Everywhere you look data drives the world. Organizations and businesses collect enormous volumes of data and then analyze them for competitive advantages. It’s all about how we manage the data, integrate data, store data, access data, and leverage data.
Data analytics for small law firms is no different.
For example, have you ever noticed how the ads in Facebook seem to know your tastes and interests? Facebook uses 98 data points to target advertisement to its users. Here’s another interesting stat – did you know that a Facebook post at 7 pm will result in more clicks than posts at 8 pm? Why is this important? Marketers use this information to reach more consumers and know when you are most likely to be engaged. The amount of data that Facebook collects and uses to its advantage is amazing.
This is data analytics at work.
How much data analytics does your law firm take advantage of?
At the top level, data analytics for small law firms lets you measure the health of your practice. You’ve probably heard of KPIs, which stands for Key Performance Indicators. KPIs are quantifiable metrics used to measure how well you are meeting your goals.
What KPI’s do you have for your small law firm? Are you on track to meet or exceed your realization rate? What’s your new client conversion rate? These are just a couple KPI’s you should be tracking at your law firm. Let’s dive in a little deeper into these two of them.
Client Conversion Rate
Our first example of data analytics for small law firms to track is Client Conversion Rate. Client Conversion Rate is a percentage metric calculated by taking the number of new clients divided by the number of potential clients. For example, if you had 20 potential clients inquire about your practice last month with 8 converting to new clients, your Client Conversion Rate is 40%.
How do I track potential clients? The first step to this KPI is to (hint): collect data analytics. Start simple by tracking how many potential clients contact you and how many converts to a client. Then, get more detailed by asking questions and tracking how potential clients contacted you. When a potential client calls your office, find out how they found you. Was it through a Google search, Facebook, a client referral or print ad. If a potential client contacts you through your website or emails you, find out how as much as you can about how they found you.
The Client Conversion Rate KPI should be tracked monthly. This gives you enough data analytics to adjust your focus on where to market, make updates to your website or invest in advertising.
Realization rate measures the difference between the time recorded and the percentage of that time that is paid by the client. For example, if you record 6 hours of billable time but only 4 of the hours are paid by the client, your realization rate is 67%. Of course, you want your rate to be 100%, but that’s not always possible. You sometimes bill less hours than performed because the client requests a reduction, you took longer than expected on a task, or you discount your fees because of a very cost sensitive client. No matter what reason, any increase in your realization rate means revenue and profits for your firm.
A by-product of tracking the realization rate is that you will know where you are spending your time. This will allow you to identify opportunities to improve efficiencies, consider new technology to improve accuracy and speed, and eliminate administrative tasks that can be performed by a computer or staff member with lower costs.
Also, realization rates will also help you consider flat or fixed fee arrangements. After tracking the amount of time on specific types of cases, you will be able to estimate a flat or fixed fee that can help you achieve rates greater than 100%.
Collecting Data Analytics for Small Law Firms
The hard part of small law firm KPI’s is collecting the data. If you don’t have an automatic and accurate method of collecting data, you will find yourself spending too much time on KPI’s.
Using a legal practice management software will help you keep track of your work and obtain the data you need to set your goals and measure your performance. Look for a solution that allows you to work throughout the day without constantly thinking about tracking the data.
Using a legal practice management software like Smokeball, enables you to collect detailed firm analytics and harness the power of data while you work. For example, with Smokeball, you can go about your day and have all of your activities recorded automatically. When you create a document, Smokeball will track the exact amount of time you spent editing. If you read and respond to emails, Smokeball will track every second of your time.
In the future, we will cover other KPI’s and data analytics you should be tracking to increase the profitability of your firm.
Click here to see how Smokeball tracks all your work and increases the profitability of firm by an average of 34%?