Measuring the performance of your business is pivotal toward law firm profitability and operational health. By tracking law firm financial metrics, you can efficiently plan, execute, and measure the success and pain points of your firm’s services. It starts with setting the right metrics, so you can make intelligent, data-driven choices.
This post will discuss the key financial metrics and legal KPIs that your law firm should be tracking to analyze and improve profitability.
What are Law Firm Financial Metrics?
Law firm KPIs measure the success of your operational, marketing, and case management performance. By identifying and tracking these metrics, you can pinpoint areas of opportunity, reduce waste, and increase your overall profit.
Law firm KPIs can be split into four categories:
Financial Performance
Attorney Performance
Case Management Performance
Legal Marketing Performance
Financial KPIs
Let’s start with the profitability and margins of your law firm. Consider law firm financial metrics as the core of your business. You’ll want to set KPIs that measure overall law firm profitability and the cost of running your firm.
Revenue KPIs
These metrics determine how well your team makes money as a group. These metrics can be used for setting projections and monthly revenue targets (as goals). Revenue KPIs can include:
Total monthly revenue billed and collected
Total monthly revenue per matter and employee
Projected annual revenue
Debt And Outstanding Balance KPIs
In addition to revenue, you need a strategy for handling overall debt and aging invoices. Set monthly targets for debt and accounts receivable management as a road map for your team. These KPIs can include:
Total firm debt
Outstanding accounts receivable (AR) balances (with aging)
Billing KPIs
What is your current billing rate and fees? Billing KPIs ensure that your firm’s prices are fair and profitable in your area of practice and location. These KPIs can include:
Operating account balances
Billing rate
Fees per matter and new matters
Overhead KPIs
Determine if your firm’s overhead is draining your firm’s revenue. Overhead KPIs help determine whether the tools, office space, and salaries contribute to productivity and profit.
Overhead KPIs can include:
Monthly cost and net overhead (supplies, technology, etc.)
Cost of annual staff and attorney salaries
Cost of current physical office space
Finally, consider a financial reporting tool made for law firms. This tool can boost company metrics with reports on aging invoices, insight on payments billed and collected, and the ability to track active payment plans.
Profitability Metrics
Law firm profitability metrics give you a high-level view of how well your law firm is converting work into profit. Key profitability metrics to track include:
Net profit margin (total revenue minus total expenses)
Profit per partner or attorney
Realization rate (actual billable hours collected vs. billed)
Utilization rate (billable hours vs. total hours worked)
Tracking these KPIs helps law firms stay financially healthy and make strategic decisions that support long-term growth.
Attorney Productivity and Performance Metrics
Next, you’ll want to measure the individual work of the attorneys in your firm. This is the lifeblood of your business. When tracking your team’s productivity, use it to improve processes and not solely on criticism. This ensures that individual members of your squad are as efficient and motivated as possible.
Utilization Rate
This legal KPI identifies the amount of time spent on billable client work. Calculate utilization rate by dividing each attorney’s billable hours by total hours worked.
For example, if an attorney works 2,500 hours and bills for 1,800 hours, then they have a 72% utilization rate.
(Billable Hours / Hours Worked) x 100 = Utilization Rate (1,800 / 2,500) x 100 =72% |
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The closer a utilization rate is to 100%, the greater the performance. If the utilization rate is low, this can unveil administrative work that consumes too much time.
Realization Rate
This second productivity metric measures the number of recorded hours compared to fees collected. This is calculated by dividing recorded payments by fees that are collected.
For instance, if an attorney records 2,000 hours and clients paid 1,200 of the hours, the realization rate is 60%.
(Fees Collected / Recorded Hours) x 100 = Realization Rate (1,200 / 2,000) x 100 =60% |
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A percentage closer to 100% indicates better performance. If the realization rate is low, this can uncover issues related to client communication, invoicing, and/or payments.
Attorney Performance KPIs
These numbers can contribute to each attorney’s reviews and goals.
Performance KPIs can include:
Monthly number of new matters/cases opened per attorney
Monthly number of expenses per attorney
Monthly average billing rate per attorney
Monthly number of referrals per attorney
Monthly number of legal assistant billable hours
The simplest way to improve the profitability of your team is with software that easily and efficiently tracks billable time, converts new leads, and automates workflows. Your team can also improve client lead and communication with legal CRM tools.
Case Management and Client Satisfaction Metrics
Incorporate law firm financial metrics for determining how well you’re servicing each client during open matters. Case management law firm KPIs can help your team determine if each matter is handled effectively. For example, these numbers can indicate whether each attorney handles too much or too few open cases.
Case management KPIs can include:
Total number of cases/matters settled: Tracking the total number of cases settled helps firms measure productivity—if one attorney settles far more cases than others, it could highlight best practices to replicate or training gaps to address across the team.
Total number of matters per client: This helps assess the depth of your client relationships and identifies high-value clients who trust your firm with multiple legal needs.
Average number of attorneys per client: Monitoring this metric ensures clients aren't being handed off too frequently, which can affect continuity and satisfaction.
The satisfaction of your clients is also an essential element during your firm’s profitability analysis. These legal metrics can help set company goals for enhancing client service.
Client satisfaction KPIs can include:
Total client referrals: High referral numbers signal strong client trust and satisfaction with your legal services.
Total number of positive (public) client reviews: Public reviews not only reflect satisfaction but also influence potential clients who are researching your firm.
Total client retention rates: A high retention rate indicates loyalty and signals that your firm consistently meets or exceeds client expectations.
Law Firm Marketing KPIs
Lastly, you’ll want to know how well your marketing efforts are performing. Marketing KPIs for law firms showcase where your firm’s money is well spent.
Law firm marketing KPIs can include:
Traffic and conversions from organic blog/SEO content
Traffic and conversions from paid Google, social, and/or print ads
Traffic, click-through-rate (CTR), and traffic from email marketing
Conversion performance of your firm’s website
As a rule of thumb, ask all new client leads and conversions (in-person or via a survey) on how they heard about your firm. This feedback can determine how well each marketing medium is performing.
Why Is Tracking Financial Metrics Important For Law Firms?
KPIs for law firms are the most direct and effective way to analyze your firm’s performance.With the right KPIs in place, you can measure your firm’s marketing success, client conversions, and the productivity of each attorney. Law firm KPIs will help you discover what works well and where changes or improvements are needed.
KPIs for law firms are essential in maximizing your law firm’s productivity and revenue. Measuring the performance of your overall firm’s profit and costs, attorney’s work output, client satisfaction, and marketing efforts set the stage for boosting your firm’s financial and operational health.
Track Law Firm Financial Metrics With Legal Analytics Software
KPIs for law firms uncover areas of your business and staff workload that are profitable or need improvement. Legal case analytics software can help with tools that quickly set, measure, and evaluate your law firm’s KPIs and goals. With MyCase, you gain real-time insights into revenue, billables, and overall case performance through features like customizable case reports, case timelines, and financial dashboards. Try MyCase risk-free with a 10-day free trial.
About the author
Adrian AguileraSenior Content Writer
Adrian Aguilera is a Senior Content Writer and SEO Strategist for leading legal software companies, including MyCase, Docketwise, and CASEpeer, as well as LawPay, the #1 legal payment processor. He covers emerging legal technology, financial wellness for law firms, the latest industry trends, and more.