Data Analytics for Small Law Firms

//Data Analytics for Small Law Firms

Data-Analytics-for-Small-Law-FirmsEverywhere 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

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%?

By |January 23rd, 2018|

About the Author:

For years, Josh has helped lawyers become more organized, productive, and profitable. A trained litigator, Josh came to Smokeball from a large east-coast law firm where his practice focused on franchise, insurance, marine, and general litigation. His work with Smokeball, and his continued passion for what he does each day, is driven by a desire to help lawyers and their staff do better in every way. Knowing well the stress and strain put on today’s legal professional, he regularly focuses on improving work and life in the law. He has traveled the country working with and learning from lawyers and their staff. Josh speaks regularly to bar associations about successful law firm practices and other legal topics. Recent notable engagements have been with the Chicago Bar Association, the Illinois State Bar Association, and the Missouri Bar’s Solo and Small Firm Conference. In addition to his work at Smokeball, Josh serves on the Writing Resource Center staff at The John Marshall Law School. Besides legal technology, his research interests include judicial decision-making, jury decision-making and psychology, and legal writing. He has written and overseen research exploring causal effects of sex/gender on federal appellate court decision-making, and assisted with research for a forthcoming textbook on judicial decision-making. Additionally, Josh sits on the Board of Directors of Chicago-based Community Activism Law Alliance and on the Board of Directors of Chicago Fringe Opera Company. Josh holds his J.D., cum laude, from Washington University in St. Louis, where he served as a Senior Editor of the Wash. U. Law Review, held the prestigious Thompson Coburn Research Fellowship, served as Research Assistant to then-Vice-Dean (now Chancellor) Andrew D. Martin, and clerked at the U.S. District Court for the Eastern District of Missouri. He holds a B.A. in Political Science and a B.M. in Music Performance with Honors Scholar distinction from the University of Connecticut, making him a Huskies basketball fan through and through. Follow Josh’s activity on LinkedIn, and keep up with new articles on the Smokeball Blog.