The Friday Five
If you want to run a successful business, you’re going to need some key performance indicators. All businesses focused on growth pay attention to certain key pieces of data that indicate the health of the business. Law firms offer professional services with uncertain outcomes for clients, some of whom are in crisis situations. So how do you measure success in such circumstances?
1. Your clients return or recommend you. Probably the biggest indicator of your ability to generate results for your clients is whether they’d retain you in the future or recommend you to their friends. Clearly, if they return to you, they’re satisfied. Many lawyers, however, come across people only during major life events, so return business is not a good indicator of success.
One way to gauge how you’re doing is to use a survey that’s becoming the standard among companies focused on customer service. It’s called the “Net Promoter Score,” and you’ve likely seen one of these surveys or taken part in one yourself. The core question is, “On a scale of 1-10, would you recommend our service to a friend or colleague?” Usually companies include one follow-up question that asks for a little exposition to explain the previous answer.
The Ultimate Question 2.0, from Harvard Business Review Press, goes into Net Promoter methodology, which includes evaluating your distribution of scores to determine how many of your clients are your promoters, are neutral about you or are your detractors.
2. Your clients pay your bills. When clients pay your bills in full and on time, that indicates a number of healthy vitals about your business. First of all, it means that you have an effective billing system in place that allows you to collect your time and generate invoices.
One of the tenets in professional services is that the longer you wait to bill for services, the less likely you are to get paid for your work. So if you’re slow to send out invoices and end up hitting your clients for work done two or three months ago, good luck collecting on all of that time. You’re going to get a haircut.
Another reason good billing realization (collection of billed time) is important is that it tells you how well you’re communicating with your clients and matching their expectations. If you find your clients are routinely asking for trims on their invoices, you might consider that a gap exists in the work you’re doing and the work your clients think you’re doing.
3. You spend 75 percent or more of your time on billable activities. Whether or not you bill by the hour, each minute of the day has value. You are a highly educated and experienced professional. You should have an intrinsic or extrinsic hourly rate regardless of whether those hours ultimately appear on an invoice.
Let’s say your hourly rate is $350, whether that hits the client or whether you backed into that number based on your target revenue numbers. When you are working, always ask yourself, “Is what I’m doing right now worth $350?” Or should someone else run to Costco for the office supplies?
According to recent data from the Florida Bar’s economics and law office management survey, the lawyers surveyed spent approximately 30 hours out of an average 50-hour work week on billable activities. That’s a 60 percent ratio, which is a colossal waste of time and money. With today’s tools and technology, there’s no reason that number can’t be at 75 percent. Consider that 75 percent of a 50-hour work week would translate to an extra 7.5 hours of billable time per week. If your time is worth $350 an hour, that extra 7.5 hours equates to $2,652 — or a whopping $131,250 for a 50-week work year.
4. You don’t waste time on things that don’t require your time. By now, the message should be clear: If you need administrative help, get it and start getting your billing percentages up with relentless focus.
- There’s no reason your law firm should shut down for a day or two to generate invoices when modern technology can knock that stuff out in 30 minutes. It’s like ordering a pizza.
- There’s no reason to dig through emails, calendar events and legal pads to reconstruct your time entries at the end of the month. Top-revenue-generating lawyers bill as they work, and are able to capture time and expenses from anywhere at anytime, without paper.
- And there’s no reason you should keep a paper filing system, either. Consider the amount of time required to look for a physical file, pull it and then put it back. Think about the waste and collisions that occur when multiple people need the file at the same time. Contrast that to being able to view a file from anywhere at anytime from a laptop or mobile device.
5. You enjoy being a lawyer. Let’s face it, the profession has a high percentage of depression — by some estimates, it’s 35 percent of all practitioners. So to me, the biggest sign of all to tell that you’re successful? You enjoy what you do and you’re proud of your law firm.
Larry Port is the CEO and Chief Software Architect of Rocket Matter, an online legal software platform for time and billing and practice management. He also runs Rocket X1, an Internet marketing agency for professional service firms. Larry writes on technology, business and marketing topics for legal publications and speaks at legal conferences around the country.
»Top cloud-based practice management software: Free 30-day trial!
»Manage my legal practice from anywhere on any device—HoudiniEsq.
»Learn more about the easiest way to get paid.
»Manage your practice with ease, for one small fee.
»Work from anywhere. Intuitive legal practice management software. Free trial.
»See who’s speaking at Lawyernomics 2014. April 23-25, Las Vegas.