When you start implementing the tools that will scale your firm, you may realize that you’re unsure how, or if, your strategies are working. Key performance indicators are a great way to measure your growth – and scale your firm. Read our blog to learn more.
The Basics of KPIs
Key performance indicators are also called KPIs for short. A KPI is a tool to measure your progress towards a specific goal. Using KPIs is vital for scaling your firm because, as Peter Drucker once said, “What gets measured gets done.”
You’re more likely to ensure that they get done when you have specific goals to measure. Let’s use budgeting as an example. If you want to ensure that you stick to your budget, you have to keep it in mind when you purchase goods or services for your firm.
Implementing KPIs is a necessary step towards seriously growing your firm. The best way to start scaling your firm is to set achievable goals and use key performance indicators to measure your progress.
Types of KPIs
Three different areas are vital for using KPIs: financial, customer, and process performance. Financial KPIs measure everything to do with how you handle your firm’s money, including budgets, investments, write-offs, and more.
Customer KPIs are used to measure the experience that clients have with your firm. If you have implemented a client journey, you have a built-in system for implementing KPIs. If you haven’t yet designed a client journey – now is the perfect time to start!
Process performance KPIs are meant to measure the internal workings of your firm. You can use these metrics to study your firm’s efficiency, how your firm is operating, and the overall satisfaction of your employees.
Examples of KPIs
It’s important to note that there are five main KPIs that you should implement as soon as possible:
- Revenue growth
- Revenue per client
- Profit margin
- Client retention rate
- Customer satisfaction
While these five are crucial, there are many different objectives you can choose from. Let’s break down some examples from each type of key performance indicator.
- Gross profit margin: the difference between the amount of money spent vs. amount earned
- Operating profit margin: the amount of money earned after subtracting costs of labor
- Operating expense ratio: how much you spend to make money
- Budget variance: the difference between projected and actual spend
- Return on assets: how your assets are impacting your financial growth
- Client satisfaction: how happy your clients are with their service
- Client retention: the number of clients that finish their case with you
- Client reviews: how many reviews you have and the ratio of positive to negative reviews
- First response time: the amount of time it takes your team to respond to a client’s question or concern
- Average resolution time: how long it takes for a question or problem to be resolved
- Efficiency: the average amount of time it takes to resolve a case
- Cycle time: the length of time in between a case’s beginning and end
- Error rate: the number of errors made in a case vs. the number of cases you have
- Capacity: how many cases you can resolve in a certain amount of time
- Complaints: the number of complaints that you receive within a specific time frame
How to Implement KPIs
Before you can begin implementing key performance indicators, you have to know your goals and how you want to measure your progress. Start by setting SMART goals, which are specific, measurable, achievable, relevant, and time-bound.
Once you have your goals, you can begin looking at the different parts you’d like to measure. If your goal is to increase your revenue, you may want to stick with financial metrics. If you’re looking to improve your number of clients, then look at your customer KPIs.
You can mix and match KPIs, but make sure you’re not biting off more than you can chew. Be honest with yourself about your goals, and stick with one at a time. Once you’ve completed one, you can focus on those KPIs to move on to the next.
Speak to an Expert
If you’ve never dealt with KPIs before, it can be challenging to know where to start. It’s vital to take a clear look at your firm before running headfirst at your KPIs. Take it slow, and build a solid foundation to grow your firm.
If you’d like help implementing key performance indicators, or you’re having trouble setting SMART goals, reach out to us here at 8 Figure Firm. We’ve been there and done that – and we’re ready to help you hit eight figures in predictable yearly revenue.
We’ll help you turn your law firm into a law business.