MEASURE WHAT MATTERS TO YOUR FIRM’SBOTTOM LINE WITH FIRM CENTRAL

March 16, 2017Mary Juetten & Kathy Freije

2 Measure What Matters to Your Firm's Bottom Line with Firm Central

MEASURES WHAT MATTERS TO YOUR FIRM’S BOTTOM LINE WITH FIRM CENTRAL

12:00 Measures that Matter: State of Small Law12:10 KPIs Examples

- Pipeline | Net Promoter Score - Individual Collections | Accounts Receivable (A/R) Aging- Matter profitability

12:40 Getting Started12:50 Questions

3 Measure What Matters to Your Firm's Bottom Line with Firm Central

Measures that Matter

4

Solos and Small Law Firm Partners Say…

7

88%

50%+

Types of challenges experienced by at least 50% of small law firms

Firms with significant challenges have taken no action to address them, with the exception of keeping up with legal changes

Client satisfaction ratings are how they define firm success

2016 State of Smaller Law Firms Study, Thomson Reuters

Small Law Firm Success Defined

Profit per partner

Revenue per partner

Case win percentage

Overall revenues

Work/life balance

Overall profits

Repeat business

Client satisfaction ratings

0% 100%

36%

38%

50%

76%

81%

82%

87%

88%

2016 State of Smaller Law Firms Study, Thomson Reuters

6

Small Law Firm Challenges

• Challenges acquiring new client business

• Spending too much time on administrative tasks

• Cost control and expense growth

• Clients demand more for less or rate pressure

• Increasing complexity of technology

• Lack of internal efficiency

• Keeping up with changes in the legal market

• Succession planning

• Information overload from growth in legal documents

2016 State of Smaller Law Firms Study, Thomson Reuters

Experienced Challenge

78%

69%

62%

62%

63%

54%

56%

47%

47%

7

Those With Significant Challenges…. Implemented

Change

37%

19%

46%

34%

28%

54%

11%

27%

18%

Living with the Problem

63%

81%

54%

66%

72%

46%

89%

73%

82%

• Challenges acquiring new client business

• Spending too much time on administrative tasks

• Cost control and expense growth

• Clients demand more for less or rate pressure

• Increasing complexity of technology

• Lack of internal efficiency

• Keeping up with changes in the legal market

• Succession planning

• Information overload from growth in legal documents

2016 State of Smaller Law Firms Study, Thomson Reuters

8 Measure What Matters to Your Firm's Bottom Line with Firm Central

WHAT ARE KPIs?

Key Performance Indicators are metrics for measuring all aspects of business and are beyond the traditional billable hour.

Law can borrow from other professional services and industries for KPIs.

Focus on outputs, client experience, collections rather than inputs such as hours billed.

Move from Profits per Partner.

9 Measure What Matters to Your Firm's Bottom Line with Firm Central

Thomson Reuters Small Law Firm KPI and Benchmark Survey

Participants:• 690 surveys sent out to customer panel June 2016• 62 Firms Responded: 10 Solos & 50% under 10 Attorneys

Stats:• 81% use technology (time & billing (34%) and practice management (44%))• 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%)

10 Measure What Matters to Your Firm's Bottom Line with Firm Central

KPI Examples

11 Measure What Matters to Your Firm's Bottom Line with Firm Central

Start with Client Satisfaction

Positive and Predictable Cash Flow:

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.

Borrow from outside the law: Net Promoter Score (NPS) & Pipeline.

Also on KPI Starter Spreadsheet – Client Acquisition Cost

12 Measure What Matters to Your Firm's Bottom Line with Firm Central

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?

Additional Question: Why or Why Not?Allow for feedback, good and bad.Help with action plan for improving NPS.Survey must be tracked, not anonymous. Technology:Google Documents or Survey Monkey, Excel for responses.

13 Measure What Matters to Your Firm's Bottom Line with Firm Central

CLIENT DEVELOPMENT: Pipeline

Adjusted Prospect Pipeline ($)Total dollar value of the Prospective Clients’ Matters on the Pipeline adjusted for likelihood of success divided by total Attorneys (and Paralegals in some cases*) to yield a dollar value.

Technology:

Can start with Excel and move to Customer Relationship Management (CRM).

