DATA DRIVEN PROFITS & MODERN LAW
As published in Winslows Digital Tax Magazine, The Wize. To subscribe for free, please click here >
Since the COVID-19 crisis, legal practices are more aware than ever of the importance of using data analytics to improve performance. But where to start? In this article, data analytics expert Tim Shaw of Modus Analytics sets out 5 ways law firms can use data to increase profitability.
Prior to COVID-19, a common response I would get from professional practices when talking about how data can help grow their business was: “We are busy already, and don’t need to invest time and money.” Not surprisingly, my response was: “Yes, but why wouldn’t you want to be more profitable (not necessarily as busy!), and more efficient?”
COVID-19 has brought a rapid change to the landscape. All businesses have had to embrace technology to keep going, and the legal profession is no exception. And, having got through the fire-fighting part of dealing with this new era, practices are now more focused on how they can best use their data. In a recent survey carried out by accountants MHA, 68% of practices surveyed said that they are considering innovation, streamlining or digitising processes or functions.
There are many ways good use of data together with intuition can help drive growth, and I can’t cover them all in this short article. However, my first piece of advice for any firm considering how to use their data is to start with your strategy and major business challenges and then set your data strategy to help you meet these objectives and overcome the challenges. Also, spend some time looking at and documenting how you currently record data. Almost certainly, there will be duplication with data held in various places.
That said, these are the five most common issues that we are asked to look at to help legal practices improve their profitability.
1. Review of current CRM system or implementation of a new one
A good CRM system properly used is central to getting to one truth about your existing clients. It will allow you to understand which lead sources give you the highest conversion rate (and do so in a highly automated and efficient way). You will also gain a more in-depth understanding of your online advertising, rather than the awful generic reports typically supplied by marketing agencies. The important outcome here is it ultimately allows you to do more of what works and less of what doesn’t work, which wastes both time and money.
2. Understand your current clients and service line profitability
Depending on the size of your practice, you may intuitively feel that you know which clients and service lines are most profitable. How accurate is this? A simple visual dashboard like the one shown below can give you definitive, real-time knowledge. This will allow you to make decisions about which clients and type of services you want to develop. Believe me, you’ll be surprised when you see which of your clients really contribute the most profit.
3. Grade your clients
Once you start to truly understand metrics such as client profitability, it can form one part of the criteria that helps you decide which of your current client list you may be able to do without, and the type of client you want to attract. This isn’t just to do with profitability, but it is likely to be one of the key indicators. Others often include: Are they good referrers? Do they provide good PR for your firm? Are they nice people to deal with?
4. Your people
Naturally, one of the issues we get asked about is how we measure what staff are doing, particularly in this post COVID-19 era where most are working at home. Practices more often than not have rich data about staff, but don’t use it in real-time. Why not have a simple dashboard showing the metrics that matter to you?
In addition, if you can analyse the characteristics of staff that have been good for the practice, this can help you develop a recruitment and interview process which is more likely to result in you recruiting this type of person.
And finally, on the subject of staff, why not automate your HR processes to give you both significant time efficiency and analysis of what is happening with arguably your most valuable resource?
5. AI-enabled software
Within the legal sector, AI-enabled software to help with contract review, discovery and legal due diligence is becoming a hot topic, and rightly so. Not only is sensible and planned adoption of this software a great time saver (freeing high-value staff to carry out high-value work), it also reduces the risk of missing important information or identifying issues that need more scrutiny. There is some excellent software in the market, and practices should be planning how to adopt it if they haven’t already.
Some other common issues we get asked to advise on
Other areas we get asked to help with are using systems and data to help predict future cash flow, referral relationships and use of free external data to help expand your referral relationships. The important thing, as I mentioned above, is to start with your business strategy and challenges and build your data strategy around this.
If you’d like to have a chat about how best to approach the management and analysis of data, and discuss any challenges that you face, then please email me at email@example.com and I’ll be happy to arrange a call.