3 Firm Metrics You Should Be Measuring
Lawyer and professional "how to run a firm" expert Christopher T. Anderson probably gets the bulk of his living from attending and hosting talks for lawyers than he does actual lawyering, but a good number of us wouldn't have it any other way. After all, he does a lot of the heavy research lifting so we don't have to. And, according to Anderson, if law schools taught attorneys how to be more like businessmen and less like lawyers, our lives would probably be a lot easier. Gee, does that salve your wounds?
No time for self-pity! Here are a couple of metrics that lawyers should get to measuring. It's about time you get on the current bandwagon -- and get a bit more business sense, when it comes to your practice.
1. Cost of Serving a Client
How much does it cost to service your client? The more clients you see within a month, the less each client will "cost" as a percentage of costs that are pretty much fixed, like utilities, rent, and staff salaries. Using this measure will also help you determine what the costs are (and what costs are affordable) for bringing new clients into the firm.
2. Profit Measures
Probably the most watched metric of all: profitability. But Anderson breaks profitability further into sub-categories. Here's a great list put together by Frank Strong on the Businesses of Law blog.
- Firm profitability
- Profitability by practice area
- Profitability by partners
- Profitability by client
- Profitability by timekeeper (all levels)
If you're small, you'll mostly be worrying about profitability by client and by practice area. There's more than enough time to add the rest, later.
3. Marketing Costs as Percentage of Revenue
All solo lawyers know that there's a certain amount of cost simply just getting one's name out. Today, more and more lawyers are understanding the importance of proactive marketing as opposed to the proud "wait for referrals" approach. A good number to shoot for is 3 percent of your revenue stream.
So, now you know. Go out there and track your progress.
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