Can look at the Matter reports in Firm Central for data to create the different types of matters (buckets).

Targets:

Should tie into the monthly revenue in your budget.

14 Measure What Matters to Your Firm's Bottom Line with Firm Central

Firm Central Reports to Support KPIsAvailable Reports

Steps to Export the Client | Matter Reports from Firm Central

1. Click the Time & Billing Tab at the top of screen2. Click the Reports tab3. Select appropriate report and click Generate Report button4. Select date range (date range will default to current month

range)5. Select individual or all client/matter data6. Click Export button7. Click Download button8. Open report in Excel

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Exported Firm Central Reports: Collection Realization by Matter(in Excel)

17 Measure What Matters to Your Firm's Bottom Line with Firm Central

Misplaced Focus on Billable Hours.

Allan focused on billing, not collectingAt the end of the year, Allan was a billing machine at 116.25% utilization but 86.22% collected.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.Results are 88% when look at one month based on this data.Firm Central provides collections realized by timekeeper or $ collected by timekeeper to develop these metrics for your timekeepers.

18 Measure What Matters to Your Firm's Bottom Line with Firm Central

PROFITABILITY: Aging Tolerance

4- Profitability (f) Aging Tolerance (%)Total collections within 60 days divided by total billings.

Set deadline for recording WIP by month-end.

Policy to bill out all WIP each month (where practical) or at end of each engagement, regardless of timing.

Set payment terms.

Investigate factoring or other services if necessary.

Use e-billing and consider accepting credit cards.

19 Measure What Matters to Your Firm's Bottom Line with Firm Central

Exported Firm Central Reports: Aged A/R(in Excel)

20 Measure What Matters to Your Firm's Bottom Line with Firm Central

Steps to Export the Aged A/R Report from Firm Central

1.       Click the Time and Billing Tab at top of screen

2.       Click the Reports tab

3.       Select Accounts Receivable and click Generate Report button

4.       Date range will auto populate for current month. Change date range to see overdue A/R (see attached Export Settings.jpg)

5.       Click Export button

6.       Click Download button

7.       Open report in Excel (see attached Aged Excel Report – Current Month.jpg)

21 Measure What Matters to Your Firm's Bottom Line with Firm Central

PROFITABILITY

58 responses to TR KPI 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.

22 Measure What Matters to Your Firm's Bottom Line with Firm Central

PROFITABILITY KPI: Contribution Margin (CM) by Matter

Look at the mini profit and loss by firm by monthPI firm with two partners so overall was 49% in Jan but OF was 60% and PR was 46%.

Remember the CM uses Direct Costs which is at salary and/or draw costs; not billing rates. We can do a calculation at billing rates which is Leverage

Use Firm Central to export the timekeeper value and costs by matter – and calculate leverage KPI OR use salaries instead of billing rates for CM.

23 Measure What Matters to Your Firm's Bottom Line with Firm Central

Exported Firm Central Reports: Timekeeper & Expenses by Matter (in Excel) Also indicates whether the matter has been billed or not in last column

24 Measure What Matters to Your Firm's Bottom Line with Firm Central

Exported Firm Central Reports: Write-offs & Discounts by Matter (in Excel)

25 Measure What Matters to Your Firm's Bottom Line with Firm Central

Getting Started

26 Measure What Matters to Your Firm's Bottom Line with Firm Central

KPI Framework: 40+ measures

27 Measure What Matters to Your Firm's Bottom Line with Firm Central

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, Firm Central to QuickBooks, extract data to automatically populate your spreadsheets using linking.

28 Measure What Matters to Your Firm's Bottom Line with Firm Central

KPIs: monitor frequently

Client Development

Client Acquisition Cost

Productivity

Profitability

Performance

Client Experience

Firm Culture

29 Measure What Matters to Your Firm's Bottom Line with Firm Central

Questions

30 Measure What Matters to Your Firm's Bottom Line with Firm Central

Small Law Firm KPIs: How to Measure Your Way to Greater Profits

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Mary Juetten Kathy Freije

@maryjuetten @WestlawSmallLaw

mejuetten@traklight.com firmcentral@thomsonreuters.com

Traklight.com Thomsonreuters.com

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