If there’s one missing link that keeps most law firms from accomplishing their goals, it’s tracking KPIs (Key Performance Indicators). That’s why Silver Peaks Accounting uses a framework of KPIs with every client to identify strengths and weaknesses and fix any hidden problems. These KPIs are law firm specific and have been shown time and time again to be crucial to the success of small firms.
Over the next few weeks, we’ll be digging into our favorite KPIs from Mary Juetten’s excellent book “Small Law Firm KPIs” which we use with our own clients. First up is a number that, if you’re not tracking it, could really shock you. It’s been a major “Aha” moment for many of our clients.
The KPI: New Client Conversion Ratio
Essentially, client development is a measure of how well you turn prospects into clients. It helps you see how many of your potential clients actually end up hiring you (and paying you). The simplest way to track this is to measure your new client conversion ratio. This can be done across your entire firm or even broken down to show the conversion ratio for a certain campaign, individual, or office.
How to track it
The new client conversion ratio is measured as a percentage of prospective clients who become clients. The math is simple – just divide the number of new clients by the number of potential clients and multiply by 100. The trick is in finding those numbers if you’re not tracking at all.
First, you need to have a system in place to track how many potential clients you interact with. You almost certainly know how many new clients you bring on, but do you know how many you speak with that don’t end up becoming clients? You need to know that number in order to see how efficient your client development system is and where it may be breaking down.
Why it matters
Ultimately, your profits depend on productivity, which depends on billable hours for your lawyers, which means you need clients! If you’re going to be sustainably profitable, you need to bring in new clients to cover turnover and even more if you want to grow. Bringing in those clients in an efficient way means it takes less time, money, and energy to keep your firm running smoothly.
A good client development system also helps create a happier, less stressful, more successful firm. Why? Because it means you’re developing more of the right clients who are a good fit for your firm rather than compromising just to get the hours.
Tracking your conversion rate can help you see where your best-fitting clients come from and identify any weak spots in your development process where you may be losing potential clients.
If you need help setting up systems to track your KPIs or knowing what to do with that information once you have it, click on the link below to schedule a time to chat. We’d love to discuss how your firm can grow and profit from working with the law firm accounting specialists.