KPIs: Data Stories to Success - Client Development
Do you know your business’s monthly break-even point? What is your client/ customer conversion rate? What is the utilization of your staff? How long does it take to bill and collect from clients/ customers? These questions highlight different Key Performance Indicators of which every business owner should be aware.
In the next seven articles of our 'Data Stories' series, we will be using case studies to emphasize the importance of these statistics. Referred to as KPIs through our article series, Key Performance Indicators are defined as 'quantifiable individual measurements that reflect the goals of a business.' They are critical to the success of a business, helping identify its current position while addressing concerns, setting goals, and helping to achieve them.
Case 1: Law Firms
Our first case is that of a Law Firm practitioner. This example highlights the importance of understanding Client Development KPIs.
LOREN HAD BEEN A PRACTICING FAMILY LAW ATTORNEY FOR NEARLY 20 YEARS
After graduating from the University of Washington, he took a position as an Associate at a medium-sized family law firm in Tacoma, eventually becoming a Partner. After about 3 years in this position, he found he was not happy with his work-life balance. He felt he was working too much for the amount of tangible success he had received, so he took a risk and started his own practice.
FROM PARTNER TO SOLE PRACTITIONER
Loren became a Sole Practitioner of family law in Tacoma. He employed one Paralegal, one Receptionist, and no Associates. At first, he felt he had a better handle on the success of his firm and future, but after about six months, he noticed that he was recognizing a pattern of feelings regarding his work-life balance. His average billable hours per day seemed far below what they should have been. This has been a problem experienced by many managing partners in small-to-medium-sized Professional Service firms.
WHAT'S REALLY WRONG?
After reviewing some basic financial data and observing processes and operations, The Doty Group was able to direct Loren to Client Development KPIs, the tracking of which could help to identify specific weaknesses in processes. This diagnosis would lead to a plan of action and a solution to the problem that jeopardized Loren's happiness with his chosen career.
THE QUANTIFIABLE DATA
KPIs focusing on Client Development help quantify the effort and cost of meeting with potential new clients (PNCs). For example, according to the 2016 and 2017 trends from Clio’s (a legal practice management program), Lawyers spend about 75% (or 6 hours) of their day on administrative tasks, including marketing and billing. A portion of this time includes meeting with potential new clients. At the time, Loren was spending a significant portion of his day with potential clients.
Loren had been holding free 30 minute in-person consultations regardless of potential case size. He believed that meeting with PNCs in person helped his conversion rate. This was just a gut feeling; there was not data to prove this notion. After we helped him begin tracking and analyzing his conversion rate, he found that it was only at 25%. In one month alone, he had 18 potential new client meetings. He had only converted 4 of those into new clients. At his billable rate of $250 per hour, his opportunity cost amounted to $1,750 (7 hours).
A BETTER PROCESS
Because Loren had started tracking and analyzing time spent on potential new clients, as well as his conversion rate, we were able to identify and quantify his issue. Moving forward, he added new questions to the firm’s inquiry form for potential clients. The answers gave Loren additional in-depth and case-specific information to more effectively qualify PNCs. Loren also developed a script for his receptionist to use if a potential client were to call the office instead of using the website.
Now, Loren only meets only with large potential cases in-person. He will simply speak with small and medium-sized cases over the phone for 15 minutes at no charge. He has developed a script for his receptionist so that she may conduct some of the small and medium-sized potential new client calls herself. Because of these changes, Loren devotes more time to his clients and has increased his billable hours.
From the moment that Loren walked through our door, we already understood the challenges he was facing, because at The Doty Group, we already have a deep understanding of the operations of Professional Service firms. Our resources, coupled with our experience as a service provider, allow us to partner with organizations to evaluate their current KPIs in these identified areas. Once evaluated, we provide effective advice on improving processes, seizing opportunities, and increasing value.
The Doty Group is a full-service CPA firm offering Tax, Audit, Valuation, and Advisory Services to Business and Individuals in Tacoma, WA. If you have more questions regarding increasing the value of your business, please give us a call at (253) 830-5450 or Contact Us here.