 11

14 Start with Clients KPI Examples 12

15 WHY FOCUS on CLIENTS Clients bring cash & repeat business; Cash is King and critical to firm survival Clients are demanding more for less and lawyers must pay attention to their needs Avvo s Sink or Swim: How to adapt to the new Legal Consumer * Informed, Connected (online), Picky 1 in 5 believe can figure out what lawyers know Shop for legal like other purchases (online) 95% use reviews * 13

16 Happy Clients; Profitable Practice What: KPIs, metrics& Data Driven decisions When: Throughout the Matter Where it s worked client experience net promoter score (NPS) but it is more: - Client needs: expert systems, like Traklight for business; WeVorce for divorce; and Neota Logic for others. Hint: Your firm must be open to change in terms of process. 14

17 CLIENT EXPERIENCE: Net Promoter Score (NPS) Net Promoter Score (NPS) (%) The percentage of total clients responding to the survey question who are promoters less the percentage of total clients responding who are detractors. Q: On a scale of one to ten (with one being not at all likely and ten being extremely likely), how likely are they are to recommend your firm to their friends, family, and colleagues? Why or Why Not? as an optional question Allow for feedback, good and bad. Survey must be tracked, not anonymous. Technology: Google Documents or Survey Monkey, Excel for responses. Follow-up s or calls. 15

18 CLIENT ACQUISITION COST: CAC BEYOND ADVERTISING AND MARKETING Advertising, sales, marketing spend Client development the billing rates, not the cost Technology or automation costs Traklight example to reduce the client development time. TRIAGE AND INTAKE AUTOMATION Client does the heavy-lifting Survey must be tracked, not anonymous. Technology: Google Documents or Survey Monkey, Practice Specific Automation 16

19 Final Thoughts on Clients Lawyers are dependent on referrals and our reputations. Define your IDEAL client Do not be afraid to end bad client relationships Monitor relationships throughout the matter and beyond. 17

20 Next Focus on Cash 18

21 Cash is King Profitability on paper only if you never collect the cash. Stats show that small law firms collect cash from 90 to 150 days after recording the hours. If you have to pay all your bills within 30 to 60 days, you have a problem. Focus on lowering the days that your cash is locked up. Important to calculate lock-up days for both WIP and A/R. Check on percentage of old A/R. Deeper dive depending on results. 19

22 PROFITABILITY: Aging Tolerance Profitability (f) Aging Tolerance (%) Total collections within 60 days divided by total billings. Set deadline for recording WIP by month-end & payment terms. Policy to bill out all WIP each month (where practical) or at end of each engagement, regardless of timing. Investigate factoring or other services if necessary. Use e-billing and consider accepting credit cards. 20

23 Getting Started 21

24 KPI Framework Workflow Driven 1. Client Development 2. Cost of Client Acquisition 3. Productivity 4. Profitability 5. Performance 6. Client Experience 7. Firm Culture 22

25 Make a Plan Pick your biggest pain point Design your survey or feedback - make it easy for clients (WPLG ex) Test it on a small group (McCarthy Tetrault) Don t be afraid to make changes (Modern Law) 23

26 Time is finite; Technology is not Infinite possibilities: Potential client calendaring Client Development automation Practice Management including time & billing Accounting Client Feedback Excel Document Signing & Storage Legal Research E-discovery Customer Relationship Management (CRM) 24

27 Choosing Tech Simple to use Demand Metrics Case studies Measure Return on Investment (ROI) Trial or free demo Less is more Feedback Evaluate Client Experience Start small and build Interoperable tech Be open to change 25

28 Systems & Data Systems from manual to high tech, define your workflow. Pick the appropriate technology. Garbage In; Garbage Out. Check the data sources and set up as many links as possible. For example, QuickBooks data to automatically populate your spreadsheet. 26

29 KPI Framework: 40+ measures but start with 10 or less 27

30 Targets Just Get Started Go back to the Previous Year or Years for a LIMITED number of KPIs. Measure more often at the start, start monthly or weekly depending on KPI. Do a first quarter review and make adjustments. Look for industry benchmarks but also outside to other professional services. This is not a check the box exercise or like financials which are historical info KPIs are actionable Targets depend on your circumstances! 28

31 Dashboard: monitor frequently Client Development Client Acquisition Cost Productivity Profitability Performance Client Experience Firm Culture 29

32 Continuous Improvement Dashboard Approach Like the workflow and matching KPIs, improvement requires constant monitoring. Change and experimentation mentality. Learn to delegate and outsource. Budget should not be just revenue divided by 12, build up costs and revenue, including pricing. Enhance your Practice with enabling technology. Measure KPIs regularly on Dashboard. Review and Act upon the results, adjusting targets, workflow, resources, & technology. 30

33 Questions 31

34 Small Law Firm KPIs: How to Measure Your Way to Greater Profits Order your copy today: 20Juetten for 20% discount Mary Evolvelawnow.com Free Starter spreadsheet will be ed to participants 32

35 CLIENT EXPERIENCE CE BUSINESS 2016 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec ANNUAL 6-CE(a) Net Promoter Score (%) 18% 24% 50% 0% 37% 95% 81% 23% 60% 45% 77% 43% 46% TARGET - Net Promoter Score (%) 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% On scale of 1-10, how likely to recommend the firm to <others>? Input - Total Responses Input - Promoter (9 or 10) Input - Neutral (7 or 8) Input - Detractor (1 to 6) This workbook is copyright material for your use only and not for reproduction or commercialization Protect your Intellectual Property (PIP) LLC 2017