Love the numbers or hate 'em. It's your choice.
But when it comes down to making better business decisions, there is nothing more powerful than objective data in the form of KPIs for professional service firms (including law and consulting firms).
While I'll call these here your KPI's (Key Performance Indicators), you might call it data, numbers, measurements...
It honestly doesn't matter what you call them in your business but "secret to success" might be just as applicable as calling it a KPI.
Why Data Beats Gut Instinct in Professional Services
You don’t have to be a math nerd to make better business decisions. In fact, the secret to success in professional services isn’t intuition... it’s objective data.
Objective data tells you whether to move forward, switch course and more. It can also increase your confidence and commitment in different areas of your firm.
And you shouldn't just take the first KPI that comes your way. Some KPIs seem similar to each other but can tell you a totally different side to the story.
Here are 3 KPIs with example use cases that should how relying on numbers, and in many cases more than one, is the real game-changer.
The Confidence To Promote: Client Lifetime Value
One of my top favorites to track is Client (or Customer) Lifetime Value, often abbreviated as LTV or CLTV.
Think of it like this.
You've been seeing massive promotion for this new coffee shop on the corner.
Advertisement after advertisement in your mailbox, your inbox, your social feed...
How are they justifying all this spend?
Because they believe in the power of CLTV.
That first purchase at their store may be a loss, but you stopping by there daily for a fresh Cup of Joe is making your lifetime value to them far higher than they've spent to get you there in the first place.
This number helps tell you how profitable and long standing your relationships are, and what you can risk up front to bring them in.
Recoup & Reward: Payback Period & ROI
Another one to track... the Payback Period or your ROI.
Payback Period is the amount of time it takes for an investment to recoup its initial cost.
Alternatively, or in addition, the expected cash return divided by the investment you made is your ROI.
(Hint: don't forget to consider time investment, particularly if you could have used that time on clients instead.)
Spending $20k to get back $200k might make sense. It's a 10x ROI.
But what if it takes 36 months?
These measures can help you decide between priorities, especially when you want to manage your cash deployment in the best way.
Not All Leads Are Created Equal: Marketing KPIs For Professional Service
You might not be thinking to find marketing KPIs on an operations blog, but we need to consider Cost Per Lead (CPL) or Cost Per Acquisition (CPA). What's most important to your firm?
A lead is a potential client, let's say measured at the point of booking a consult call or using the inquiry form on your website.
An acquisition is an actual new customer, measured at the point of signing an engagement letter.
You might be hesitant spending money on ads and fairly so.
But what if you were to add up the value of your time on business development and networking that could be spent elsewhere?
What if you coupled in the time to convert a prospect from a marketing lead and to a genuine client?
What if you considered the quality of the lead and your Conversion Rate (another great KPI!)?
You might decide that a higher CPL is okay to get a lower CPA and/or higher quality clients.
Measure What Matters: KPIs For Your Firm
If you're not using some form of KPIs in your business, you're missing out!
Regardless of which KPI or KPIs you decide to track, the power to your firm comes from understanding what those numbers indicate and letting them guide your next move from an objective perspective.
This might be considering your highest value clients or referral relationships so you can "surprise and delight" them or deciding what service or practice area to add on next. Or it might be about ensuring your team moves together toward a goal.
KPIs are a primary tool to add to your leadership toolkit.
If you'd like the "no homework" plan to putting KPIs and other operational best practices to work in your firm, let’s connect for an Operations ROI Assessment Call and start building that out.
