We live in a world where everything is tracked. A device on my wrist tells me how many steps I’ve taken and my current heart rate. I use apps on my phone to track how much money I have, what bills have been paid and how my investments are growing. Data is everywhere. The question is “can data save law firms.”
Can Data Save Law Firms?
By many measures, today’s law firm model is struggling. By some measures, today’s law firm model is irrevocably broken. I’d suggest, though I’m not the first nor will I be the last, that you can correct course by using data.
While there are many challenges for solo and small firm lawyers today, here are three problems often identified:
- Reaching new clients;
- Being attuned to the needs of clients (client service, types of services provided, fee arrangements); and
- Spending too much time on administrative tasks and running the business.
The good news is we can address these concerns by mining a few of our systems and recording some numbers.
At the Clio Conference in late September, Clio released the 2017 Legal Trends Report, which you can find at clio.com.
Clio 2017 Legal Trends Report
Out of an average workday, here’s how lawyers are spending their time:
- Utilization rate: 2.3 hours
- Realization rate: 1.9 hours
- Collection rate: 1.6 hours
This means lawyers are spending 2.3 hours of their day doing client work and getting paid for 1.6 hours of work a day. This is not a sustainable business model.
Let’s talk about data around the challenges we discussed earlier, finding more work, providing excellent client service and administrative efficiencies.
Reaching New Clients
There is an old adage, “I know that half the money I spend on advertising is wasted, I just don’t know which half.” Without data, how do we know where to spend our time or our money?
Lawyers are advertising by using their websites, google ad words, print advertising and referrals from clients, friends, family and other lawyers.
Today, there is an array of marketing automation tools and customer relationship management tools. Solos and small firms are using products such as Salesforce to manage client interactions such as scheduling events with clients, maintaining potential client contact information, and providing clients, potential clients and referral sources with newsletters, alerts or evites.
Using the data collected in these tools can help you determine how to allocate resources, which clients come from which advertising campaigns and which clients are most profitable.
A low-tech solution is to ask your client how they heard about your service. Add this step to your client intake process. Once you collect the data, analyze it.
If you find clients come to you based on referrals, then keep up the coffees and networking lunches. If you find your clients are coming to you from ads, you can increase your ad spend. Digital advertising can be much less expensive than traditional advertising campaigns and can be targeted directly to your likely client.
The October issue of the ABA Journal features an article titled “Statistical Significance” featuring Drew Vaughn, founder of NuVorce. Vaughn was a speaker at the national bar-related insurance company conference this summer. He shared his results (and costs of) doing traditional networking compared with digital advertising where he can pinpoint his potential client by age, income and geographical location. Vaughn did some “back of the envelope” numbers showing his competitors profit was 16% compared to his 37.9% profit.
Vaughn has developed algorithms that help him in pricing matters for clients. His use of algorithms has garnered interest in his law firm from venture capitalists interested in investing in his firm, as well as other law firms interested in buying his law firm to have access to his algorithms.
An Easy Kick Start to Better Client Service
When consumers are surveyed, the vast majority say lawyers do not return phone calls. This is no different from the complaints that the State Bar gets, the vast number involve clients complaining about lawyers failing to return phone calls.
Many of the calls you fail to return may be because you do not believe you can assist the client. However, responding to a potential client to say “I’m not the lawyer for you, but let me make a referral” allows you to provide a service to a consumer in need and if handled well, could leave the consumer with a positive experience. A positive experience is good for the profession and may result in a referral to you later for a matter that is a better fit.
These calls are a great opportunity to refer clients to other lawyers thereby strengthening your network of referral sources, or to provide a referral to your bar association’s Lawyer Referral Service. If you are concerned about how long this process will take, look for ways to automate this process or delegate the calls to your paralegal, your receptionist or to your virtual assistant.
Where Can I Find the Data?
There are many sources for locating data about your firm. Depending on the tools you are using, analytics from Google, Facebook, Sales Force, or Avvo are a few. You can build Excel reports to track and analyze the data or if that is not in your skill set, hire someone to help you with this. The best treasure trove of data can be found in your own billing records. There, you should be able to determine how much it costs you to take a deposition or try a criminal traffic case. A lawyer told me about a real estate closing several years ago. The client complained about the price of the closing. When the lawyer went back to her billing records, she found that she or her paralegal had taken 50 phone calls from the client during the course of the closing. If these calls were billed at her lowest billing rate at a minimum time increment, the closing would have cost 10 times more than the flat fee. It is no accident that this lawyer is no longer practicing real estate law.
What questions are you trying to answer with this data? How are prospective clients finding me? What is my rate of turning prospects into clients? Is online marketing bringing in paying clients? Are my fees reasonable?
Move from “I think” to “I know”
It’s easy to say, “This won’t work for me”. “I don’t have time to track data.” “I’m not a numbers guy.”
Once you incorporate data analysis into your practice, you are no longer guessing about the effectiveness of your marketing, the accuracy of your pricing or the continued inefficiencies in your practice. Welcome to a data-driven law practice!
Camille Stell is the Vice President of Client Services for Lawyers Mutual. Continue this conversation with Camille at [email protected] or 800.662.8843.