All successful businesses use quantifiable measures to track, monitor, and assess the success or failure of a specific business process. They are called metrics.
If you’re not using the right metrics, in the right way then:
- You’re running your practice by guessing – which means you don’t really have any control.
- You won’t be able to repeat the success you feel like you’ve achieved.
- You won’t be able to tell if what you are doing is making things better or worse.
- You will spend way too much time fighting fires and cleaning up messes.
- You will not be able to prioritize effectively.
- Your decisions will be sabotaged by feelings, anecdotal evidence, hearsay, and bias.
Ok, so you can probably agree that not having metrics is bad.
Here are the five types of metrics you need to be measuring in your practice.
Think of these as the dashboard on the car – back when dashboards had actual gauges and information and not just the idiot “check engine” light.
- The cost of serving a client, including client acquisition cost, direct costs, and overhead allocation.
- Profitability. You must understand the contribution of each matter to your bottom line to guide your decision-making on client and matter acquisition strategies. Make sure you understand this by timekeeper, client, matter, practice area, and firm.
- Marketing Expenses as a percent of revenue.
- Technology Expenses as a percent of revenue.
- Realization. This measures how much you make against how much you work, including: billed vs collected, discounts and write-downs, write-offs, and accounts receivable.
Metrics only work for you when you have simple ways to gather the information repeatable routines to review and respond to what you’re seeing. Establishing these habits takes time and effort. But once you’ve got it down you’ll be in complete control of your practice. And who wouldn’t want that?
P.S… I know how difficult it is to build these business processes while you feel like you are running at full speed hoping to just “get through” whatever the next thing is. I’ve lived it. So I can show you how to get there without unnecessary stress and stumbles. If you’d like to know more just reach out and we’ll talk.