Are you measuring business performance in your practice?
In the recent economic climate, smaller legal firms have to work smarter to maximise resources, deliver outstanding customer service and compete in a turbulent market. And that means they need to improve processes that impact on their business.
However, the starting point for managing any resource or process is in measurement. Without knowing where you started from and where you ended up, how can you know that you’ve managed it successfully? Or could have managed it better?
And for many small law firms, therein lies the problem. Resource is tight and there’s work to be done, clients to keep happy and fees to be earned. Everyone is too busy to start thinking about measuring – let alone implement a measurement framework.
I’d like to discuss here, though, that taking such a step can pay dividends both in the short term for small business owners and also in laying sound groundwork for future strategic decision making.
For this purpose, then, let us consider a sample scenario where measurement is required to take place and follow it through:
A small firm of solicitors (ABC Solicitors, say, hereafter known as ABC) want to improve their client conversion rate. They have a good mix of marketing channels that has evolved over time (trade events, networking, website, email campaigns, etc.) but don’t have a clear idea of how effective they are.
In developing a measurement framework to solve this scenario we need to ask three key questions that run nicely into each other.
- What and why do we want to measure?
- What processes are required to measure?
- How should the results be analysed?
Let’s look at these in turn.
What and why?
In this scenario, the sentiment is clear – understanding the rate of conversion is a first step for ABC to manage their marketing budget more effectively.
However, if we ask why again, we can establish that what we actually want is to generate more business that delivers more value, more profit for ABC.
As we all know – put simply – profit equals income less costs. So to understand the profitability of the ABC marketing channels, what we really want to measure is both the income generated from and the cost of each of those channels.
So does that mean that we don’t want to measure conversion rates after all?
No it doesn’t. By measuring this part of the marketing process across each of the different channels, this leads to greater insight when we come to the analysis phase which we’ll discuss later.
We now know what we want to measure – income generated, associated costs and conversion rates across each of the channels. Now we have to decide on how to measure them.
However, each measurement comes with a processing / recording cost – the trick is to find the balance that gets ABC the information it needs with the minimum of disruption to business as usual.
Ideally, then, ABC are looking for simple solutions that can be embedded in their day-to-day running of things in a way that the administrators have to spend little or no time or effort in gathering the information required for the measurements.
Automated solutions tend to fit this model. However, all small businesses are unique, so the measurement processes ABC need to adopt will need to fit around their current practices, culture and ambitions.
The basic premise for analysing the measurement data gathered above is to consider the short-, medium- and long-term implications for ABC. And the larger the data set (in terms of volume, timespan and type of data), the richer the analysis can be.
For example, if we just knew the values of the costs of and income from each channel, but not the conversion rate, the analysis of data may suggest that Channel 1 was more profitable than Channel 2 and, therefore, more resources should be directly to Channel 1.
However, what if we discovered that a 10% improvement in the current conversion rate of Channel 2 would lead to an overall 50% improvement in ABC’s overall profitability? Understanding the conversion rates, then, would allow us to do so.
If we knew that Channel 1 was more profitable in March and September and Channel 2 was less so, ABC could adjust their marketing plan to take advantage of this opportunity which might otherwise go unnoticed.
The cross-referencing of data sets at increasingly smaller levels of granularity allows the analysis to become more and more targeted in order to provide a level of predictability in the cause-and-effect of ABC’s marketing plan. It also allows them to identify – and react to – changes in the marketplace much earlier and to greater effect.
Some practical points
So how does this impact you? If you aren’t doing so already, why not try recording the referral source for each of your new clients? A simple case of asking each new client how they heard about you and recording their answer on a spreadsheet will quickly allow you to build up a picture of whether or not all that money you are spending on yellow pages is actually worth it.
The longer you do this, the more easily you will be able to identify trends in your business and act accordingly to win new clients.
You can, of course, get far more sophisticated than this, but as a starting point it is a simple but powerful tool in helping you make strategic decisions that will win you new clients.
To learn more about how PureIntuitive can help you measure the performance of your practice, click here.
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